uranium the next big thing

Money Weekend
Saturday, 5 December 2009
Melbourne, Australia


Why This Could be the Hottest Mineral of 2010 By Alex Cowie

Gold has hogged the spotlight for so long, that everyone seems to have forgotten how exciting uranium can be too.

Right now across the globe, there are nearly 350 nuclear plants that are either proposed, planned or already in construction. Let me put that in perspective for you...

The number of nuclear plants is set to increase by 80% if all these projects go ahead.

And whether you're a climate change sceptic or believer, the Copenhagen climate conference starts next week, and both China and the US have already made pledges to reduce their emissions.

If that happens then nuclear power is sure to be a part of the solution in coming years. Therefore, uranium will slide right back into the limelight.

But the catch is that there is already a shortfall in uranium production. Existing mines currently only meet 70% of the world's demand. The remaining 30% comes from the last place you'd expect.

Where?

Since 1993, the 30% shortfall has been bridged by cannibalising the warheads from the nuclear warhead arsenal of the former Soviet Union!

The "High Energy Uranium" agreement has been in place since 1993. It's also known by the slightly catchier title of "the megaton-to-megawatts program".

Over twenty thousand nuclear warheads have been recycled into power plant fuel in the program. Those former weapons of mass destruction have supplied about ten percent of US' electricity over the last sixteen years.

The weapons-grade uranium in each warhead can yield 700 kilos of lower concentration, reactor-grade uranium.

But this unique arrangement is ending. Back in 1993, the program was designed to have a twenty-year lifespan, and Russia recently indicated that it would let this policy expire as planned in 2013.

We're hoping it wants to keep the last ten thousand warheads for the 42 nuclear reactors it has in the pipeline, rather than for any less friendly plans!

When this secondary source runs out, there will be a gaping hole left in the market. And this will happen just as a many of these new reactors are due to come on line. This shortfall in supply, happening at the same time as a big increase in demand will cause a scramble to secure supply, and will lead to a big rise in uranium prices.

That's why in last month's Diggers and Drillers newsletter I looked at which uranium companies are going to be there right in time to meet this need in 2013.

But it's not enough to look for companies that can provide uranium. It is essential that they'll produce enough volume on a regular basis to attract big players like the Chinese utilities.

China is increasing its fleet of nuclear reactors from eleven, to one-hundred-and-eighteen! This is where the big contracts will be signed, and money made.

Gerard Minack, the highly respected global strategist for Morgan Stanley believes this is "going to be the biggest turning point for the Australian energy market in twenty years."

Fortunately, Australia has the world's biggest proven uranium reserves, with 28% of the world's total, and right now the heat is back on for the uranium sector.

Cheers.

Alex Cowie
Editor, Diggers & Drillers