Don't look now, but the uranium sector is actually showing some
signs of life.
After going into a near free fall shortly following the
catastrophic events in Japan, uranium prices have stabilized.
Equities linked to the commodity have recently seen a push higher.
Could it be that the horrible sentiment that quickly invaded the
uranium sector is finally starting to lift? Is this the beginning
of a sustained recovery? I think so.
Regardless of what the pundits say, nuclear power remains the
cleanest, safest and cheapest form of mass power generation
available. And, long-term demand remains intact.
Yes, Germany's recent political grandstanding caused some
volatility in the uranium market, but realistically; where do they
plan on acquiring the power to replace the 22 percent that nuclear
energy provides the country? Solar panels, windmills, coal - I
don't think so.
With 180 million pounds of uranium required to meet current
worldwide demand Germany represents only 5 percent of the demand
market - and will only be 3 percent by 2020.
Meanwhile, 61 reactors in 16 countries are currently under
Even if long-term demand is lower by 5 to 10 percent over the next
ten years, the World Nuclear Association (WNA) still expects demand
for uranium will outstrip supply, particularly as low uranium
prices potentially defer even more mining projects.
The supply crunch easily has the potential to become even more
strained with 63 percent of the current uranium production coming
from only 10 mines worldwide. Additionally, the global supply of
mined uranium is susceptible to supply shocks if one mine floods,
or stops production for other reasons.
The most direct way to profit from the recovery in nuclear energy
and the shortage in uranium is to buy shares in the most productive
uranium miners in the world. Cameco (
), Denison Mines (
), Uranium Energy (
) and Uranerz Enrgy (
) are a few of the top names in the sector that are trading well
below their net asset values.
As I stated in this
letter over a month ago
, the tragedy in Japan, and subsequent fear in the market, has
presented us with the opportunity to invest in several well-managed
and fundamentally sound uranium companies. For well-informed
investors with the patience to tolerate volatility for a couple of
months, I think this could potentially be the single best
opportunity to buy and hold uranium stocks.
Invest in uranium stocks now while it is unpopular - because once
the nuclear renaissance becomes fashionable again, stocks of
companies exploring for, producing, and selling uranium could
realistically be 50 percent higher.
I will continue to track the nuclear/uranium story closely and
report back to you here in SmallCap Investor Daily. Feel free to
send in questions, or companies, that you would like me to discuss.
My address is email@example.com.