Nuclear Power Is on an Upswing: Jeb Handwerger
Source: George S. Mack of
The Energy Report
Despite the Fukushima setback of last March, nuclear power is
not a dinosaur industry of the past, according to Jeb Handwerger,
Gold Stock Trades.
In fact, he believes the world is reawakening to the need for
nuclear power generation, which demands increasing amounts of
uranium. The big-percentage returns on uranium will come from the
near term U.S. domestic producers and junior exploration
companies in the Athabasca Basin, and in this exclusive interview
The Energy Report
, Handwerger shares his favorite names that could return huge
The Energy Report:
I can see from your newsletter that you are bullish on uranium.
Can you explain why?
The worldwide demand for electrical power is giving rise to a
nuclear renaissance. Even before the events in Japan in March
2011 there was renewed interest. In some ways, the disaster at
Fukishima can benefit the sector by pushing us into the modern
age of nuclear, which is safer, cleaner, smaller and in some
cases portable. We are really at the cusp of a nuclear revival,
and I think it is going to be stronger than ever. The West and
especially North America have the ability over the next few years
to become not only energy independent, but to become suppliers
and exporters of energy. Regardless of public opinion on this
energy source, nuclear power is not going away. Countries are
going to have to learn how to live with and use nuclear power in
a safer and more efficient way.
What are the catalysts you're seeing in the sector?
There are so many catalysts in the sector right now. We just saw
two new approvals for nuclear power plants in Georgia with the
new AP1000 Generation III design. This is after three decades of
not approving a reactor here in the U.S. Elsewhere we see that
Canada has its own CANDU (Canada deuterium uranium) reactors, and
we've seen Canadian Prime Minister Stephen Harper work out a deal
with the Chinese Investment Corporation. China is looking to
expand its investment presence in natural resources and to
diversify its large holdings of U.S. dollars and Treasuries. The
Chinese are establishing relationships with uranium producers,
and this is going to be very big for Canadian resource companies.
We are really excited about the uranium sector at the moment.
We're even seeing interest from major entrepreneurs, such as Bill
I'll ask you about Gates in a bit. But where are uranium equities
in their cycle right now?
Right now uranium is presenting a once-in-a-lifetime opportunity.
Even though we have seen a rally with some near-term producers up
over 200% since those 2011 lows, investors are just now beginning
to realize a real turn in uranium market fundamentals, and I
think we're really beginning the next cycle, moving higher as
demand outpaces supply. Many technical charts show stocks
beginning to break above their long-term 200-day moving averages.
It may begin to slope upward.
Global X Uranium ETF (URA:NYSE)
is one of the better ways to look at the sector as a whole, and
the 200-day moving average right now is about $10.34, having just
broken $10.45. It is up over 33% in 2012 outpacing the gold and
Do you see uranium equities as value plays?
I see that the near-term producers have rallied and have had
quite a bounce, and now are not as cheap as they once were,
that's for sure. Some of the producers have also moved, such as
Uranium One Inc. (UUU:TSX)
Cameco Corp. (CCO:TSX; CCJ:NYSE)
Denison Mines Corp. (DML:TSX; DNN:NYSE.A)
. So far I haven't seen a really explosive move in many of the
uranium explorers, and so I think that there's still a lot of
upside. Investors have to realize that when the uranium sector
begins a new leg up, the moves will be dramatic. We believe we
are still early in the game.
Do you have a favorite play?
My main recommendation over the past few months has been
Uranerz Energy Corp. (URZ:TSX; URZ:NYSE.A)
. It hit a low in October; it has rallied since that point with
over a 200% move. But I still don't think it's been recognized
that it is in construction at its Nichols Ranch Project and
should be producing 600-800 thousand pounds of uranium annually.
Its grades are substantially higher than its peers and it already
has a processing agreement signed with its neighbor, Cameco. I
think we're still early stage. It's one of my premier, select
equities, and I recommend it be bought on pullbacks. Uranerz is
well funded and fully permitted for construction on its Nichols
Ranch Project in the Powder River Basin, which is scheduled for
production of uranium ore by the end of this year. The 20-, 50-
and 200-day moving averages are sloping upwards.
