Uranium The Next Yellow Metal Bull Market

Uranium: The Next

Yellow-MetalBull Market

All you’ll ever need to know about uranium – where it’s found, how it’s produced, who the major players are, why it has a truly glorious future, and what to consider before investing.

A Global Resource Intelligence Report by the Casey Research Energy Team

Page 2Uranium: The Next Yellow-Metal Bull Market

Table of Contents

Another “Barbarous Relic” with Moonshot Potential Page 3

An Element of Surprise Page 4

Uranium’s Tumultuous History Page 7

A Tale of Four Bull Markets Page 11

Top Arenas and Major-League Players Page 18

Uranium and the “Yellow Barrel” Page 23

Uranium’s Future: The Big Pinch Page 26

Investment Implications Page 38


Another “Barbarous Relic” with Moonshot Potential“ The next super cycle in the uranium mining industry is looming and … it could

be larger than that of 2003-06 and the small rally of 2010-11.”

–RFC Ambrian, global mining and energy corporate advisory business

When the gold bull market started in the early 2000s, only a handful of “smart money” investors saw the writing on the wall, while most TV pundits and financial talking heads ridiculed the yellow metal as a “barbarous relic” coveted only by gold bugs and other behind-the-times nutjobs.

Today, few of them are still smirking. Instead, those farsighted investors who first recog-nized gold’s vast upside potential – and made enormous gains in bullion and stocks while the rest of the mainstream investing herd were still snoozing – are having the last laugh.

Marin Katusa and his Casey Research Energy Team are convinced that “the other yellow metal,” uranium, will follow a similar upward trajectory as gold has done in the past decade. This Global Resource Intelligence Report is designed for aware investors – those keen enough to recognize a bull market in the making and agile enough to act on the opportunities it presents.

Due to the Fukushima Daiichi accident (which we will talk about in depth a little later), even solid uranium companies with excellent management and cash in the till are under-valued right now – but as you will see, that is unlikely to last long. We hope that by the time you’ve finished reading, you’ll be as convinced as we are that right now we’re living through one of those rare historic moments where the seeds of true fortunes are sown.

But to invest or speculate in any commodity, you should first aim to know all about it there is to know. In this report, we’ll give you a comprehensive overview – you could call it our “uranium bible” – of all you need to know about “yellowcake,” from its physi-cal properties to the supply-and-demand picture, and everything in between.

If you are new to the world of uranium, we recommend reading this report from cover to cover. However, in case there are particular topics that interest you, we hyperlinked all the sections for your convenience. Just click on any topic in the table of contents to skip directly to that section.


An Element of SurpriseUranium is true “Big Bang” stuff – a primor-dial element that was part of Earth’s for-mation 4.5 billion years ago and, scientists believe, has its origins in supernovas. Over time, the uranium was deposited on land by volcanic activity and dissolved by rainfall and carried into underground locations; the chemical conditions in some locations resulted in the element’s concentration in “ore bodies.”

Uranium is a fairly common element in the Earth’s crust and is more abundant than gold or silver. A square mile of earth one foot deep will typically contain over a ton of uranium. The natural decay of uranium in the Earth’s core and mantle is a major source of heat that drives geological and tectonic processes, such as convection and continental drift.

What Is Uranium Used For?

Uranium’s number-one use is for electric-ity generation via nuclear fission. Currently, about 20% of US electricity is generated by uranium fuel in nuclear power plants. One 77-gram (¼-ounce) uranium fuel pellet has an energy-to-electricity equivalent of 3.5 barrels of oil, or 17,000 cubic feet of natural gas, or 1,780 pounds of coal.

The uranium fission in nuclear reactors also makes isotopes that are utilized in medi-cine, specifically in diagnostic imaging studies. Other common uses are military armor and armament, counterweights on ships and aircraft, and radiation shielding.

Methods of Recovery

While extraction techniques have varied throughout the years, there are three main methods to get uranium out of the ground: Conventional mining (47%), in-situ recovery (46%), and byprod-uct (7%).

1. Conventional Production

In conventional uranium min-ing, depending on the depth of Mill and pit at the Ranger Uranium Mine in Australia

Uranium was used to color glass and ceramics for almost 2,000 years. A glass object was found in Italy, dated to about 79 AD, which was colored with uranium oxide to a yellow-green hue.

Ancient Coloring Agent

Uranium is naturally occurring and is found almost everywhere in nature. The average human ingests 1/15,000 of an ounce of uranium a day.

It’s Everywhere


the deposit, large amounts of rock and soil containing uranium ore are extracted from underground mines or open pits at or near the surface.

The ore is extracted by established methods (blasting and drilling) and transported to a mill, where it is crushed, ground into a fine powder, and then leached with sulfuric acid to dissolve the uranium oxides. This process normally separates 90% of the uranium from the crushed ore, and the remaining 10% and the tailings are collected as waste product.

After the uranium concentration is dried, “yel-lowcake” (U3O8) is formed – the first stage between actual uranium and fuel. The milled uranium ore is then further processed to make uranium hexafluoride (UF6), a compound used in the uranium-enrichment process that produces fuel for nuclear reactors.

Conventional uranium production is capital intensive, has a large environmental foot-print, and is difficult to permit.

2. ISR Mining

In 1990, over 50% of the world’s ura-nium production came from conven-tional underground mining, but since then that number has fallen to 33% due to the increase of in-situ recovery (ISR) mining.

ISR mining is the process of recovering uranium through boreholes drilled into the deposit. A hydro-solution is pumped into the ore body that dissolves the uranium within the ore as it passes through. The pregnant solution is then extracted through another borehole nearby and transported through pipes directly to the processing facility. Final processing releases the uranium from the ion-exchange resin and turns it into yellowcake for transport as product.

In-situ recovery (also called ISL, for in-situ leaching) is currently used to mine uranium in the US, Kazakhstan, and Australia. It now accounts for 46% of world uranium produc-tion and the lion’s share of America’s uranium mining. In the United States, high levels of calcium, usually in the form of limestone, in the deposit require an alkaline form of ISR; Australia and Kazakhstan typically use acid for their ISR.

A self-sustaining nuclear chain reaction occurred naturally at Oklo in Gabon, Africa, some 1.7 billion years ago. Oklo is the only known location in the world where this has happened. Due to the special geol-ogy of the place, the nuclear fis-sion reactions continued for a few hundred thousand years, averaging 100kW of power output.

Nature’s Nuclear Reactor


Because it is considered noninvasive and en-vironmentally friendly, today ISR is preferred over conventional mining. Not only is there minimal surface disturbance when extracting the uranium, but ISR is also more economical.

