We Love You, Mr. President! (If Only You Knew That Uranium Was Strategic)

This guest editorial is by Marin Katusa, Chief Energy Investment Strategist, Casey Energy Report

uranium-casey-energy-report
Uranium – Image from Wikipedia

With Valentine’s Day coming up fast and furious, I wanted to take a moment to give heartfelt thanks to one of my personal heroes this year—the man who single-handedly destroyed US national security and will give smart uranium investors a lot to be grateful for in the coming months. This letter is addressed to him.

Dear President Obama (may I call you Barry?),

I’m writing this letter to you in sincere appreciation and heartfelt gratitude for your achievements regarding national security and the uranium sector.

Perhaps you wonder what on earth national security could have to do with uranium (unless it is used in those pesky nuclear weapons that you keep taking away from the mullahs).

In fact, I bet you do wonder, because apparently it never occurred to you that one could depend on a ready supply of the other.

But let’s take this one step at a time.

I know you’re used to receiving information on the state of the union from your slew of sycophantic advisors in the form of tidbits and sound bites, so I’ll try not to overwhelm your fragile cerebrum.

Please take a look at the facts listed below, and maybe, just maybe, it’ll begin to dawn on you…

7 Facts You Should Know About Uranium in America

Amount of electricity in the United States generated by nuclear power: 20%.

Number of homes in President Obama’s America that are powered by the Russians: 1 in 10.

Number of homes in President Kennedy’s America that were powered by the Russians: 0.

Percentage of imported uranium in President Obama’s America: over 90%.

Percentage of imported uranium in President Kennedy’s America: 0%.

In 1962, the US was the largest producer of uranium in the world.

In 2013, the US ranked #8 in uranium production, right after China.

But let’s not stop there. To fully understand in what way national security and uranium might be linked (except that they both share some of the same vowels and consonants), I need to insert a brief…

History of the DOE

Believe it or not, but it was good old Albert Einstein who was the catalyst for the creation of what’s known as the US Department of Energy (DOE) today. In 1939, seeing that the Germans had an alarming head start in the nuclear race, Einstein wrote a letter to your predecessor Franklin D. Roosevelt, alerting him to that fact.

We know the rest from the textbooks: In 1939, Germany invaded Poland… in 1941, Japan bombed Pearl Harbor… and within two months, in 1942, Roosevelt instructed the Army Corps of Engineers to build a nuclear bomb—the start of the Manhattan Project. The US dropped two nuclear bombs on Japan, and in August of 1945, Japan surrendered.

The beginning of the Cold War led to the creation of the DOE.

In 1946, the US presented a plan for international control of nuclear research at the United Nations summit. The Soviet Union completely rejected the American proposal, launching the race for the nuclear bomb between the two superpowers.

After World War II, the Manhattan Project was turned over to the Atomic Energy Commission, which by the late 1940s had invested hundreds of billions of dollars into expanding the weapons complex.

By 1973, OPEC caused chaos at the pumps for Americans, and President Nixon announced an energy plan of independence for the US by 1980 (the first of many announced by subsequent presidents; I wonder why they never worked out).

Nixon created the Federal Energy Administration, and in 1974, his successor, Gerald Ford, signed the Federal Energy Reorganization Act. Like most political promises, the program failed to deliver, and by the late 1970s, Jimmy Carter was facing high oil prices and low approval ratings.

President Carter created the Department of Energy, and nine days before Elvis Presley died of a heart attack, James Schlesinger was sworn in as the first secretary of energy.

I know, Barry, you’ve been impatiently shifting around in your seat, waiting for the punchline. Okay, now this is where you come in…

President Obama Makes Changes to the DOE

Perhaps you know that since its inception, the Department of Energy has been the largest holder of uranium in the world. The DOE’s mandate for uranium was a strategic one, and the essential goal—as an issue of national security—was for the US and its citizens to never become dependent on another nation for uranium.

