Uranium: An Invisible Bull

12/12/2003 12:00 am EST

Focus:

James Dines

Editor, The Dines Letter

"The beginnings of new bull markets are always ‘invisible’ to the public," says Jim Dines, editor of The Dines Letter. "Uranium is certainly ‘invisible’ these days. Since no one else seems to be aware of the coming boom in uranium, we're preparing you for a future bull market."

"It is not our place to decide whether nuclear power is good or bad, especially since oil reserves will be used up in this century and there is no replacement in sight yet. At the end of the last year, there were 441 nuclear reactors in operation worldwide, with another 34 under construction. Six new reactors began commercial production in 2002. Six units that had been mothballed in Canada are expected to return to service, with more units coming from Finland, Russia, Ukraine, Romania, Brazil, and Bulgaria. China and India have said clearly that they intend to commit more resources to nuclear-generated electricity.

"The core business of Cameco (CA:CCO Toronto) is uranium. It is the only uranium producer in the US, with operations in Wyoming and Nebraska. It controls the world’s largest high-grade reserves and low-cost operations. Cameco has a commanding position because it supplies around 20% of the western world’s uranium, and since it can take decades to bring reserves into production, there is little likelihood of a competitor springing up from out of nowhere. The firm is also the world’s larger uranium concentrates suppliers, with mines in the US, Canada, and a test mine in Kazakhstan, marketed almost entirely to electric-utilities under long-term contracts.

"Besides Cameco’s commanding position in uranium production, there are two kickers. The first is its position in Bruce Power, whose six reactors produce around one-fifth of Ontario’s electricity. The second, is gold production. We expect Cameco to aggregate its gold properties into a single company that will then be sold to the public. The primary negative with Cameco’s gold is that it has hedged its gold position as of the end of last year in a range between $310 and $317. We recommend maintaining at least an initial long-term position in Cameco. The biggest profits await those who get in early and who hold all the way up."

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