ISR projects do not require large resources to be feasible – a deposit of 6 million pounds is sufficient to go into production. Additionally, ISR construction takes less than two years, while conventional projects take up to four years to be permitted and built. ISR processing plants cost $10 to $35 million and usually produce 1-2 million pounds of ura-nium per year, with a benchmark operating cost of $25 per pound. Conventional mines can cost over $1 billion and produce 5-8 million pounds per year, but can have operating costs of $80 to $90 per pound.

“Warm” ISR – An Even Better Deal

Marin coined the term “warm ISR” or “WISR,” meaning uranium production in warmer regions. Since in-situ recovery is all about moving liquids, cold weather can hamper those operations – not a factor in areas where temperatures rarely get below freezing.

WISR uranium production has lower costs than conventional mining techniques because of the lower-cost capex and lower ongoing operational expenses. Another reason that it’s cheaper is that the pipes moving the water don’t need to be insulated; therefore, produc-tion margins for WISR are up to 30% higher than ISR production. Most of the production in Kazakhstan and Texas is WISR uranium production.

The Uranium Process

One pound of uranium will make a ball only 1.3 inches in diameter, which is smaller than a ping pong ball.

Small But Heavy


Uranium’s Tumultuous HistoryDays before Germany’s un-conditional surrender in May 1945, the German U-boat U-234 quietly departed for Japan carrying a cargo of mil-itary documents, two disas-sembled Me-262 fighter jets, German scientists who were among the world’s leaders in nuclear and rocket power technologies, and more than 1,000 pounds of uranium. Its mission was to prolong the war and aid the Japanese in the Pacific.

However, U-234 was cap-tured by the USS Sutton, which was patrolling the North Atlantic, and escorted to Ports-mouth Harbor, NH, where – a week after V-E Day – the crew officially surrendered, abruptly ending its mission and the nuclear arms race for Germany.

Some historians argue that U-234 was proof that Germany’s nuclear program was far more advanced than what was initially suspected and that after its capture, the race for the nuclear bomb heated up even more.

From E=mc2 to the Manhattan Project

Uranium was discovered by Martin Klaproth, a German chemist, in 1789. Little did he know that his discovery would be the basis of one of the most impor-tant energy sources in the world today, but also the source of signifi-cant conflict and deaths.

Nuclear energy didn’t make signifi-cant progress, though, until 1895, when German physicist Wilhelm Roentgen discovered x-rays. Just ten years later, in 1905, Albert Ein-stein developed his famous theory about the relationship of mass and energy, E=mc2, which plays a sup-porting role in nuclear physics. Albert Einstein and Leó Szilárd


But the thing that likely influenced the de-velopment of the nuclear bomb much more than Einstein’s famed equation was the letter to US President Franklin D. Roosevelt, which he wrote in August 1939. At the re-quest of his friend Leó Szilárd, who in 1937 had filed the first patent for the method of producing a nuclear chain reaction, Einstein warned President Roosevelt that “Germany has actually stopped the sale of uranium from the Czechoslovakian mines which she has taken over,” and urged him to fund nuclear research in the United States.

President Roosevelt formed a special committee to address the issue, and within a matter of months the committee reported back that uranium “would provide a possible source of bombs with destruc-tiveness vastly greater than anything now known.”

The Race for the Atomic Bomb

The race was on, and one of the keys was obtain-ing uranium. In 1940, there were only four known major deposits of uranium: Colorado, northern Canada, Czechoslovakia (controlled by the Ger-mans), and the Belgian Congo.

In 1942, the US government bought 1,200 tons of uranium ore from the Belgian Congo, over 900 tons from Eldorado Gold Mines (a predecessor of Cameco Corp.) from its mine in Port Hope, Ontario, and an-other 800 tons from all domestic production, which largely came from US Vanadium Corporation’s vana-dium tailings stockpile in Uravan, Colorado.

The Manhattan Project, which eventually led to the development of the first nuclear bomb, got off to a relatively slow start. However, after the Japa-nese attack on Pearl Harbor in 1941 that prompted America’s entry into World War II, efforts and spending vastly increased.

The project culminated in the first nuclear-weapons test at Alamogordo, New Mexico. The actual bomb-ings of Hiroshima and Nagasaki followed soon after the “Trinity” test. Japan surrendered six days after the second strike, on Nagasaki.

The Manhattan Project employed more than 130,000 people and by the end of December 1945, had cost the US government approximately $2 bil-lion, a staggering $25.8 billion adjust-ed for inflation in today’s dollars.

No Cost Too High

Joseph Stalin (1878-1953) led the So-viet Union throughout WWII and was its leader when the Cold War started. A largely forgotten fact is that Stalin was responsible for more deaths than Hitler. While numbers are de-bated, the death toll due to Stalin's brutal regime is estimated to be around 27 million Russians. Truman essentially kept Stalin in the dark about the atomic bomb until it was finally deployed. Stalin subsequently implemented a nuclear program of his own, and the race for nuclear warheads was on.


Although Germany and Japan didn’t have time to finish their bombs, the post-World War II period saw a new arms race emerge, this time between the United States and the Soviet Union in what became famously known as the Cold War.

Bombs and Espionage

The Soviet nuclear-bomb project actually began during World War II, when a Soviet physicist, Gregory Flyorov, noticed that the publication of scientific papers from the United States, Britain, and Germany regarding uranium fission had abruptly ceased, though research had been making extraordinary progress.

Flyorov correctly assumed that such research was now classified and warned Stalin of the consequences of a nuclear bomb in the hands of the enemy. In September 1942, Stalin launched the Soviet nuclear program and greatly accelerated its efforts after the bombing of Hiroshima and Nagasaki.

Russia not only had a great number of scientific minds dedicated to nuclear research, the Soviets also had a highly efficient spy ring that was able to acquire important infor-mation from the US’s nuclear research. In fact, Soviet spies were able to obtain rough blueprints of the United States’ first atomic device and even the cross-section for D-T fusion. Some analysts and researchers have also concluded that espionage was used to access vital information of the development of the hydrogen bomb from 1950 to 1953.

The End of the Cold War

The Cold War, which lasted from 1945 to 1991, was a period of significant military and political tension. The US and the Soviet Union were struggling for global dominance, both countries backed by their growing arsenals of nuclear arms. The Cold War ended with the collapse of the USSR and the reconstruction of the Russian country and its satellite states, leaving the United States as the sole superpower of the world.


With the research and important infrastructure now in place, the world was able to tran-sition to a more peaceful and productive use of nuclear energy.

It is no surprise that the countries that invested the most into their nuclear-warfare programs now have the greatest share of power generation by nuclear energy. Among them is France, owner of the third-largest nuclear arsenal in the world.