All the DOE had to do was follow two simple rules for sales to the US utilities that required uranium to power American households. Here they are:

  1. Never sell more than 10% of domestic demand into the market per year.
  1. Never sell uranium at such a low price that it would sabotage domestic uranium production.

Enter you, Mr. President, Barack Obama. You rode your campaign horse to victory on slogans like “Yes we can” and “It’s about time. It’s about change.”

Unfortunately, you forgot to mention that rather than change American politics, you were about to short-change the American people.

Why, oh why couldn’t you just leave well enough alone? Every US president before you had obeyed those two rules I mentioned above—Republican or Democrat, from Truman to Kennedy to even George W. Bush.

In mid-2013, you, Barry, apparently not understanding the importance of national energy security, changed the law and dropped the two rules. (We’ve been writing about this for a while now, so thanks for providing us with editorial material too.)

Since your advisors obviously did such a dismal job explaining it to you, maybe we can help.

How You Destroyed the US Uranium Sector—and US National Security

You see, the DOE built up its strategic stockpile of uranium from domestic production to make sure that the nuclear power generation that is so vital for the United States’ supply of electricity was never at risk. (The US is the world’s largest consumer of uranium and makes up about 25% of the global demand.)

All the presidents before you, Barry, followed the two sacred rules because the Russians, due to their Soviet legacy assets, can produce uranium at much lower prices than the Americans. Therefore, it is crucial to keep domestic production economic and competitive.

However, your recent job numbers didn’t look so good, did they—so you decided to milk the nuclear sector in order to create jobs and raise $250 million for the reclamation of old nuclear sites.

(You never openly stated this, but we found out anyway. It was easy, you see—to figure out your agenda, all we had to do was work backwards through the nuclear chain and look at the companies the DOE approved for the clean-up jobs, because these companies have announced their work programs for the next few years. Nice try there, Mr. President.)

So to get your $250 million—do we still count in millions, by the way? I thought everything under a billion was viewed as chump change these days—you made the DOE sell significantly more uranium into the market than ever before in the history of the United States.

And of course your timing couldn’t have been worse. Namely, you decided to do this right after the Japanese started selling record amounts of uranium after the Fukushima incident, and the wave of uranium hitting the market dropped the spot price from over US$72/lb to US$34/lb… a more than 50% drop within 24 months.

Well, you got what you wanted: with the spot price slashed in half, 95% of all US uranium production is now uneconomic. That means the miners are losing money and the higher-cost producers will soon go bankrupt.

Thanks to your tireless efforts, the former “Land of the Free” is now a junkie dependent on Russian uranium supplies for its next fix. And the nice Mr. Putin, whose country was America’s sworn enemy not too long ago (remember that?), now essentially controls 10% of the entire US electricity matrix.

Which proves again that with friends like you, Barry, one can make do quite easily without enemies.

So why exactly am I writing you a thank-you letter?

Well, as a community organizer, you wouldn’t know such things, but you see, the cure for low prices is low prices.

Less uranium production = less supply = higher price. So thanks to you, the shares of first-class uranium explorers and producers now really have nowhere to go but up. Well done!

You may have endangered the welfare of your entire nation for the foreseeable future, but from an investor’s viewpoint, you deserve a ton of chocolate truffles. Because you have single-handedly created—oh, just the…

Greatest Investment Opportunity in Uranium EVER

So, thank you, dear Mr. President, because your loss is my gain.

Oh, come on now, no need to hide your face in shame. After all, this is not the first time government stupidity has set up an incredible opportunity to make a fortune—you’re in very good company.

Thanks to your stunning incompetence, I wouldn’t be surprised if you handed me and my Casey Energy Report subscribers a double or triple on our investments.

So I close my letter with the warmest wishes for the rest of your presidency. May you never change.

Yours in deep gratitude,

Marin Katusa

Now to you, dear readers: If you want to find out the true extent of the windfall my dearest friend, Mr. Obama, has so kindly provided for us, you should give the Casey Energy Report a try today.

The current issue is all about the latest and greatest opportunities in uranium investing, and in our article “Making the Grade,” we’ll take you to the richest uranium deposit in the world and tell you all about the company that’s in the best position to be successful there.

