Macrae's original message has me laughing here. He states...

Macrae's original message has me laughing here. He states "uranium price is unsustainable".

A few facts.

"1. Nuclear power plants must have uranium as fuel. There are no substitutes, so if they do not have uranium, their hugely expensive plant and equipment sit idle. 2. The cost of uranium relative to total operating costs, even at the current price of $72 per pound is very low. In fact, some analysts have estimated that uranium would need to rise to $500 before it would begin to equate to the cost of fuel for natural gas driven power plants. 3. Uranium production from mines is currently meeting only about 60% of annual consumption to fuel existing 440 nuclear reactors around the world. As such, the stockpile of uranium that resulted from the disassembling of nuclear weapons by the Soviet Union is rapidly drawing down. 4. There are no significant new supplies of uranium scheduled to come into production until 2010 or later, but by then there will be new nuclear power plants hungry for additional sources of uranium.

The market forces above are not only bullish for uranium but I believe make this metal almost recession proof. With a major portion of the world’s electricity being supplied by nuclear power plants, and with those plants needing to keep supplying electricity even in a major economic decline, and with supplies of uranium dwindling, it is hard to see how uranium prices would fall, even though the cost of mining uranium may decline in a deflationary environment.

Higher prices in time beget more supply. But the time required to find a deposit and get it into production can be a decade or longer. When we turned bullish on uranium, we first focused on companies with historical resources from prior exploration work, with management teams who could actually produce uranium, and in the states where uranium is now being produced. As the hysteria stemming from uranium shortages unfolds and as the price of uranium rises, we will see a stampede into uranium mining shares and into the higher risk/higher return uranium exploration stocks".

End