France’s first nuclear power plant was commissioned in 1962; the country currently derives the majority of its electricity from nuclear energy. France is also home to nucle-ar-energy leader Areva, a vertically integrated company and one of the largest uranium producers in the world.


A Tale of Four Bull Markets

Bull Market #1 (1943-1955): The AEC Uranium Frenzy

On January 26, 1943, the fulfillment require-ments for the US Defense Department created a shortage in the supply of uranium, and restrictions on the sale and delivery of uranium were implemented in January 1943. That date sparked the beginning of the first bull market in uranium and the beginning of the race to build nuclear warheads.

The chart illustrates the level of nuclear warheads stockpiled by the United States and So-viet Union. The run-up of US warhead inventory coincides with the rise of uranium prices.

The first uranium bull market was fueled by the incentive program the US government implemented through the Atomic Energy Commission (AEC) in 1946. The AEC guaran-teed a minimum price for uranium to increase the domestic uranium supply available. It


raised the price of uranium to reflect its current need, which sent explorers and pros-pectors into a uranium frenzy.

In the mid-1950s, it was no longer in the interest of the US government to expand uranium production, so the AEC cut back on its incentive program. As demand from the government decreased, an oversupply of uranium occurred. Eventually the price of uranium collapsed, abruptly ending the first bull run.

Bull Market #2 (1973-1979): The Arab Oil Scare

In 1971, spot uranium bottomed out at $5.95/lb. On October 17, 1973, the Arab Oil Crisis occurred, causing a spike in uranium prices as investors looked towards alterna-tive sources of power.

The nuclear rush spurred fears of a uranium shortage, and prices soared from $16 to $40 per pound within fifteen months (adjusted for inflation, that would be $160/lb. today). The run was interrupted by the partial core meltdown at the Three Mile Island power plant in Pennsylvania.

Between 1957 and 1973, worldwide nuclear power capacity expanded by an average of only 2,400 megawatts electric (MWe) yearly, with the majority of new reactors being built in the United States or the United Kingdom. Japan, Russia, Germany, Canada, and France (13,000 MWe) also were active in connecting power plants to the grid; however, their combined additions were only half of what the United States (23,000 MWe) contributed in the same period.

Compare that to the “great nuclear awakening” between 1973 and 1990, when global capacity grew at an average 16,000 MWe per year. The US was leading the expansion by building 81 (or 25%) of the 321 new reactors worldwide.

In 1960, the United States had over 1,000 mines producing almost 36 million pounds of uranium. Today, according to US Energy Information Administration, the US has only 11 mines producing less than 3.4 mil-lion pounds of uranium.

Then vs. Now


As we mentioned before, the acceleration of reactor construction was primarily due to the 1973 Arab Oil Crisis, which set off a petroleum-shortage hysteria. But even after reac-tor orders began to decline in the mid-1970s and planned facilities were being canceled, uranium prices held steady until the Three Mile Island meltdown on March 28, 1979.

Although uranium prices dropped, Three Mile Island did not reduce uranium con-sumption. World uranium demand decreased by just 4.3% after the accident, and consumption soon began to climb again. By 1985, world uranium requirements were up 47% from 1979, while uranium prices had fallen 73%. The price of uranium in 1985 was US$16.00 per pound, whereas the peak in the second uranium bull market was US$43.40 per pound.

Some analysts expected uranium to pick up, but fate struck again, in the form of the 1986 nuclear meltdown at Chernobyl. It would be over a decade before uranium got back into the spotlight.

Bull Market #3 (2001-2008): Millennial Optimism

Uranium’s run prior to the 2008 credit crisis showed many parallels to the run before the Three Mile Island accident, its rise having been incited by the new dawn for nuclear power in the developing world and the com-ing end of the Megatons to Megawatts agreement between Russia and the US. China and India were experiencing unprec-edented growth, and mounting fears over climate change prompted many to call for an energy source with a low “carbon footprint.”

The industry had not experienced such bullish-ness since the early 1970s. In 2007, 28 new reactors (12 in China and India) were under construction worldwide, with another 64 planned and 158 proposed. The run also coin-cided with high oil prices, just as it had in the ‘70s. Furthermore, the price increase came without significant growth in consumption.

Since 2000, world uranium requirements had grown about 15% overall, roughly the same rate seen since the mid-1980s. As in the last cycle, uranium prices were being bid up on expectations of consumption growth, with buyers assuming that scores of planned reactors would be built and loaded with fuel.

In 1998, Doug Casey deduced that at $10.00 per pound, uranium prices were highly undervalued as supplies were decreasing while demand was increasing. Chernobyl and Three Mile Island were still in the minds of many investors, but always the contrarian, Doug wrote: “A whole new uranium boom is possible, and uranium will trade to over $20 within the next two years, and spike to $40 or more.”

Doug Casey recommended several undervalued uranium stocks to his subscribers, resulting in the follow-ing returns:

Paladin Resources – 1,333%International Uranium – 1,225%

Cameco – 895%Strathmore – 660%

Doug Casey’s Uranium Winners


This was exaggerated by hedge funds speculating and buying up physical uranium. At one point, hedge funds were believed to account for over 25% of the world’s uranium trading. This type of speculation helped raise the spot price to a peak of $138 per pound in 2007 from $7.23 per pound in 2001.

The Cameco Supply Crunch

Adding to the uranium hysteria, on October 23, 2006, uranium major Cameco re-ported the flooding of its Cigar Lake mine. To the uranium sector, losing the expected uranium production from Cigar Lake was like losing the oil production from Saudi Arabia’s Ghawar oil field. Cameco’s Cigar Lake, which is still being built, is one of the world’s largest undeveloped uranium deposits, with 232 million pounds of U3O8 at an average grade of 19%.

Cigar Lake had been slated to start produc-tion in early 2008 and was expected to peak at 18 million pounds per year – equal to 16% of global mine output at the time. This loss fur-ther fired up the already hot uranium markets.

But as we saw in the 1970s, market sentiment can quickly change from optimism and a bullish view to pessimism and a bearish outlook.

The Big Squeeze

In this case, the turnaround was caused by the financial crisis of 2008. Uranium prices crashed without a meltdown, but the equity prices of the uranium companies experi-enced their own meltdown.

All the markets dropped, and hedge funds were forced to liquidate their positions due to redemptions from investors. Available capital to finance uranium projects quickly dried up, and exploration and development in uranium – particularly in Africa and con-ventional mines in the United States – suffered. Consequently, supply took a big hit.

