March 31, 2010


What Will Eventually Turn Out To Be
The Trade Of The Decade,
Is To Buy Quality Uranium Play's.
This unique energy source is a “backdoor play” on the growth of Emerging Markets.

There are 436 nuclear reactors in 30 countries around the world. But here’s the important thing; there are over 200 new plants in some stage of planning, engineering or construction. And most of these new plants will open in a Developing World nation.

But there’s not even enough uranium coming from the world’s mines right now to supply the current power plants across the world, let alone a couple hundred more. Thus, the uranium story is really quite simple. It is a supply and demand story. There is a lot of demand and not much supply. Any questions so far?

Mined supply of uranium satisfies only about 55% of total demand. The rest of the supply comes from somewhere else. These secondary sources of uranium come primarily from old nuclear warheads. But no one really knows how this enormous supply gap will resolve itself in the future. This is what we do know: when you get a supply deficit, prices rise. And I think that will be the case with uranium.

Uranium demand is on its way to hitting 226 million pounds per year. Yet last year, the top dogs of the uranium mining industry – which make up 90% of the market – produced only about 110 million pounds of uranium.

A sidelight to this statistic is the fact that 63% of all mined uranium comes from just 10 mines. This means that the global supply of uranium is susceptible to supply shocks. If one big mine floods or goes down for whatever reason, it’ll make a big wave in the uranium market.

The current spot price is around $42.25 a pound. In the summer of 2007, the spot price hit $136 a pound. But the uranium price collapsed, along with many other commodities, during the credit rises. The uranium price has not yet recovered, but I believe very much that it will, as supply/demand trends start to operate on the pricing of this commodity.

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