There’s no risk in giving it a try: Test my newsletter for the next 3 months, and if you don’t like it or don’t make any money, just cancel within that time for a full refund, no questions asked. Click here to get started.

Why a Uranium Renaissance Looks Inevitable

This guest editorial by The Casey Energy Report Team

Casey Research’s Chief Energy Investment Strategist, Marin Katusa, whose portfolio profited nicely the last time the uranium bull broke loose a decade ago, recently interviewed a group of world-renowned energy experts to discuss the prospects for the sector that some considered doomed by the Fukushima disaster. Anti-nuclear power sentiment has by no means evaporated, but Katusa sees clear signals that the bulls are ready to run, not least of which is the recent attack on the Somair uranium mine in Niger.

Why? First, the 20-year Highly Enriched Uranium (HEU) Program agreement between the U.S. and Russia, aka “Megatons to Megawatts,” expires this year.

Second, the end of that program will allow Russia to sell its coveted uranium, which currently powers one of every 10 homes in the U.S., to the highest bidder. With 200 nuclear power plants under construction or on the drawing boards, China is likely to be first in line, with India and even oil-rich Saudi Arabia on its heels.

Third, the increase in nuclear plants being built around the world will stimulate huge demand while supply inevitably dwindles. Because it can take a decade to bring a uranium mine on-line, new mining production can’t grow fast enough to meet the demand.

Fourth, like it or not, nuclear energy is clean—while the average coal-fired power plant in the U.S. emits nearly 4 million metric tons of CO2 each year, nuclear power plants emit no carbon dioxide, sulfur dioxide, nitrogen oxides, mercury or other toxic gases.

Finally, last Thursday, an Al-Qaeda splinter group attacked the Somair uranium mine in Niger—owned by French uranium giant Areva. This will further disrupt global uranium supplies and emphasizes what the energy experts have been saying: Uranium is prime for price increases.

Casey Research agreed to share Katusa’s segment with Sprott U.S. Holdings Chairman Rick Rule with The Energy Report readers and invites you to listen to the rest.

Marin Katusa: We first met 10 years ago, when you were begging people to buy uranium companies, and the market boomed. Those of us who followed your advice made a lot of money. Are you expecting a replay in that market?

Rick Rule: I think so. The similarities are interesting. At that time, the price of uranium on the market was less than what it cost to produce it, which meant that one of two things would happen: Either the uranium price would go up, or the lights would go out. Those were the only two choices. We’re in a situation now where the uranium price on world markets is lower than what’s required to bring online the supplies needed to keep the lights on around the world. So once again, either the uranium price goes up, or the lights go out. I think the price will go up.

MK: What can you tell investors who are nervous about uranium? Nuclear power is unpopular. Why should investors expect its feedstock to have this massive bull market?

RR: You make money in financial markets by buying low and selling high, and you can’t buy low when something is universally loved and every investor is competing with you. You have to buy things when they are unloved. In natural resources, you can be a contrarian or a victim. You had the good sense of getting into the market when uranium was cheap, and you also had the good sense to get out when everybody else was flocking in. You did what you were supposed to—buy it when it was out of favor and sell it when it came into favor. It’s out of favor again. You will make money buying it now and selling again when it returns to favor, because it will.

MK: Are you currently investing in companies that are exploring for and producing uranium in the junior resource sector?

RR: We are. We are investing in the broader junior resource sector because it is universally unloved, and we are specifically investing in the uranium sector. We invest in any commodity where the selling price on global markets is less than the cost of production and where we see ongoing demand. The price has to rise to meet demand.

MK: Considering that China is on its way to building twice as many nuclear reactors as America, India is building theirs and Saudi Arabia—which is so rich in oil and gas—is planning on building 16 nuclear reactors, does that make the argument for uranium better today than it was 10 years ago?

RR: I wouldn’t argue that it’s better, because the situation 10 years ago was superb. But it doesn’t have to be better. A lot of people added a zero to their net worth as a consequence of that market. If they increase their net worth only five times, would that be sufficient?