With no exploration dollars available, uranium juniors were forced to reevaluate their business strategies. The majority closed shop; others changed their focus to gold, silver, lithium, and even graphite. Management teams turned their backs on uranium and started pursuing anything that would allow them to raise exploration capital to keep their companies alive and their jobs intact.


Bull Market #4 (2011-Present): The Race for Reliable Energy

Because the previous bull market crash was not associated with a meltdown, the recov-ery was much faster. No construction plans were canceled, and nuclear power quickly experienced a renaissance, from both a power-generation and stock-market perspective.

The gap between the third and fourth bull run was a mere three years; however, the fourth run includes numerous unprecedented catalysts that truly make it exceptional. These cata-lysts, which have never been experienced by the global nuclear sector, are going to make the fourth uranium bull market the largest of all the uranium bull markets to date.

Fukushima – Just a Blip on the Radar

The fourth bull run is unique, as its catalyst was the Fukushima Daiichi nuclear disaster in Japan, which oc-curred on March 11, 2011. Following a major earthquake, a 15-meter tsunami hit the plant and disabled the power supply and cooling of three reactors. Consequently, all three reactors expe-rienced meltdowns, and four reactors that provided 2,719 MWe net were written off. (2,719 MWe would be enough electricity to power 2.7 million homes in the US.)

Overnight, the nuclear sector was being turned upside down.

Naturally, the reaction to the Fukushima disaster has been international and controver-sial. The majority of countries with nuclear power have reevaluated their nuclear power programs. Germany immediately took eight reactors offline and has stated it will phase out its remaining nine reactors by 2022, starting in 2015. Despite this, Germany ironical-ly still supports foreign nuclear power and will use public money to guarantee the con-struction of power plants in other countries. Since Fukushima, Germany has become a net importer of power from France, relying on more costly French nuclear power.

We don’t believe that Germany will continue paying for expensive imported French nuclear electricity when it can provide its own at a much cheaper price. Despite the soothing bed-time stories the politicians have fed the German public, Germany can’t afford to phase out its nuclear reactors by 2022. Other countries, such as Canada, have also stated in the past that they would phase out their nuclear reactors, but when the time comes, the public generally has long forgotten about its former misgivings, and the reactors get a lifeline extension.

Due to its unique properties, de-pleted uranium is used in the manu-facturing of shipping containers of radioactive cargo and nuclear waste.

Depleted Uranium


China – Powering Ahead

China, too, reevaluated its nuclear power program, even suspending nuclear plant ap-provals for a couple of months. However, after an intense assessment, the govern-ment decided not to change its mind on the development of more nuclear power plants.

China has 26 reactors under construction, including the world’s first Westinghouse AP1000 units. The AP1000 is a Generation III+ reactor and can produce 1,120 MWe. It is considered revolutionary due to its great power but small footprint, using only a fifth of the concrete and rebar of older designs. China is looking to quadruple its nuclear capacity by 2020.

Developed Nations Need Uranium

The uranium market experienced a minor resurgence from 2009-2011; however, it was short-lived due to the tsunami and the even-tual nuclear meltdown at Fukushima. The ura-nium markets, too, saw a meltdown, and this is still where we find ourselves at present.

While the uranium markets have plummet-ed, what Fukushima really showed was the emergence of another bull market run – in a nutshell, it has made abundantly clear that the developed nations of the world have no choice but to use uranium as part of their energy matrix. Hence, we are beginning to see a firestorm of acquisitions as uranium majors position themselves to capitalize on the inevitable.

In 2010, ARMZ, a Russian state-owned company, bought 356 million shares of Ura-nium One for C$622 million in a transaction to give it 51.4% ownership. Recently, ARMZ announced the takeover of the 48.6% of Uranium One (T.UUU) it didn’t previously own in an obvious move to secure supply. For C$1.3 billion, it will get UUU’s assets in

The Megatons to Megawatts pro-gram was a US-Russian agreement that called for Russia to down-blend 1.1 million pounds of highly enriched uranium (HEU) from nuclear weap-ons into fuel for nuclear reactors. The agreement is set to expire in late 2013, which leads investors to believe a squeeze in uranium supply is coming. Signed in the early 1990s, the program helped secure nuclear-weapons arsenals before they could disappear into the black market. It gave the US a steady supply of nuclear fuel and scored diplomacy points by both sides. The agreement accounted for one-third of America’s uranium supply.

Post-HEU: A new contract has been drawn up called the Transitional Supply Contract. It will use Russia’s commercial resources rather than weapons. The contract allows the United States to purchase 21 mil-lion separative work units (SWUs) through 2022, with a mutual option to purchase up to another 25 million SWUs during that period. The total 46 million SWUs (units of measure-ment for the enrichment process) would roughly replace the uranium America bought under Megatons to Megawatts, but on Russian terms. This time it’s the Russians setting the price, so it’s a safe bet that higher prices are coming.

Life After HEU – the Certainty of Higher Prices


Kazakhstan, the United States, Australia, and Tanzania. ARMZ also acquired Australian junior Mantra Resources in 2011 for C$1.15 billion.

Other examples of uranium majors snapping up properties: In January 2013, Denison Mines acquired Fission Energy in a stock-swap deal valued at $70 million. And in late 2011, Rio Tinto bought Canadian uranium explorer Hathor Exploration for $654 million.

In the political arena, Japan’s parliamentary elections in December returned the Lib-eral Democratic Party and former Prime Minister Shinzo Abe to power. Abe wasted little time in expressing his intent to bring Japan’s nuclear program back online. In the United States, the head of the Department of Energy (DOE) announced a fresh start to its nuclear-disposal issue on January 10, 2013, emphasizing the importance of nuclear power to US energy security as well as of building community consensus. Finding a replacement for the defunct Yucca Mountain project removes a contentious issue from the country’s nuclear debate.


Top Arenas and Major-League PlayersWhile there are uranium mines in twenty different countries, Kazakhstan and Canada account for over 50% of the world’s production.

The majority of uranium deposits globally average grades of 0.10% uranium, but the highest-grade depos-its in the world are located in the Athabasca Basin in Can-ada. While Kazakhstan and Canada lead world produc-tion, that will soon change as Australia has more known recoverable resources of ura-nium than both Canada and Kazakhstan combined.

Looking at the top uranium producers of the world, Canada really stands out in terms of grade. The rest of the producers are es-sentially lumped towards the bottom left, the United States included.

Investing in Africa?

