From Unloved Stepchild to Superstar:
Why Uranium Stocks
...and the 3 uranium companies you should own today
Right now, the price for a pound of uranium is less than the cost of producing it – a situation that is clearly unsustainable.
The last time this was the case, farsighted Casey subscribers ended up making gains of up to 1,506.3%.
Read on, and I'll prove to you that uranium has nowhere to go but up – and show you how to ride this emerging bull market to its dizzying heights...
Dear Fellow Investor,
You've heard the adage, "The cure for low prices is low prices."
Once a commodity has become so cheap that those who produce it can't make a buck anymore, some will simply close up shop, while others will stockpile their product and wait for better times.
As supply dwindles but demand stays the same, a commodity shortage occurs, and prices inevitably have to rise to reflect the new reality.
In the current uranium market, this fateful chain of events is already well under way:
"Back in 2006, when uranium became the flavor of the month, all of a sudden we went from having 30 uranium companies worldwide, exploration/development, to having 600 uranium companies worldwide, exploration/development. Today we are back down to 30, but this is not healthy."
– Amir Adnani, president and CEO, Uranium Energy Corp.
Or, as my friend Rick Rule, chairman of Sprott US Holdings and famous natural resource speculator, put it so succinctly: "We have two options – either the uranium price goes up or the lights go out."
Which do you think it will be?
The big US uranium pinch
Since Nixon, every US president has made a big to-do about America's dependence on foreign oil, but most people would be shocked to hear that America is EVEN MORE dependent on foreign uranium.
- Roughly 20% of US electricity comes from nuclear energy – that means 1 out of 5 homes in America is powered by it.
- Half of the roughly 55 million pounds of uranium needed to provide that power comes from Russia via "Megatons to Megawatts," a program we'll talk about in a moment.
- In the 1960s, the US was the world's largest producer and the largest consumer of uranium. While it is still the largest consumer, US uranium production has shrunk from about 36 million pounds back then, to a paltry 3.5 million pounds today.
Here's the first of my 3 reasons why uranium (and uranium stocks) MUST soar – and provide daring investors with superb profit potential...
Reason #1No more sweetheart deals
In 1993, the US and Russia entered into a nuclear nonproliferation agreement for the purpose of both countries dismantling nuclear warheads and converting the fissile material into reactor fuel.
However, of the two partners, Russia was the only one with the means to turn large amounts of highly enriched, weapons-grade uranium (HEU) into reactor-grade, low-enriched material (LEU).
So for two decades, Russian state-owned nuclear exporter TENEX dismantled nearly 20,000 bombs, blended down a total of 500 million pounds of HEU, and sold it to the United States Enrichment Corp. (USEC) at a fixed price.
Those happy times, unfortunately, are coming to an end in December 2013, when Megatons to Megawatts expires and the Russians will stop converting warheads into fuel.
And while Russia and the US signed a new agreement, it's little more than a farce.
The so-called "Transitional Supply Contract," announced in March 2011, specifies that the US may purchase a certain quantity of LEU from Russia – about half the amount it received under Megatons to Megawatts.
Doesn't sound too bad, but as usual, the devil is in the details.
You see, that uranium won't come from dismantled warheads but straight out of Russia's uranium mines. And the Russians won't even sell it to the Americans... it's really more like a loan.
Because whatever amount of natural uranium TENEX uses up to make LEU for the United States, the US will have to give back to the Russians.
In other words, this contract is just a purchasing agreement for Russian enrichment capacity, not for delivery of uranium. All the uranium used must be supplied by the United States itself.
And therein lies the rub...
As I said, current US uranium production is about 3.5 million pounds per year – a drop in the bucket compared to the 57 million pounds needed to keep the lights on.
Right now, there are very few companies in the United States that produce uranium... and some of them are not even American. In fact, the Russians produce more uranium on American soil than the US itself. You read that correctly.
So why not go and produce more?
For one thing, it takes TEN YEARS to build an operating mine from scratch. So even if you had ten startups today, there wouldn't be any more domestic supply for a decade.
And in the meantime, America now depends almost entirely on its own fast-shrinking stockpiles and foreign uranium supplies.
That alone would make a pretty good case for a uranium crunch and subsequent rise in price. But we haven't even looked at the other players...
Reason #2China's nuclear feeding frenzy
The "shock and awe" effect of Fukushima caused many countries to rethink their nuclear plans.
That moment of critical reflection generally didn't last too long, though. Most governments realized rather quickly that there was no feasible alternative to nuclear power generation.
Keeping the environmentalists happy would have meant facing nationwide rolling blackouts and, in the long term, would have made for a very unhappy citizenry – the one thing no politician wants to have to deal with.
Communist China, however, unburdened by democratic considerations and reelection worries, never missed a beat in forging ahead with its nuclear power program.