MK: I think it would. Like uranium, the junior resource sector is not popular. How would you advise people to invest in that sector today?

RR: They have to invest in themselves before they invest in the sector. They have to get educated about natural resources and you don’t get educated about natural resources in The Wall Street Journal. These businesses differ from other businesses. You need the courage and the common sense to invest in contrarian fashion. You need to buy out-of-favor sectors and once your thesis has been vindicated and you’re feeling smart, you need to sell those sectors. It’s very important that you both buy low and sell high. Industry cycles in natural resources are very predictable, and after you discipline yourself, find information sources you can trust and figure out how to use those information sources, you will find the sector extremely generous.

MK: What is the most important factor when you look at a company? When Rick Rule and Sprott write a check with their own money into a company, what’s the most important element of that investment decision?

RR: If it’s a speculative, junior company, the three most important factors are people, people and people. In the uranium sector for example, when the resource became popular in the middle part of the last decade, there were 500 junior uranium companies but only 20 competent teams.

MK: And of those 500 companies, about 480 disappeared.

RR: Another thing that argues in your favor today is that you’re now able to come in and buy companies with $50M market caps that spent $250–300M they raised cheaply during the boom. Those are very attractive propositions.

MK: Can anything derail this nuclear renaissance?

RR: If there’s a black swan on the nuclear side, it would be another event like Fukushima, Chernobyl or Three Mile Island. On the financial side, it would be another 2008-style psychotic break. But if that happened, your uranium portfolio would be probably the least of your concerns.

MK: As always, Rick, it was a pleasure. Thank you.

Uranium prices have nowhere to go but up. Rick confirmed that, as do the other experts in the videocast. Listen for the insights from:

  • Spencer Abraham, who served as the 10th U.S. Secretary of Energy (2001-2005) during the George W. Bush Administration.
  • Lady Barbara Thomas Judge, chairman emeritus of the U.K. Atomic Energy Authority, chairman of the Pension Protection Fund, and U.K. business ambassador on behalf of U.K. Trade and Investment, and is an appointed member of the TEPCO Nuclear Reform Monitoring Committee.
  • Herb Dhaliwal, former Canadian minister of natural resources and senior regional minister for British Columbia.
  • Amir Adnani, co-founder and CEO of Uranium Energy Corp. (UEC:NYSE.MKT), which operates North America’s newest uranium mine; located in South Texas, it’s the first new uranium production in the U.S. in seven years.

Casey Research has identified the top three undervalued uranium stocks that you should invest in right now to be well positioned for the coming uranium bull market. Compiled into a special report, Three Must-Own Uranium Stocks, Casey is making this time-sensitive special report available exclusively for viewers of this webinar.

Why Thorium Is A Better Nuclear Fuel Than Uranium

Why Not Thorium?

By Marin Katusa, Chief Energy Investment Strategist, Casey Research

thorium-nuclear-fuel
Can You Invest In Thorium?

The Fukushima disaster reminded us all of the dangers inherent in uranium-fueled nuclear reactors. Fresh news yesterday about Tepco’s continued struggle to contain and cool the fuel rods highlights just how energetic uranium fission reactions are and how challenging to control. Of course, that level of energy is exactly why we use nuclear energy – it is incredibly efficient as a source of power, and it creates very few emissions and carries a laudable safety record to boot.

This conversation – “nuclear good but uranium dangerous” – regularly leads to a very good question: what about thorium? Thorium sits two spots left of uranium on the periodic table, in the same row or series. Elements in the same series share characteristics. With uranium and thorium, the key similarity is that both can absorb neutrons and transmute into fissile elements.

That means thorium could be used to fuel nuclear reactors, just like uranium. And as proponents of the underdog fuel will happily tell you, thorium is more abundant in nature than uranium, is not fissile on its own (which means reactions can be stopped when necessary), produces waste products that are less radioactive, and generates more energy per ton.