Niger is the fourth-largest uranium producer in the world, representing 8% of global production. Uranium is Ni-ger’s largest export, providing over 70% of the national export proceeds. The govern-ment of Niger depends on uranium for tax revenue and uses it to attract foreign capital for exploration and development. French company Areva has a very strong presence in Niger, with a 63.4% stake in the Arlit mine, which currently produces 5% of the world’s uranium. Accordingly, Niger’s current political situation can be deemed safe; however, as with the majority of African countries, this could change in a matter of days.

Namibia, too, is a country friendly to uranium mining. It’s home to the Rossing mine, which has been in operation for over 25 years and employs almost 1,000 Namibians. Rossing produces over 3.6 million pounds of uranium a year, or 3% of global produc-


tion. Like Niger, Namibia relies heavily on uranium to fund its economic growth, but appears to be more politically stable.

Disregarding political risk for a moment, in-vesting in Africa presents other risks inves-tors should make note of. First, infrastruc-ture and electricity will always be a problem. Unless the deposit is “world-class,” it will be stranded as the economics of a project must include the cost of roads, pipelines, facilities, etc.

And second, water – a valuable commodity on a dry continent – must be available. Many projects in Africa are located in deserts and require water to be carried or pumped in order to commence exploration. This in-creases the costs and risks of operating in African countries.

Down Under and Up North

Australia’s emergence as a uranium super-power is largely due to BHP Billiton’s Olym-pic Dam project, which boasts reserves of 591.3 million pounds and resources of 4.1 billion pounds of uranium. Currently, the project produces around 7 million pounds, but once the planned expansion is completed, mine output is expected to quadruple to more than 36 million pounds. To put that into proportion, listed below are the top ten producing mines of 2011:

Hathor Exploration was a company covered by the Casey Energy Report and was bought and sold several times for the better half of a decade for enormous gains. In our most recent recommendation, we bought the company at C$1.50 and sold upon its acquisition for a 180% return.

Hathor – the Gift that Kept Giving

Mine Country Production (lbs of U) % of World

McArthur River Canada 15,372,000 14%

Olympic Dam Australia 6,706,000 6%

Arlit Niger 5,452,000 5%

Tortkuduk Kazakhstan 5,216,000 5%

Ranger Australia 4,480,000 4%

Kraznokamensk Russia 4,382,000 4%

Budenovskoye 2 Kazakhstan 4,350,000 4%

Rossing Namibia 3,644,000 3%

Inkai Kazakhstan 3,204,000 3%

South Inkai Kazakhstan 3,096,000 3%

0.1% U3O8 is equal to two pounds of uranium per ton.

That means the uranium being mined in the Athabasca Basin is equivalent to $18,000/ton at current uranium prices, which would be equivalent to 10.84 ounces per ton of gold production. That would be the highest-grade major producing gold mine in the world.

Two Yellow Metals Compared

http://www.caseyresearch.com/go/bwqgq?promo=523A


The expansion at Olympic Dam will cost BHP $30 bil-lion, but it has been post-poned indefinitely due to falling commodity prices and higher capital cost. Olympic Dam is so enor-mous that its abundance could be its undoing. The massive ore body presents unprecedented technical challenges, which of course are costly to tackle.

Up in the cold north, urani-um major Cameco is hoping to finally begin production at its Cigar Lake mine in Saskatchewan by mid-2013, with a ramp-up to full production by the end of 2017. Target annual production from Cigar Lake is approximately 9 million pounds of uranium per year.

As mentioned earlier, in October 2006 the mine suffered a disastrous water inflow that terminated all underground activities. An-other water inflow occurred in 2008, interrupting the dewatering and remediation process. To date, Cameco has spent almost $100 million in remediation and expects the project to have a final cost of $1.3 billion.

A Volatile Industry

As you can see, uranium mines have enormous project risks and are often at the mercy of unpredictable markets. The market has been waiting for both of the above projects for a long time, and another delay will no doubt increase future supply worries.

We would not be surprised if Cigar Lake is delayed again, like Olympic Dam, this time due to low uranium prices. The flooding of the mine ran up project costs and will require a higher uranium price to be economical. It may be prudent for Cameco to shelve the project and wait for higher prices.

The “other yellow metal” made unemployed geologist Charlie Steen one of the richest people in America. Steen – convinced that the area around Moab, Utah, held uranium – borrowed $1,000 from his mother and moved his family to the Colorado Plateau, where they lived in ramshackle trailers and tarpaper shacks while he prospected for uranium. Two years later, in 1952, he hit the jack-

pot finding a high-grade uranium deposit. He named his mine Mi Vida (My Life), and within two years the discovery became a $130 million development. In today’s dollars adjusted for inflation, that would put Steen’s net worth at $1.1 billion.


Due to a major downturn and consolidations of uranium companies during the 1990s, today eight uranium companies are responsible for over 85% of the world’s production.

Kingpins of the Uranium World

Below you can see the six largest producers (with production of over 1 million pounds of uranium per year) and the locations of their properties:

Looking at publicly traded companies that produce uranium, it is apparent that there are

few ways for an investor to gain exposure to large companies with stable production.

It is important to note that these companies don’t have production from many different projects. What this means is that any mining risk or political issues can affect the global uranium market very negatively. It is so difficult to bring on a new uranium mine that the largest producers in the world produce from just a handful of mines. Essentially, this is high-risk production, and the US is exposed to high-risk production more today than ever before.

Moreover, the majority of the listed companies have been around for decades, proving how hard it is to get a uranium deposit to actual production.



Uranium and the “Yellow Barrel”So how do the large uranium companies stack up against oil companies?

For this analysis, we created the “yellow barrel,” the number of barrels of oil equiva-lent needed to generate the same amount of power that can be produced from uranium.

Below right are the public pure-uranium plays and their oil comparisons.

As illustrated, from a barrel-of-oil standpoint, the uranium majors trade cheaply relative to their oil counterparts. Moreover, the ura-nium companies have the largest resources as well.

When looked at on an EV-per-boepd and pro-duction basis, the ideal company would fall to the bottom. The enter-prise value is widely con-sidered to be the theo-retical takeover price, because in the event of a takeover, the buyer must assume the debt.

The lower the bubble, the cheaper the compa-ny is when compared to production on an energy-equivalent basis. The ratio is also called “price per flowing barrel” and is universally used by oil analysts.

If a company’s multiple is high compared to others, it is trading at a premium. If the com-pany’s multiple is low, it is trading at a discount.

All the uranium companies are at the bot-tom of the graph, indicating that the value of the companies is cheap on a boepd basis. Furthermore, the uranium companies have significantly more resources as implied by the size of the bubbles, which means lon-ger reserve life indexes, which is critical to national energy supply.