In addition to the country's existing 16 nuclear reactors, Beijing is currently building 29 more – the most of any country, and 40% of the world's total.
And that's just the beginning: the Chinese government plans to build 51 more nuclear reactors in the coming decades, for a grand total of 96.
That means China will soon catch up with the United States – which owns 104 operating reactors – and will become a contender for the title "world's biggest consumer of uranium."
According to projections from the International Atomic Energy Agency (IAEA), by 2035 China's share of global nuclear capacity will reach 19%... up from only 3% in 2008.
India, another emerging country with ever-increasing energy needs, also is a future force to be reckoned with in the nuclear energy sector.
Just recently, the Obama administration signed a nuclear agreement with India, which has opened the doors for uranium exporter Canada to sell into the Indian market.
And the US itself isn't standing idly by either. In March 2013, the concrete foundations for two new reactors, one in South Carolina, one in Georgia, were laid – the first new nuclear reactors that are being built on American soil in over three decades.
All those new power plants and reactors, of course, spell a vast increase in global uranium demand.
But China, India, and the US are not the only countries ramping up on nuclear power...
Reason #3Japan comes back from the brink
In the aftermath of the Fukushima disaster, Japan tried to drastically reduce its reliance on nuclear energy... which is a tough call when a full one-third of your energy needs are supplied by nuclear power.
"Japan lacks alternate sources of energy that are plentiful and cheap," states a recent article in the National Journal. "After 60 years of dependence, the country is economically, historically, and culturally handcuffed to the atom."
And so, two years after the Japanese government decided to idle all but two of the country's 54 reactors, the Abe administration is ready to bring those nuclear plants back online – possibly as early as July.
When Japan shut down its 52 reactors in 2011, 20 million pounds of annual uranium demand suddenly evaporated.
Moreover, the Japanese dumped about 15 million pounds of unused inventory onto the market, depressing the price of uranium.
"The biggest pressure on price at the moment is not necessarily the downgrade to demand since Fukushima, it's this massive inventory overhang," Joel Crane, VP of research at Morgan Stanley, Melbourne, told Bloomberg in January.
"Should the Japanese give the green light to restarts, that overhang is instantly gone, and that will be very positive for prices."
Those restarts are about to happen. There's no telling how high they could drive the uranium price, but I suggest you hold on to your hat – it'll be a wild ride.
And if you're bold enough to get into deeply undervalued, solid uranium companies now, you could be a very happy rider indeed.
As a matter of fact, I just finished putting together a special report with detailed descriptions of the top three uranium companies that, I believe, investors will be able to hang on to straight to the top of this bull market.
And I'd like to send you that special report free with a no-risk trial subscription to my monthly newsletter, the Casey Energy Report. The report is titled 3 Must-Own Uranium Stocks for 2013, and in a moment I'll give you an overview of what's in it.
But first I want to drive home one point that I only touched on briefly before...
The coming uranium shortage
We've already talked about how demand for nuclear reactor fuel is ready to explode. Now let's take a look at supply.
For an eye-opening glimpse of what we can expect in terms of future supply/demand challenges, you only have to take a look at the chart below:
There are two main factors that almost guarantee that a severe uranium shortage is in our immediate future:
- The world consumes more uranium than it produces.
- Barely anyone is producing uranium anymore.
Let's start with factor number one. As you've read, the United States today produces less than one-tenth of the uranium supply it consumes per year.
But the global picture looks equally disturbing:
Worldwide, there are 433 operable nuclear reactors, which consume 177 million pounds of uranium per year.
Global uranium production, though, is only about 130 million pounds.
So far, part of that shortfall has been made up for by Megatons to Megawatts, but as you know, that program is coming to an end now... and who will provide all that uranium?
Which brings us to factor number two – a lack of uranium miners.
I've mentioned before that there are very few uranium producers in the United States. On the entire planet, there are maybe 30 uranium miners left – from about 600 in uranium's heyday in the mid-2000s. Most of them simply have been washed out of the business when mining became uneconomical and the share prices of uranium stocks plummeted.
And the few that are left are actually LOSING MONEY right now.
You see, in order to bring new mines into production and to work profitably, the uranium industry needs a spot price of at least $85 per pound. Currently, uranium is trading for a little over $40 per pound.
So for the miners to keep supplying uranium,
the price needs to go up.
Which won't really be a problem, because producing and delivering electricity from nuclear power is a hugely complex endeavor. The uranium price is only a fraction of a utility's overall cost... and that would still be true even if the uranium price doubled.
Since nuclear reactors have 20- to 40-year life spans, what plant operators are much more interested in is reliable long-term supply, and that's where my favorite uranium companies excel.