So why on earth are we using uranium? As you may recall, research into the mechanization of nuclear reactions was initially driven not by the desire to make energy, but by the desire to make bombs. The $2-billion Manhattan Project that produced the atomic bomb sparked a worldwide surge in nuclear research, most of it funded by governments embroiled in the Cold War. And here we come to it: Thorium reactors do not produce plutonium, which is what you need to make a nuke.

How ironic. The fact that thorium reactors could not produce fuel for nuclear weapons meant the better reactor fuel got short shrift, yet today we would love to be able to clearly differentiate a country’s nuclear reactors from its weapons program.

In the post-Cold War world, is there any hope for thorium? Perhaps, but don’t run to your broker just yet.

The Uranium Reactor

The typical nuclear-fuel cycle starts with refined uranium ore, which is mostly U238 but contains 3% to 5% U235. Most naturally occurring uranium is U238, but this common isotope does not undergo fission – which is the process whereby the nucleus splits and releases tremendous amounts of energy. By contrast, the less-prevalent U235 is fissile. As such, to make reactor fuel we have to expend considerable energy enriching yellowcake, to boost its proportion of U235.

Once in the reactor, U235 starts splitting and releasing high-energy neutrons. The U238 does not just sit idly by, however; it transmutes into other fissile elements. When an atom of U238 absorbs a neutron, it transmutes into short-lived U239, which rapidly decays into neptunium-239 and then into plutonium-239, that lovely, weaponizable byproduct.

When the U235 content burns down to 0.3%, the fuel is spent, but it contains some very radioactive isotopes of americium, technetium, and iodine, as well as plutonium. This waste fuel is highly radioactive and the culprits – these high-mass isotopes – have half-lives of many thousands of years. As such, the waste has to be housed for up to 10,000 years, cloistered from the environment and from anyone who might want to get at the plutonium for nefarious reasons.

The Thing about Thorium

Thorium’s advantages start from the moment it is mined and purified, in that all but a trace of naturally occurring thorium is Th232, the isotope useful in nuclear reactors. That’s a heck of a lot better than the 3 to 5% of uranium that comes in the form we need.

Then there’s the safety side of thorium reactions. Unlike U235, thorium is not fissile. That means no matter how many thorium nuclei you pack together, they will not on their own start splitting apart and exploding. If you want to make thorium nuclei split apart, though, it’s easy: you simply start throwing neutrons at them. Then, when you need the reaction to stop, simply turn off the source of neutrons and the whole process shuts down, simple as pie.

Here’s how it works. When Th232 absorbs a neutron it becomes Th233, which is unstable and decays into protactinium-233 and then into U233. That’s the same uranium isotope we use in reactors now as a nuclear fuel, the one that is fissile all on its own. Thankfully, it is also relatively long lived, which means at this point in the cycle the irradiated fuel can be unloaded from the reactor and the U233 separated from the remaining thorium. The uranium is then fed into another reactor all on its own, to generate energy.

The U233 does its thing, splitting apart and releasing high-energy neutrons. But there isn’t a pile of U238 sitting by. Remember, with uranium reactors it’s the U238, turned into U239 by absorbing some of those high-flying neutrons, that produces all the highly radioactive waste products. With thorium, the U233 is isolated and the result is far fewer highly radioactive, long-lived byproducts. Thorium nuclear waste only stays radioactive for 500 years, instead of 10,000, and there is 1,000 to 10,000 times less of it to start with.

The Thorium Leaders

Researchers have studied thorium-based fuel cycles for 50 years, but India leads the pack when it comes to commercialization. As home to a quarter of the world’s known thorium reserves and notably lacking in uranium resources, it’s no surprise that India envisions meeting 30% of its electricity demand through thorium-based reactors by 2050.

In 2002, India’s nuclear regulatory agency issued approval to start construction of a 500-megawatts electric prototype fast breeder reactor, which should be completed this year. In the next decade, construction will begin on six more of these fast breeder reactors, which “breed” U233 and plutonium from thorium and uranium.