It is important to note that Uranerz' land position is
strategically surrounded by hungry majors such as Uranium One and
Cameco, which has stated that its production needs are beefing
up. Already, Cameco has arranged for Uranerz to use its
processing facilities, which heretofore have been underutilized
as Cameco is not meeting desired production levels.
Cameco was willing to pay a premium for Hathor, which had
nowhere near Uranerz' immediate potential. It may be occurring to
Cameco that Uranerz might make a desirable acquisition that will
enable the company to expand profitably in this strategic
Uranium One, which also neighbors Uranerz, might make a bid
for the next U.S. domestic producer. The acquisition
possibilities seem endless, with the Chinese looking for
acquisitions to purchase with their hoard of depreciating U.S.
dollars and Euros. Additionally, the flooding of the Ranger
deposit in Australia further intensifies the supply-demand ratio
of uranium, which is positive for North American miners such as
Uranerz also has an agreement to sell uranium to
Exelon Corporation (EXC:NYSE)
, one of the largest nuclear power-producing utilities. It will
be shipping resin over to Cameco's processing facility, which is
not being filled to capacity, and that's telling me that Uranerz
will be a great acquisition target.
Do you think we will see a bidding war between Uranium One and
Cameco for Uranerz?
Possibly, and I think that
Paladin Energy Ltd. (PDN:TSX; PDN:ASX)
is also interested in coming into North America. Paladin just did
a big write-down on its African deposit and took a loss. Paladin
CEO John Borshoff was also CEO at Uranerz from 1987 to 1991, and
I am sure he is aware that it should be coming into production by
the end of the year. Right before Fukushima in 2011, Paladin
bought the Michelin uranium deposit from Fronteer Gold (acquired
by Newmont Mining Corporation (NEM:NYSE)). So, Paladin definitely
has an interest in North America.
Jeb, just one more question about Uranerz. Only 18% of shares are
being held by institutions. Just based on that capital structure,
there's tremendous room for appreciation here, isn't there?
That's why I have targeted Uranerz shares at around $7, which is
still over double where it is today. I don't think it is a real
stretch when you see the supply-demand constraints over the next
12-18 months. The majors such as Paladin, Rio Tinto, China and
surprisingly the government of Iran are having problems dealing
with the ever-rising threat of resource nationalism as
exemplified by Namibia, which is making noises that it may
institute a super tax on miners. Of these aforementioned
entities, Rio Tinto and Paladin may find a warmer welcome in the
mining-friendly Canadian Athabasca Basin and U.S. Powder River
You just began following
Athabasca Uranium Inc. (UAX:TSX.V;
, with a market cap of under $10 million (
). How do you classify this stock, seeing that it's too small for
mutual funds to purchase shares?
I look at Athabasca Uranium as an exploration company in the
midst of an upswing. We had not seen a lot of interest in uranium
exploration plays, but that changed at the end of 2011. The Rio
Tinto deal with Hathor changed the price of real estate in the
Athabasca Basin, and this is something that investors are going
to begin to realize as the whole area heats up. Uranium is to the
Athabasca Basin as oil is to Saudi Arabia. The Basin has by far
the best grades in the world, as Saudi does oil. If you're
looking for a company with a proven exploration model that is
trying to replicate the Hathor, Denison and Cameco model, then
Athabasca Uranium is one that you are going to keep a close eye
on. It's using leading-edge technology, including airborne
surveys and seismic data to precisely designate its drilling
If an investor believes in a uranium bull market and that
exploration plays are going to provide significant leverage to
the price of uranium, then this is a company you should be
looking at because it's on a geological discovery trend. The big
boys, such as Cameco, Rio Tinto, Sovereign Asian Funds and
possibly BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK) are realizing
that future uranium production will come from the Athabasca
Basin. This is where deposits have grades tens to hundreds of
times greater than conventional projects and are located in the
mining-friendly jurisdiction of Saskatchewan, Canada.
To your point, you are right that with a $10M market cap the
mutual funds are not going to invest in the company yet, but you
have to remember that this young company really acquired all
these land assets after Fukushima, when this opportunity
presented itself. This is a chance for investors to get in on a
ground-floor opportunity where if the company does make a
discovery, it has the potential to make very impressive gains. I
can't emphasize enough that the Rio-Hathor deal has changed the
Athabasca Basin, and certainly the price of real estate in the
area. I think investors need to follow companies like Athabasca
Uranium, which is on the verge of hitting one of its target
The company currently has samples in analysis. What can we expect
to see happen to these shares if these analyses show strikes?
