News Flow Picking Up
Friday, September 15, 2006
This past week has been momentous for those invested in
uraniums and some of our other equities we think are special. Although their
momentum has carried them downward (a sharp contrast to the last few weeks when
they began to take off) due to inflation fears striking the market once again,
the underlying foundation of our uranium hypothesis is strengthening with the
news discovered this week. The first event, which will most likely interest the
stock investors deals with a little uranium company in Australia by the name of
PepinNini Minerals and the Chinese company Sinosteel. Sinosteel has purchased
the right to 60% of PNP's two uranium deposits for nearly $39 million. This will
supply PNP with much needed capital to develop these deposits which have an
estimated combined cost of nearly $300 million to develop ($120 and $180). Also,
it is important that they have a deep pocketed investor to help them develop the
deposits into mines and secure cheap financing because these deposits cannot
even be mined at this point for a profit. This is probably the most significant
aspect of the deal.
In America, Uranium is not even on the radar yet, however
we are going to need tons more of it to supply our reactors over the next few
years and with utilities wanting to build more...well in short we simply need a
lot more. Even with this supply problem on the horizon, the investment community
seems to be oblivious to the fact that a new baby bull market is waiting to take
charge, but not the Chinese. The Chinese are out making investments...and these
are true investments, because the are buying deposits that are worthless right
now under the assumption that they will rise in value in the next few years.
They are locking up reserves because with their massive building program
underway (more on this to follow) they realize that they must act now and secure
resources and a reliable supplier.
Also, a story not picked up by the American media...or
really any media in the world really was the fact that Russia came out and
stated that they may need 40 new nuclear reactors by 2030 in order to increase
its output of nuclear energy to 25%. Currently Russia produces 17% of its power
from nuclear means, and are a huge exporter of uranium. It is very important
that you keep in mind that their inventory of uranium (nuclear warheads and
such) is the only reason we have enough supply to keep the reactors around the
world running. In my opinion, this effectively will allow for the end of the
program the world currently has for Russia's uranium when it expires in 2014,
and give Russia a reason not to renew it. After all, why would anyone sell
something they are going to need later on when the price of it is increasing
nearly everyday?!?!?!?! They will not once the contract expires and this will
give the demand side major problems, not to mention what will happen to the
supply side...or shall we say what is left of it.
It also appears that Russia will win the contract to build
the next round of nuclear reactos in/for China. That was mentioned in the same
article as Russia's future needs and seems to highlight the belief that nuclear
is the way to go in Asia...and as we are seeing, around the world.
With China moving quickly to lock up reserves and build its
reactors, we see a tightening of supplies and added demand to the market.
Russia's stated goal also adds to the pressures on the market in more ways than
one can imagine. We cannot imagine any more evidence one would need to start to
buy into this idea that uranium is the future and that uranium stocks will
reward you greatly one day. The uranium industry died once, but it has reemerged
and will become an important and respected industry quite soon. When Wall Street
becomes enamored with these same uranium stocks that it ignored during the early
years (today) that is when we will know it is time to begin to take profits, if
not jump ship.