Design work is also largely complete for India’s first Advanced Heavy Water Reactor (AHWR), which will involve a reactor fueled primarily by thorium that has gone through a series of tests in full-scale replica. The biggest holdup at present is finding a suitable location for the plant, which will generate 300 MW of electricity. Indian officials say they are aiming to have the plant operational by the end of the decade.

China is the other nation with a firm commitment to develop thorium power. In early 2011, China’s Academy of Sciences launched a major research and development program on Liquid Fluoride Thorium Reactor (LFTR) technology, which utilizes U233 that has been bred in a liquid thorium salt blanket. This molten salt blanket becomes less dense as temperatures rise, slowing the reaction down in a sort of built-in safety catch. This kind of thorium reactor gets the most attention in the thorium world; China’s research program is in a race with similar though smaller programs in Japan, Russia, France, and the US.

There are at least seven types of reactors that can use thorium as a nuclear fuel, five of which have entered into operation at some point. Several were abandoned not for technical reasons but because of a lack of interest or research funding (blame the Cold War again). So proven designs for thorium-based reactors exist and need but for some support.

Well, maybe quite a bit of support. One of the biggest challenges in developing a thorium reactor is finding a way to fabricate the fuel economically. Making thorium dioxide is expensive, in part because its melting point is the highest of all oxides, at 3,300° C. The options for generating the barrage of neutrons needed to kick-start the reaction regularly come down to uranium or plutonium, bringing at least part of the problem full circle.

And while India is certainly working on thorium, not all of its eggs are in that basket. India has 20 uranium-based nuclear reactors producing 4,385 MW of electricity already in operation and has another six under construction, 17 planned, and 40 proposed. The country gets props for its interest in thorium as a homegrown energy solution, but the majority of its nuclear money is still going toward traditional uranium. China is in exactly the same situation – while it promotes its efforts in the LFTR race, its big bucks are behind uranium reactors. China has only 15 reactors in operation but has 26 under construction, 51 planned, and 120 proposed.

The Bottom Line

Thorium is three times more abundant in nature than uranium. All but a trace of the world’s thorium exists as the useful isotope, which means it does not require enrichment. Thorium-based reactors are safer because the reaction can easily be stopped and because the operation does not have to take place under extreme pressures. Compared to uranium reactors, thorium reactors produce far less waste and the waste that is generated is much less radioactive and much shorter-lived.

To top it all off, thorium would also be the ideal solution for allowing countries like Iran or North Korea to have nuclear power without worrying whether their nuclear programs are a cover for developing weapons… a worry with which we are all too familiar at present.

So, should we run out and invest in thorium? Unfortunately, no. For one, there are very few investment vehicles. Most thorium research and development is conducted by national research groups. There is one publicly traded company working to develop thorium-based fuels, called Lightbridge Corp. (Nasdaq: LTBR). Lightbridge has the advantage of being a first mover in the area, but on the flip side the scarcity of competitors is a good sign that it’s simply too early.

Had it not been for mankind’s seemingly insatiable desire to fight, thorium would have been the world’s nuclear fuel of choice. Unfortunately, the Cold War pushed nuclear research toward uranium; and the momentum gained in those years has kept uranium far ahead of its lighter, more controllable, more abundant brother to date. History is replete with examples of an inferior technology beating out a superior competitor for market share, whether because of marketing or geopolitics, and once that stage is set it is near impossible for the runner-up to make a comeback. Remember Beta VCRs, anyone? On a technical front they beat VHS hands down, but VHS’s marketing machine won the race and Beta slid into oblivion. Thorium reactors aren’t quite the Beta VCRs of the nuclear world, but the challenge they face is pretty similar: it’s damn hard to unseat the reigning champ.

[Marin has an enviable track record in the uranium sector, with one current pick up nearly 1,600% since he first recommended it to his subscribers 39 months ago. Now he’s targeting a little-known company that possesses oil-recovery technology that could reward investors with similar gains.]