That's a good question. This is an area where there are massive
uranium deposits, and if Athabasca Uranium has a showing similar
to the size of McArthur Lake, the rewards could be spectacular on
the exploration side. There's limited volume on the shares, and
investors need to remember that it's a speculative exploratory
Looking at the map, it's clear that Athabasca Uranium is
surrounded by hungry giants such as Cameco, Rio, Denison and
, among others. This company is actively exploring this area and
has encountered massive alterations zones for which results are
The company is optimistic that of the many holes being
currently explored, it would take only several dramatic finds to
replicate the Hathor phenomenon, which resulted in the stock
rising from a few pennies to dollars.
Athabasca Uranium is modeling itself after the Hathor success.
The same aces that generated Hathor are being replicated step by
step by this young uranium miner, which is barely more than a
year old. It has the "goods" sitting directly in the middle of
other successful mining ventures.
The company hired Dr. Zoltan Hajnal, who was the seismic
exploration expert for Hathor. Hathor's exploration success was
based on the use of seismic data to efficiently pinpoint targets.
The success rate of its drilling subsequently rose to
approximately 70%. Dr. Hajnal played an integral role in the
Is it a role of the dice or is it a matter of time?
Athabasca Uranium is sitting on valuable real estate with
high-value targets defined by airborne surveys and 2D seismic
surveys. So I think there's potential there, but of course
there's no guarantee with exploration. We don't know how long or
how much cash it will take.
You've written quite a lot about it China's growing interest in
the sector. Anything new on that front?
Yes, I should mention China's state-owned China Guangdong Nuclear
Power Holdings, which offered $2.2 billion (
Extract Resources Ltd. (EXT:TSX; EXT:ASX)
in mid-February. It had earlier in the month bought
Kalahari Minerals plc (KAH:LSE; KAH:NSX)
, which is Extract's biggest shareholder. Extract has the Husab
uranium resource in Namibia. China has just recommitted to expand
its power demands. We are all realizing that there's permanence
in nuclear power. Even Germany is turning on some of its power
plants due to record cold temperatures.
Earlier you mentioned Bill Gates' interest in nuclear power. How
has he demonstrated this?
Many environmentalists remain oblivious to the ongoing advances
of modern nuclear designs, but there are also some new
technologies being developed. There has been a little-publicized
start-up called Terra Power LLC, where Bill Gates serves as
chairman. The stated goal is to make nuclear reactors smaller,
cheaper and safer. It has designed a reactor that might run
untouched for 100 years. Gates is putting a lot of efforts into
nuclear power, and I think there's going to be huge demand for
new technologies in this industry. He has traveled to China to
speak on the subject, and China seems to be amenable to new ideas
in its ongoing programs.
Surprisingly, the Saudis are also building modern nuclear
plants. The government set up an entire city for the development
of atomic energy entitled, "The King Abdullah City for Atomic
Energy Research" (KA-CARE). Soon after, the Saudis contracted the
French nuclear builder AREVA to design the building of
next-generation nuclear plants. A number of nations particularly
in the Asian Rim are going full speed ahead.
I've enjoyed speaking with you, Jeb.
It was my pleasure. Thank you.
Gold Stock Trades
is a highly sought-after stock analyst and best selling writer
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industry for his accurate, in-depth and timely analysis of the
general markets, particularly as they relate to the precious
metals, nuclear and rare earth sectors. Handwerger utilizes both
fundamental and technical analysis, especially the study of price
volume action to understand the long-term macroeconomic trends in
the natural resource market. He has a strong background in stock
market history, investment psychology, geopolitics, mining
engineering and economics. His work has been featured in
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1) George Mack of
The Energy Report
conducted this interview. He personally and/or his family own
shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are
The Energy Report:
Athabasca Uranium Inc., Uranerz Energy Corp. and Uranium Energy
Corp. Streetwise Reports does not accept stock in exchange for
3) Jeb Handwerger: I personally and/or my family own shares of
the following companies mentioned in this interview: Uranerz
Energy Corp. and Athabasca Uranium. I personally and/or my family
am paid by the following companies mentioned in this interview:
None. I was not paid by Streetwise for this interview.
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