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Uranium: Powering the Future
Thursday, May 8, 2008

Uranium equities have continued their downturn after a period where it appeared we may have been flat-lining. Unfortunately for those still holding, many of these stocks dipped further in recent trading days resulting in a new all-time low for theinvestar's Canadian Uranium Average (TICUA). We noticed during those down days that volume spiked on many of the smaller uranium stocks included in the average as well as those which we follow on the side. Some of these stocks reversed course during high volume days and finished up after being down 5-10% which brought to mind the word capitulation. Even if the uranium mining stocks have reached a bottom, it will take some time to achieve the highs set in previous years as many stocks would need to triple just to get back in the neighborhood of their old highs.

Volume in the smaller uranium issues tipped us off, and the chart seems to confirm that we may be somewhere near a bottom. A chart from the top would show that any bubble which existed is no more, and mid- to large caps now dominate the above index.

For all the good “spin” and taxpayer dollars funneled to ethanol and biofuel production over the past decade, it is time to seriously consider the ramifications of this policy on futures markets, the environment, and most of all our food supply. We here at, LLC have continually argued against burning food rather than drilling for further oil supplies and are convinced that this is an issue which must be confronted sooner rather than later. At some point in the future American politicians are going to have to stop delaying until tomorrow problems faced by the country and take serious and responsible stands on real issues. We see a future where “renewables” and “fossils” can coexist and complement each other. Goals will have to be set, and they must be realistic (solar power is not going to power the whole United States- let alone a large state such as California, New York or Texas) or these policies will fail. Most importantly though, is the fact that nuclear power will have to be the “keystone” to any successfully planned policy. You cannot have energy 'independence' yet be dependent upon such variables as sunlight in the day- I for one would like to be reassured that my refrigerator is not going to shut off each night when the sun sets upon America and have to dispose of all my melted frozen foods.

Nuclear power is a safe, efficient, and non-carbon dioxide producing form of power. Today it produces around 20% of the United States' electricity needs, and if we as a nation are serious about switching our vehicles to electricity from oil then we will most surely need to not only replace but also add more nuclear power stations to our aging fleet in the not too distant future. Plans are on the board for between 20 to 45 new nuclear power stations in this country over the next 30 years, but if these stations are being built to replace coal fired plants as well as a small number of oil burning stations, then many more nuclear stations will be needed. Today it appears that nuclear power falls under that 'blue state' v. 'red state' game of politics, but in the past nuclear has been an option which has transcended political lines, ties, and biases for the advancement of the country.

If you are having trouble believing this, look no further than Illinois. This is a state which bleeds dark blue due to in large part to Chicago, America's third largest city. With its huge electricity demands, Illinois allowed 21 nuclear power stations to be constructed within its borders over the past 50 years or so. If you have ever driven through the state you can relate to the spectacle of seeing clear blue skies over farms for miles and as you drive down the interstates you notice large swaths of white “clouds” coming from a spec on the horizon. As a child it amazed me, and I even imagined a volcano or something ahead. Each time it turned out to be but a nuclear power station emitting harmless water vapors into the air while powering one of America's greatest cities in the process.

New York City even gets 20% of its electricity needs from nuclear power generation. Although such notable political figures such as Senator Hillary Clinton and Senator Chuck Schumer have called for nuclear power stations to be closed, including the one powering much of New York City, they have not found a way to replace that kind of generating capacity with renewables or even coal or natural gas.

One should take note that utilities such as Exelon are reporting strong earnings in the face of higher coal, oil and natural gas costs. These utilities are giving full credit to their nuclear units as they are able to export cheaply generated power across the country to sell to other utilities at higher prices. This proves that nuclear facilities are profit centers, and after the new plants now under construction come online the point shall be reiterated for those still not convinced.

All of this shall contribute to greater need for uranium to power not only America, but China as well. The world needs a 'denser' fuel source, and despite any argument one can come up with, NOTHING is denser than uranium. As our societies around the world have evolved and required further power needs, man has always reached an inflection point where the only logical move was to a source of power which was more efficient than the previous. Over the course of history the evolution of power sources has looked something like this:

1. Wood
2. Coal
3. Oil

Now each of these has had subcategories such as the switch from whale oil to petrol oil, but that is a basic outline. The only logical step to take next is uranium based power which blows away all the before-mentioned substances. What is ironic is the fact that this nuclear waste that so many complain about is in fact a gold mine for future generations. Today we can recycle some of this by taking out the metals which appear after one cycle use such as plutonium and then up-blending what is left to form a substance which can then go through the cycle again. This can only be repeated so much until it becomes uneconomical. In France however, scientists are trying to develop ways to harness this unspent fuel in order to make the entire process more environmentally friendly and economically profitable. Scientists estimate that somewhere between 90-95% of the power available from uranium fuel is not used today because we neither posses the technology or the know-how to harness this power.

Now if we only consumed say 5% of the oil we drilled for and put the rest in storage, how many people would complain? Probably none, as today no one complains about the large storage facilities located around the country. They pose a serious environmental concern if an earthquake or flood hit to wildlife, the environment, water sources, and humans. If you doubt these facts simply look at New Orleans after Hurricane Katrina where crews had to go in and clean up large oil slicks from the high winds and flooding.

For some reason there seems to be a bias to nuclear power which is probably due to the fact that the deadliest weapons on earth use this same fuel source to implement unbelievable destruction. Despite how backwards France appears to many Americans, it would behoove many of them to take notice that America is behind the times in the Nuclear field and play catch up, for it is they who are behind and backwards. It is most likely the outspoken minority (those niche environmental and special interest groups) who influence those policy makers capable of creating change in this area, but our guess is that Americans, and we mean the silent majority, simply want their electricity demands met by any means necessary. Americans care for neither where the oil came from nor how much it pollutes so long as they can get to where they need to be, and one can assume they will take this same nonchalant approach to future electricity needs.

This is why we believe that uranium is still a necessary fuel source and one that will power the world for many years to come. In a world as complex as ours, there are necessary evils and environmentalists will have to choose the lessor of evils to achieve their dreams. On one hand they can continue to allow pollutants to be 'dumped' or as we like to say 'pumped' into the atmosphere and then distributed all over the earth, or they can allow for clean emission nuclear power stations to dot the landscape and preserve thousands of acres of wildlife habitat in the process while the pollutants are collected and kept in controlled environments. This is not much different from the process involved at plants which use 'scrubbers' on their smokestacks to lessen emissions as those pollutants are eventually collected and disposed of by firms which provide services solely devoted to cleaning and disposing of these toxins.

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