no shortage of uranium, page-5

http://www.proactiveinvestors.com.au/companies/news/2259/merrill-mchenry-discusses-the-big-picture-for-the-uranium-market-2259.html


" I want to emphasize that the only thing better than bullish supply and demand factors are exogenous events. Both China and India have recently had favorable exogenous events that will greatly affect uranium demand. Both are seeking to buy well beyond current needs.

Only this year India entered the spot market after a 34-year Nuclear Suppliers Group embargo (due to India's 1974 nuclear test and refusal to sign the Non-Proliferation Treaty). India is not only seeking uranium for it is current needs, but also after years of shortages and a strong national sentiment towards nuclear sovereignty, is seeking to buy sufficient uranium for all reactors for the entire service life of those reactors. Needless to say, that is and will be quite a bit of additional uranium demand. Investors should note, that was not factored in the market one year ago; it is a new and significantly bullish event.

Korea also has good sector news. Korea Resources Corp. expressed they are seeking a US$1 billion uranium mine.

So, we have had three major future uranium players-India, China and Korea-come forward with billions of dollars in additional uranium demand over the last year; and actually increasing reactor builds over plans. The uranium sector has had nothing bearish in the last year even close to those bullish factors.

As for uranium supplies, the continuing theme of 2008 was "lowered production guidance becomes a norm." My total of production cuts for 2008 was 4.7mlbs, which by way of relative comparison was roughly two months of a typical year's spot market volume. At the margin, that is a bullish number as well. Also, people do not realize the rate of existing mine depletion. Based upon current estimates, by 2020, six of the world's top 10 uranium mines will be depleted, and the top two mines will be entering the latter stages of production.

In summary, while many unknowingly ditched the sector, arguably the uranium space has a better price floor and verifiable new pricing paradigm in place than most-if not all-commodities. To use the street phrase, for uranium what has transpired in the last year-"It's all good." The exogenous events significantly boosting uranium demand for China and India are far greater than the minimal and distant "ifs" of private sector reactor delays. Not to mention China has actually boosted reactor construction; while India made no delays and entered the world market. "


Cheers, Skip