1 GW = 29.89 Bcf / year

244 ton U3O8 / year = 13,649 barrels of oil equivalent per day (boepd)

1 ton U308 / year = 56 boepd or 20,440 barrels of oil equivalent a year

Casey Energy “Yellow Barrel” Formula

Enterprise Value (EV) is defined as the total market capitalization of the company plus all the debt the com-pany has on its books, minus the cash in the bank.

Enterprise Value Explained


Mid-Tier Producers

Applying the same metric to mid-tier producers, the same results are yielded.

When looking at a peer group of mid-tier energy producers, the relative val-ue of a uranium company becomes more apparent.

We used publicly listed US uranium producer Uranium Energy Corp. as our example. You can see here that it trades much cheaper and has signifi-cantly more resources than its oil and gas counterparts.

We receive the same results when converting uranium reserves into barrels of oil equiv-alent. The enterprise value per reserve is defined as the value per barrel of the market capitalization plus net liabilities, divided by the reserve or resource. Like EV/boepd, the lower the ratio, the cheaper the company. Because we converted uranium resources into barrels of oil equivalent, we can compare uranium companies to oil companies on an even basis.

When converted into barrels of oil equivalent, Uranium Energy’s re-serves far surpass its peer group’s, as dis-played by the size of the bubbles. Accordingly, relative to its takeover price or enterprise value, UEC is the cheapest of all the mid-tier energy-pro-ducing companies on the list based on an energy-equivalent basis.

It is no surprise that nuclear is the most cost-effective way of generating electricity. You can see above that UEC has more boepd pro-duction than both Zargon and Delphi and significantly more resources, yet both have higher enterprise values than the uranium producer.


BlackPearl, one of the larger Canadian heavy-oil mid-tiers, has a market capitalization over five times larger than Uranium Energy Corp. and trades at over five times EV/boepd. This means that investors are willing to pay five times more per barrel of oil energy equivalent for oil producers than they will pay for uranium producers – a metric that we believe will change, and the gap will narrow, especially for US uranium producers.

Looking at BlackPearl again, you see that its resources are nowhere near the size of UEC’s when compared on an energy-equivalent basis, as is commonly done in the oil and gas sector. From the bubble charts above, it’s clear that uranium companies are extremely undervalued when compared on a relative basis to their oil and gas peers.

The Cost of Power

In the chart on the right, the y-axis graphs the cost of producing electricity.

As you can see, solar en-ergy is the most expensive at $250 per megawatt-hour (MWh), while nuclear is the cheapest at $40 per MWh.

In certain countries, nuclear only costs $30 per MWh and thus can be described as the lowest-cost way of generating energy.

Furthermore, nuclear power plants have high-capacity factors, or the highest per-centage of electricity produced relative to the total capacity of the plant. Nuclear plants have a capacity of 89.6% – the next-highest is coal (72.6%), then natu-ral gas (37.7%), heavy oil (29.8%), hydro (29.3%), wind (26.8%), and solar (18.8%).

For every one pound of uranium used instead of coal, CO2 emissions are decreased by 45,000 pounds.

Accordingly, for every one ton of ore mined in the Athabasca Basin, roughly 300 pounds of uranium are recovered. That’s enough uranium to displace 13.5 million pounds of CO2 emissions, or the same as taking 1,500 cars off the road for a year.

Lowered CO2 Emissions


Uranium’s Future: The Big PinchIn 2011, in the United States alone, total capital expenditures in the oil and gas industry were $149.2 billion, with $21.7 billion spent on exploration. Compare that to 2011 world uranium exploration expenditures of a paltry $1.7 billion.

In other words, the United States spent 13 times more to marginally add to its crude-oil reserves. Looking at these numbers, it’s quite staggering how underex-plored uranium is globally, while proven uranium reserves are dropping every year. By converting uranium to barrels of oil equivalent, we are able to appreciate how underfunded the current uranium sector is:


In both graphs, the blue line reveals that the cumulative exploration expenditure is increas-ing in both sectors. However, it is important to note the lefthand y-axis of both charts.

The cumulative spending of oil and gas exploration in the United States is significantly more than the cumulative spending of uranium exploration in the world.

The shaded red area shows that US oil reserves are increasing, while uranium reserves are falling.

So what are the total uranium expenditures within the United States?

The total amount of uranium expenditures in the United States is 0.21% of the total amount spent in oil and gas. Or, put differently…

In America, 475 times more capital goes into oil and gas than it does in uranium… yet almost 20% of electricity generated in the US comes from nuclear energy.

This will have to change, as the US power industry is rapidly approaching a cliff. Today the American electricity sector is more vulnerable and dependent on Russian uranium sources than ever before. The only solution for the US is to develop and increase its domestic production of uranium.


The US Is at Major Risk

It is very easy to forget about the United States and its need for uranium, especially with the pro-jected resource require-ments of the BRICs – Brazil, Russia, India, and China. The BRIC countries are expected to have the same nuclear capacity as the United States sometime within the next decade, or approximately 95,000 MWe in aggregate. The United States has always imported uranium to fuel its reactors, since domestic production comes nowhere near what its reactors actually require.

Unfortunately for the US, the production vs. demand curve will widen, as reactors currently have over 255 million pounds of unfilled uranium requirements. You only have to look at the next chart to understand the severity of the situation.

To further add to the already bleak uranium situation, over 40% of the United States’ ura-nium imports come from Rus-sia or from locations under the influence of Russia.

Another 16% originate from developing countries in Af-rica, an area where the United States has weak diplomatic relationships.

In fact, Russia and Namibia plan to launch joint development of uranium deposits, and Niger has already granted Gazprom urani-um-exploration licenses in return for guaranteed investments.

Altogether, Russia has control or influence over 56% of the sources of the United States’ uranium supply.

Considering that the US generates 20% of its power from nuclear energy, that means 10% of Americans rely on the Russians for electricity. Americans are more dependent on Russian uranium than they are on any other commodity.


Losing Vital Allies

To make matters worse, the United States may have lost an important uranium ally when Australia and China signed a nuclear deal in April 2006 to allow Beijing to import Aus-tralian uranium.

The Nuclear Material Transfer Agreement and Nuclear Coopera-tion Agreement places safeguards to ensure that Australian uranium supplied to China will be used only for power generation. The Nuclear Material Transfer Agreement allows Australian uranium to be used in Chinese power plants, while the Nuclear Cooperation Agreement allows China to explore for uranium on Australian soil.

Australia is also developing relationships with India, one of the biggest emerging economies.

In October 2012, current Australian Prime Minister Julia Gillard spent three days in New Delhi to establish a dialogue on uranium trade. While it is too early to ascertain if trade will occur, the United States’ second “safest” source of uranium is at risk of disappearing.

