Uranium could be setting up to make another +100% move to the upside like it did in 2007, but unlike back then there are a multitude of small cap plays on the precious, yet controversial metal. Before we get into these companies, let's take a look at the argument for higher Uranium spot prices.
Many of the key dynamics that drove the "atomic" rise in '07 are present today: Bullish speculation, aggressive demand forecasts for nuclear energy, and Uranium hoarding have all played an integral role in the recent 50% rise in spot prices over the past few months from around $40 to above $60.
Bullish Speculation - The news wire and Internet may have never been so chuck full of Uranium-related pieces, even when prices were at record highs. In addition, many respected prognosticators have revised the future demand forecasts and adopted a more aggressive future outlook. A global search is underway for a clean & economic alternative to fossil fuels and a growing number of pundits are pushing nuclear power as the energy source of the future. While this may or may not be the case, all eyes are now firmly on Uranium as the next big metal investment while gold and silver digest recent triple digit gains.
Aggressive Demand Forecasts: According to Cameco (NYSE: CCJ) - one of the largest Uranium miners in the world - there will be a net increase of 97 nuclear reactors worldwide in the ten year period following January 2009. Commodities Hoarding - Here's where things get real interesting: Future demand expectations are so high that some parties will do whatever it takes to acquire as much Uranium as possible. In Kazakhstan - the world's largest Uranium producer with 15% of global resources - a former government official reportedly stoleHALF of the nation's supply worth tens of billions of dollars.
The Chinese government is reportedly stockpiling Uranium to control the cost for their upcoming atomic expansion and set to purchase twice what it uses this year. China alone is reportedly planning to build 60 new nuclear reactors over the next decade, which would require about 30% of the Uranium mined today. If this type of growth is to occur, industrial capacity & Uranium supply will need to increase substantially. One roadblock here is the fact that many Uranium producers can't mine profitably when market prices are under $50 per lb, so many have been forced to scale back operations since the beginning of the recession as prices stagnated at around $40 per lb. Russia, which is reportedly planning to build 18 nuclear plants in India and is by many accounts past the point of peak domestic oil production, is boosting Uranium production but slashing exports.
Mega Uranium Ltd (OTCPK: MGAFF) holds the unique potential to become a low-cost Uranium producer because its Lake Maitland, Western Australia resource will not require drilling or blasting. Estimates that I've seen anticipate production in the $25 to $30 per pound range. Adding a level of credibility to the company and its property - which is pegged for initial production in 2013 - is the Joint venture with well-known Japanese investors. AURD (the Japan Australia Uranium Resources Development Co. Ltd.) - a conglomerate of 3 of Japan's largest utilities and ITOCHU Corporation (ITOCHU ) the world's second largest uranium trading house have acquired a 35% stake in the project
Uranium Energy (AMEX: UEC) - became the world's newest Uranium producer earlier this month when the company began processing a 500 cubic foot shipment of uranium-loaded resins from its Palangana ISR project in Texas. In addition to its state-of-the-art processing facility boasts a robust portfolio of Uranium resources throughout the southwestern U.S. and recently announced that phase 1 drill results at its Salvo property in South Texas were extremely positive and exhibit potential for more drilling than was originally anticipated.
Uranerz Energy Corporation (AMEX: URZ) -This "Pure Play" Uranium acquisition, exploration, and development company already has long-term contracts in place with 2 of America's largest nuclear operators, including Exelon (3rd largest nuclear fleet operator in the world). URZ management expects to receive government approval for its first two Uranium mines in 2011 with initial production coming in 2012.
Ur Energy, Inc. (AMEX: URG) - This U.S. & Canada-focused junior miner is striving to become Wyoming's next Uranium producer. With nearly $38 Million in cash on hand and a reported recoverable reserve of about 25 million pounds (more than 2X more than URZ & UEC according to management), the future looks bright for URG. The company is reportedly now in the process of obtaining the permits necessary to bring its Lost Creek, WY Uranium deposit into production and taking steps towards building out a 2 million pound per year processing facility close by at an estimated cost of $30M.
According to the company's December corporation presentation, the initial mining property contains 6.5 million pounds of Uranium (conservative estimate at 80% recovery) and is economic at prices about $40 per lb. On a side note, it is important to note that unlike some comparable peers like URZ & UEC, the company has yet to secure mining licenses or initiate Uranium production.
Uranium One Inc. (SXRZF.PK) - Headquartered in Vancouver, Uranium One has four producing Uranium properties in Kazakhstan as well as3 projects in the U.S. & 1 in Australia, which are in development stage. The company produced approximately 1.75 million pounds of Uranium during the 3rd quarter of 2010 and revenues rise 243% year-over-year to $73.1M ($43 per lb). 2009 production sales were a record 3.2 million pounds and the company boasts what it claims is the lowest cash cost at $20 per pound on a consolidated basis.
SXRZY recently made strides towards achieving its goal of building a top-5, globally diversified Uranium production company with its acquisition of Mantra Resources Limited - operator of Mkuju River Project in Tanzania - in a $1.2 Billion transaction worth $8 per share. If Uranium One can bring all of its Uranium properties into full production mode, annual output would be in the 22 to 26 million pound range.
Denison Mines Corp (AMEX: DNN) - an intermediate Uranium producer with 3 active mines and an interest in 2 North American Uranium mills (1 fully-owned, 1 22.5% owned). DNN produced 1.4 million pounds of Uranium in 2009 and expects output to increase by more than 14% to 1.6 million pound in 2010. The company also churned out.5 million lbs of Vanadium in '09 and anticipates that number to surge by nearly 500 this year to 2.4 million lbs. After securing nearly $65.5M in a financing recently to fund ongoing mining operations, Denison Mines Corp appears to be very well positioned to capitalize on growing demand and potentially higher prices for Uranium going forward.
Uranium Resources, Inc. (OTCPK: URRE) - Incorporated in 1997, the company lays claim to one of the largest in-place mineralized Uranium reserves in the U.S. (about 1 million pounds) and holds the only Nuclear Regulatory Commission (NRC) license in the State of New Mexico. The company has produced more than 8 million pounds of Uranium since its inception and anticipates ramping production back up again by 2013, although there appears to be a number of roadblocks preventing this from happening. Firstly, market prices must continue to make mining economical. In addition, all necessary licenses must be successfully renewed and processing facilities must be built to sustain mining in New Mexico, which will require a joint venture partnership or source of substantial financing. Nevertheless,
Disclosure: The author has not been compensated for coverage of any company mentioned in this piece, holds no position and does not intend to take a position in any company mentioned over the next 72 hours.
Keith Reinhardt:
I provide a premiere source of otherwise hard to find market information on dynamic and innovative emerging growth micro-cap companies that I believe have excellent future appreciation potential.
Visit my website at http://www.AtomicPennyStocks.com
No comments:
Post a Comment