Once we broke support a few months ago in the metals market, I began pointing to much lower levels b...
Uranium Glowing Brighter Every Day
06/03/2013 9:00 am EST
Terrorism, rising natural gas prices, and the need for cleaner energy will send uranium prices up, says Jeb Handwerger of Gold Stock Trades.
Four months ago, I warned my readers that the uranium price could break out due to the rise of terrorism and radical extremism in West Africa.
This past week there was a suicide car bombing on a French uranium mine in Niger. This latest terrorist attack comes just a few months after terrorists violently took control of a natural gas plant in Algeria.
This latest incident was at the Somair uranium mine owned and operated by France's Areva (ARVCF), the world's leading nuclear company. More than a third of its uranium is supplied by Niger.
Uranium investors must continue to look for additional supply in stable jurisdictions such as the Powder River Basin in Wyoming, where both Cameco (CCJ) and Uranium One (SXRZF) operate. Cameco is planning to ramp up US uranium production, especially in Wyoming. But keep a close eye on other juniors in the Powder River Basin, especially the ones that may already have a processing deal with Cameco.
The price of uranium continues to base at the $40 mark. Look for a possible bullish reversal.
Investors over the past few years may have believed natural gas would be our long-term energy solution. Since natural gas hit a low at $2 in 2012, it has doubled, and is no longer an affordable option. Utilities may increasingly look at cleaner and cheaper uranium.
Some investors panicked out of the sector due to media scare tactics and sold their uranium miners at major lows. And some analysts claimed the sector would never come back after Fukushima.
I disagreed. Cameco's price has not violated 2008 lows, despite a one-two combo to the chin. Clearly, the long-term uptrend is intact.
Germany and Japan, who at first wanted to shut down their nuclear plants, have realized that the economic costs are just too great. Next-generation nuclear technologies are safer and more efficient than the fossilized plants like Fukushima, which were built in the 1970's.
In addition, China and India are dealing with debilitating air pollution from dirty fossil fuels. They need to increase energy capacity and bring air pollution down. The only solution is to invest in nuclear.
Japan elected a pro-nuclear Prime Minister. China is constructing new nuclear plants. The US is building plants in South Carolina and Georgia. Europe—the largest per-capita user of nuclear plants—is building several. Europe only has one uranium mine currently in production, despite having 160 nuclear reactors in operation.
Additionally, Vietnam, Saudi Arabia, Argentina, Russia, the United Arab Emirates, Ukraine, Slovakia, Canada, and South Korea are building plants. This also comes at a time when supply is very limited.
Most mines can't operate at prices below $85 a pound. Majors are in search for lower-cost, higher-grade uranium mines. Increasing takeovers should become more common, as we witnessed with Uranium One being taken over by the Russians and Denison (DNN) buying a junior for their Athabasca Basin assets.
This past week, two junior uranium miners in the US announced a consolidation to create a competitive entity focused on US uranium production. The US is the largest consumer of uranium in the World. Surprisingly, over 90% of uranium is imported. There could be a real uranium supply crisis in the United States, and will either boost domestic production—or the lights could go out.
Demand will need additional safe and secure supply to come online from Mother Earth. High-quality and advanced uranium miners should soon break out.
Related Articles on COMMODITIES
I think exceptional returns for the metals are a slam dunk for long-term investors who take advantag...
The recent weakness in commodities correlates highly with events on the trade front. When the U.S. r...
We’ve heard many reasons why no one should buy gold. The people you speak with about gold eith...