Most of the heyday hotshots are gone. The best of the best miners, though, have hung in there, and their perseverance will soon be richly rewarded – along with the investors who recognized the value of those companies early on.
Let me tell you a bit more about my three favorites that you'll find in your free special report...
3 Must-Own Uranium
Stocks for 2013
The first stock I recommend in my just-finished special report is one of my favorite American uranium miners.
Must-Own Stock #1The low-cost producer
That company is Uranium Energy Corp. (UEC), featured in our recent webinar The Myth of American Energy Independence.
UEC owns properties in Wyoming and throughout the US Southwest – Texas, New Mexico, Arizona, Colorado, and Utah – a region that has historically been the most concentrated area for uranium mining in the United States.
What I like most about the company is that it's one of the lowest-cost producers of uranium in the United States. UEC's specialty is in-situ recovery (ISR), the most cost-efficient and environmentally friendly method of extracting uranium.
Today ISR is still only used in about one-third of global uranium production, but UEC founder, President, and CEO Amir Adnani predicts that it will play a much greater role in uranium mining in the future – and that visionary companies like UEC will be able to build market share around this technological advantage.
Longtime subscribers of my monthly newsletter, the Casey Energy Report, are already familiar with UEC, which is a member of the Casey "Ten-Bagger Club."
In a spectacular run from $0.25 in November 2008 (when we first recommended the stock) to over $2.60 seven months later, Uranium Energy Corp. handed Casey Energy Report subscribers more than 1,000% gains.
And I believe it can do it again. Right now, uranium stocks are so undervalued that for the solid companies with sizeable deposits and enough cash in the bank, a dramatic rise in share price is practically baked in the cake.
In your free special report, 3 Must-Own Uranium Stocks for 2013, you'll read all the reasons why UEC is a prime candidate for another ten-bagger, and why you should buy now.
Must-Own Stock #2A Finger in Every Pot
This versatile mining giant has a large portfolio of low-cost mining operations and is engaged in all stages of uranium production, from exploration to nuclear fuel conversion.
Here's a factoid that will tell you how much of a player in the uranium market this company is: It controls more than 45% of the new uranium production that is slated to come online over the next ten years.
There's no question that this is a stock that belongs in every uranium investor's portfolio... and right now you can buy it at bargain prices.
You'll get all the details on this bulwark of the uranium sector in your free special report, 3 Must-Own Uranium Stocks for 2013.
Must-Own Stock #3The Silent Tracker
This uranium company makes money without ever getting its hands dirty.
Its secret: it doesn't actually produce "yellowcake." Instead, it is a buyer and seller of uranium oxide (U3O8) and uranium hexafluoride (UF6), and therefore its share price tracks uranium's spot price.
The company has one of the most respected management teams in the business and currently owns 7.25 million pounds of uranium that it bought for about $43 per pound. All it has to do now is wait for the price to go up – and you've already seen the many reasons why that is bound to happen, and soon.
For a bit of perspective, in the last great uranium bull market, the spot price for U3O8 peaked at $136 per pound... so there's a lot of room for gains from where we are.
In your free special report, 3 Must-Own Uranium Stocks for 2013, I'll tell you all you need to know about this company and what price to buy at.
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All three uranium stocks listed above are described in the free special report I want to send you – including names, ticker symbols, descriptions of management, financials, properties, current operations, and future plans.
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I hope you're ready to join me in taking advantage of the coming uranium shortage. If this bull run is only half as good as the last one, we're in for some exceptional gains...
How do you get gains of
1,000% and more?
"By being right and sitting tight," my friend and former mentor, famous natural resource speculator Doug Casey would say.
And that's what he did in August 2004, when he decided to publish an all-uranium edition of his flagship newsletter, advising his subscribers to buy several uranium companies, among them Paladin Resources (PDN.ASX).
At that time, uranium was selling for $18 a pound. A few months later, it was on a trajectory to the moon – topping out at $136/lb. in 2007 – and took the uranium stocks with it.
A little over two years later, Paladin Resources had handed Casey subscribers returns of up to 1,506.3%.
I won't lie to you and say these kinds of gains are the norm – however, they ARE possible.
But how do we know this coming uranium bull market will be as big as the last?
I'll let my friend Rick Rule answer that one, with an excerpt from our webinar, The Myth of American Energy Independence:
"I wouldn't argue that it's better, because the situation that we saw ten years ago was superb – but it doesn't have to be better.
You made the point yourself that there were a lot of people who added a zero to their net worth as a consequence of that market. Suppose one only did half as well, Marin, and their net worth "only" went up five times. Would that be sufficient for most of your viewers?"
I know it would be sufficient for me – how about you?
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P.S. Aside from the 3 Must-Own Uranium Stocks for 2013, I strongly recommend you read Doug Casey's Eight Ps of Resource Stock Evaluation.
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