In 2011, the United States had approximate-ly 4 million pounds of domestic uranium pro-duction, with Canada-based major Cameco supplying the majority.

While Cameco is currently the largest pro-ducer of uranium, its growth profile carries significant risk. Most of the growth in Came-co’s uranium production is focused in the Canadian Athabasca Basin, and the company is six years behind schedule and over budget on the production of uranium from its Cigar Lake deposit.

Chinese Premier Wen Jiabao and Australian Prime Minister John Howard watch the exchange of the Nuclear Safeguard Agreement during the signing ceremony.


The chart above makes it abundantly clear that the United States has almost no allies and very few stable, low-risk suppliers of uranium. Australia has opened its doors to Chinese money and will probably be able to sell its uranium for a higher price than what it gets from the US.

With this move, the Australians have not only secured a large uranium market closer to home, but have ensured that foreign capital will be available to further explore and develop their uranium assets. Accordingly, the United States will be importing less uranium from Australia and more from Canada. While Canada has limited country risk, it has very high proj-ect risk – a result of Canada’s geology and the requirement of deep, hard-rock mining.

The Coming Big Pinch of Global Uranium Resources

The Russians now produce more uranium on American soil than the Americans pro-duce in their own country.

As we stated earlier, Uranium One was recently acquired by the Russians; therefore it is safe to assume the company


will have no US production growth. The Russians bought Uranium One mainly for its other producing assets in Kazakhstan. That makes Uranium Energy Corp. the largest American publicly listed uranium company operating in the United States.

Russia has been negotiating strategic deals with many countries within the last decade. Most recently, the Russian government lent $500 million to Bangladesh to build a power plant and committed another $1.5 billion further down the line.

The red parts in the map on the right identify the countries where Russia has recently signed agree-ments or made uranium-related acquisitions.

The New Cold War – the “Putiniza-tion” of Uranium

Like the United States, the European Union also relies heavily on Russia and the Common-wealth of Independent States (CIS) for its uranium:

Russia is projected to produce 64 mil-lion pounds per year by 2020. The ma-jority – 40 million pounds – will come from Russia itself, and the remainder from its foreign projects in Kazakhstan, Ukraine, Uzbekistan, and Mongolia.

But there’s an often forgotten sub-sector of uranium production: the processes necessary to convert U3O8 into something that power plants can use.

For that purpose, yellowcake is first converted into uranium hexafluoride (UF6) at a conversion facility, then enriched, or concentrated, at an enrichment plant. Russia’s main conversion facility is at Angarsk, with a capacity of 42 million pounds of uranium per year. A small facility near Moscow, rated at 1.54 million pounds per year, primarily converts recycled uranium.

Russia can claim about one-third of the uranium-conversion capacity worldwide. Rosatom, the regulatory body of the Russian nuclear program, is also looking to set up an additional conversion plant by 2015, with the planned capacity currently unknown.


The United States normally owns 20% of the world’s conversion capacity; however, its plant, Metropolis, is currently shut down for maintenance and upgrades. Though the plant is scheduled to reopen in June 2013, the current shutdown just adds to the growing scarcity of UF6.

In the chart on the top right, you may have noticed that the United States isn’t listed. Currently, as of January 2013, the US has no conversion capacity and isn’t expected to be back online till mid- to late 2013.

Almost half of the world’s capacity to enrich uranium will lie in Russia once the country completes the planned expansion of its cur-rent enrichment facilities. Accordingly, the life source of reactors and power generation is not obtaining the uranium but having access to facilities that turn them into nuclear fuel.

Russian President Vladimir Putin is attempting to corner the uranium sector and the UF6 and enrichment markets alike. Russia’s squeeze will be felt around the world – not only in regard to uranium supply but to enrichment as well.

Portents of Things to Come?

It’s pretty safe to say that the Putinization of uranium was foretold by the master himself. On May 11, 2006, during his state of the nation address, Putin stated:

“ We must also take steps to develop nuclear energy, a nuclear energy sector based on safe, new-generation reactors. We need to consolidate Russia’s position on the world markets for nuclear energy sector technology and equipment and make full use here of our knowledge, experience, advanced technology, and of course, inter-national cooperation. Restructuring in the nuclear energy industry itself also aims at enabling us to achieve these goals. We must, of course, also focus work on prom-ising new directions in energy – hydrogen and thermonuclear energy. We must also take action to make our energy consumption radically more efficient. This demand is not just a whim for a country rich in energy resources, but is an is-sue for our competitiveness in the context of integration into the world economy. It is an issue of the environmental security and quality of life for our people.


I believe that only in this way can we ensure that Russia maintains a leading and stable position on energy markets in the long term. And in this way, Russia will be able to play a positive part in forming a common European energy strategy.”

U3O8 and UF6 Pricing Rundown

A good proxy for UF6 is the Canada-listed Uranium Participation Corp (TSX:U). The hold-ing company has bought and holds uranium oxide (U3O8) and uranium hexafluoride (UF6) with the aim to sell them later at a higher price.

It currently holds 7.25 million pounds of U3O8 and 2.34 million kilograms of UF6. As such, its share price depends on the spot price of these uranium compounds. There is no regulated commodity market for uranium of the sort that there is for copper or gold. Uranium is more like coal, where contract prices are set based on other recent contracts, historical data, and market sentiment.

Utilities secure the majority of uranium they need through medium- and long-term contracts with producers. In general, a producer and a utility will sign a contract one to four years before delivery is set to begin, and deliveries will last for many years.

Utilities also acquire uranium through spot and near-term purchases that typically call for delivery within one year. These purchases help them amend their long-term supplies to fit their real needs. Spot trades account for 12% to 20% of the uranium market, and spot prices are more volatile than contract prices.

We expect the recent disconnect between the share price of Uranium Participation Corp. and the spot price of uranium stems from Putin’s cornering of the UF6 market. The market is beginning to realize that UF6 is overlooked and undervalued. If our invest-ment thesis is correct, UF6 has a lot more room to run up.

As of January 2013, the 2018 U3O8 forward curve has been traded at US$68 per pound. That is over a 50% premium from where the spot price of uranium trades today. Utili-ties would not be buying uranium at over a 50% premium if they didn’t think uranium is going higher and will get more expensive.

Uranium at a 50% Premium


Follow the Smart Money

In this case, it’s the second- and third-richest people in the world. Bill Gates and Warren Buffett are strong advocates of nuclear power, and both believe that the markets have overreacted after the Fukushima meltdown. They are actively investing in the sector, and Gates is a staunch believer in the safety of nuclear reactors. He has already invested mil-lions into the private company TerraPower, which is developing a new nuclear design.

At Berkshire Hathaway’s annual meeting, Warren Buffett stated that nuclear power is important for the world. A Buffett company, MidAmerican Energy, has applied to build a nuclear plant in Iowa and currently operates a 1,760 MW facility in Illinois. Buffett’s right-hand man, Charlie Munger, agreed with his boss’ assessment, adding that the public can’t afford to be scared of nuclear power and that the risk of failure is very small.

China, the Catalyst

It’s safe to say that China’s growth and its insatiable need for energy were major fac-tors in two of the previously described uranium bull runs: the one prior to the 2008 financial crisis and the most recent renaissance prior to Fukushima.

Mainland China currently has 16 nuclear reactors, almost 20 under construction, and is look-ing to ramp up generation to 400 GW by 2050.

To fuel 400 GW, China will need 195.4 million pounds of urani-um per year for its power plants.

Considering that the largest uranium produc-er only has an output of 19.58 million pounds per year, and that the com-bined global output is only 120 million pounds, explorers and develop-ers truly have their work cut out for them.

195.4 million pounds of uranium is roughly equivalent to 4.9 million barrels of oil equivalent per day (boepd)… that’s 900,000 boepd more than what the largest oil company in the world, the newly consolidated Rosneft, produces. The runner-up, Exxon Mobil, comes in at a distant second at 2.1 million boepd.

America’s substantial growth from 1900-1950 required an increase in elec-tricity generation of more than 60 times.


China doesn’t have the luxury of having a Vladimir Putin in power, so it has to find other ways to feed its voracious nuclear-power appetite.

As we detailed in the November 2012 issue of the Casey Energy Re-port, there are distinct parallels between the oil and uranium markets, and China will need to look to other countries to secure resources.

In other words, we wouldn’t be surprised if Beijing starts taking out its checkbook and looking at foreign companies for potential acquisitions. Suitors will possess the same characteristics as previously recommended Casey portfolio companies that were ac-quired by larger companies.

United States – Losing the New Cold War

The United States now depends on Russia and its president more than ever for its ura-nium – a supply that is constantly at risk.

This was evident during the final years of the HEU agreement, when panic overtook the markets when it appeared the United States did not have a replacement source for the uranium supply from the Megatons to Megawatts program.

Fortunately, the United States Enrichment Corporation (USEC) was able to sign the multiyear Transitional Supply Contract – but instead of down-blended enriched uranium, which comes from the nuclear warhead missiles, the new supply will come from repro-cessed Russian uranium tailings and other uranium sources around the world, which means a higher cost of uranium production.

The key takeaway from this new contract is that the US doesn’t have a long-term supply contract, but will have to depend on this Russian-provided transitional supply until 2022.

The once-proud United States is forced to accept table scraps from the Russians and pay more to do so, with no fixed prices for the uranium. The US will become a price taker, as Russia will be setting the price of uranium globally in the future.

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While Americans are more worried about oil and gas, the nuclear sector is just as important in terms of energy security. But the United States is too late to the game to have any influence on its vital sources. Kazakhstan and Uzbekistan are controlled by the Russians; Australia is looking to the Chinese and Indians; and the Europeans have the African uranium producers in the palms of their hands. Even longstand-ing trade partner Canada has completed negotiations to export increased amounts of uranium to China.

Besides, while developing relationships, it seems every major developed or devel-oping country – except the United States – has been se-curing uranium at its source. The Athabasca Basin has a very strong Korean, Japa-nese, and French presence. And it is no secret that the Russians and Chinese have adopted a blank-check policy in their investments and ac-quisitions of uranium projects in Africa and Australia.

The United States has no choice but to hedge its risks and find and produce uranium domestically. As we said earlier, American utilities are unable to secure long-term contracts, which jeopardizes the United States’ economy and defense. However, rising capital costs and low prices are placing a greater strain on compa-nies that explore and develop uranium projects. Olympic Dam and Cigar Lake are prime ex-amples of how highly praised, world-class uranium projects can go awry. Therefore we can be sure to see a rise in domestic low-cost production, or production through ISR mining.

Thorium is a naturally occurring radioactive ele-ment that was first discovered on a remote island in Norway over 100 years ago. Advocates claim that thorium reactors have numerous advantages over uranium reactors, the main ones being:

• It is cheaper to extract and more abundant than uranium. Fact: the extractable reserves in the United States alone can power the entire country for the next 10,000 years.

• It is not useful in making nuclear weapons.

• The reactors are more stable and can’t melt down.

• The reactors produce less radioactive waste.

Naturally, with such benefits, thorium research is being actively funded – with India, China, and the United States leading the way. So what is currently stopping thorium?

Thorium reactors are too early-stage and too expen-sive to be feasible. While thorium is much cheaper than uranium, fuel costs are the least of the wor-ries. In fact, fuel accounts for less than 10% of the costs to operate a nuclear reactor (78% of costs for a coal plant).

However, nuclear power plants cost billions to build and are much more expensive than a coal plant of equal capacity. Also, there are papers now being published stating thorium can indeed be used to produce weaponized uranium-233.

We don’t foresee thorium being a worthwhile in-vestment in the near future. The non-warhead and green benefits alone at this point can’t justify the infrastructure costs.

Thorium as an Alternative Fuel?


The cost of building mines everywhere in the world has escalated due to higher ex-penditures on labor and materials, and cost overruns are impeding global mining per-formance. Conventional mines will have a difficult time attracting the capital to invest in such high-risk ventures. ISR, a much cheaper alternative, will be the first step for the US to increase its domestic production of uranium. In-situ recovery offers a lower startup cost, as well as a much lower cost of production and operation than conven-tional mining methods.

It’s ironic that a nuclear meltdown has been the catalyst to start what will be the big-gest of all the bull markets in uranium’s history. Fukushima has proven that nuclear power is essential for the world’s generation mix – and the next cycle of the uranium bull market is about to begin.


Investment ImplicationsNot all uranium companies are cut from the same cloth – therefore investing in this volatile sector requires good instincts and a lot of due diligence. You want to invest in companies that can make money using new technologies, such as “warm ISR” (“WISR”) production.

As the price of uranium moves higher, the margins of solid explorers and producers increase significantly. One company that has been in our Ten-Bagger Club – having gen-erated over 1,000% gains for subscribers – is Uranium Energy Corp (UEC). The com-pany is run by very smart people who have actually done what they said they would. Founder, President, and CEO Amir Adnani has put together a great team of people, such as Harry Anthony, who know the ins and outs of ISR production. This US-listed company is a low-cost producer and is a good buy at current market prices.


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Uranium The Next Yellow Metal Bull Market