Investing in Uranium Post Fukushima

Glow at the End of the Tunnel

By Elizabeth Manning, Casey Energy Opportunities

Nuclear energy has taken a beating since the Fukushima crisis began in March, but we believe the arguments are strong that it’s not down for the count.

There are a couple of factors that the Casey Energy Team considers bullish for the nuclear industry and market. Let’s take a closer look and back them up.

Factor #1: The pre-Fukushima price of uranium reflected not just market perception but a very real shortage of uranium that’s looming in the face of growing global demand.

The Japanese earthquake struck just as the nuclear renaissance was gaining momentum. After a decade, efforts by the industry to promote nuclear power as a safe, clean and reliable alternative to fossil fuels were finally taking hold. So was the message that nuclear power offers the “always on” type of electricity that other, more glamorous low-carbon technologies like solar and wind power could only supplement, not replace.

China ordered a swath of new reactors, Russia embarked on a nuclear construction boom, India made nuclear power a key component of its energy plans, and the U.S. Congress issued loan guarantees for new plants.

The price of uranium responded, climbing slowly but surely out from its late-2000 all-time low of US$7.10 per pound, then spiking rapidly from the low US$70s in 2006 to a record US$136 in 2007. That unsustainable drive was fueled by speculators and hedge fund investments that disappeared with the 2008 recession. The spot price dropped back into the US$40s per pound.

While most other commodities recovered, uranium spent 2009 and the first half of 2010 dormant. The market woke up in mid-2010, starting a remarkable eight-month ascent from US$42 to US$72.65 per pound in February. Uranium outperformed every other commodity in that period, including gold, gaining 73%.

The 2007 frenzy aside, uranium’s bullish drive is justified by industry conditions. We already mentioned the construction trend; now here are some numbers to back it up.

Global uranium demand is set to increase some 33% from 2010 to 2020, according to the World Nuclear Association (WNA). China is the most important player in that prediction: the Asian giant plans to increase nuclear capacity to 80 GWe by 2020, 200 GWe by 2030, and 400 GWe by 2050. A gigawatt electrical (GWe) is one billion watts, which provides enough power for roughly one million households in a developed country.

China may lead the world in number of nuclear reactors under construction, at 27, but Russia is building 11 and India has five in the works, while countries like Bulgaria, the Slovak Republic, and Ukraine each have two under construction. Demand for uranium is absolutely on the up-and-up.

Supply is another story. To reach just its 2030 target, China alone will need some 95 million pounds of uranium each year. In 2010, the world as a whole produced just over 118 million pounds.

uranium supply scenario

This WNA graph compares projected uranium demand and supplies. It’s important to note that the solid line, indicating mid-range projected demand, will only be met if mines under development make it into production and, starting in six years, if mines now just in the planning stages start also operating. Those are two big “ifs,” given that building uranium mines is an expensive, time-consuming business, and a venture with many opponents.

Most analysts do not expect supplies to meet growing global demand unless prices increase enough to make it economic to build these new mines. There’s the key bit – unless prices increase enough to make new mines economic. Commodity prices are arguably the most important factor in whether a proposed mine will be economic, and therefore production rates track prices pretty closely.

uranium production versus reactor requirements 1940 - 2020

In that context, the major gains in the price of uranium during late 2010 and early 2011 were justified. A uranium price above US$70 per pound was a real reflection of restricted supplies in the face of growing demand, and most industry observers expected the price to only climb, if slowly, from there.

Then came the earthquake.

Factor #2: Fukushima will not have any significant impact on global uranium demand in the long run.

Initially, the world reacted to the Fukushima crisis with dramatic calls to reconsider the use of nuclear power. Several governments put their nuclear power programs on hold, including China. For a moment, there was a real chance that Fukushima would derail the nuclear renaissance.

But is has not. Nuclear power growth in the developed world has been impacted, but the developed world isn’t the make-or-break player for growth in the nuclear industry. The developing world is where the action will be, where governments are struggling to provide power to millions of impoverished people while still keeping some control of greenhouse gas emissions.

As expensive as a nuclear power plant is, they’re relatively economical to keep running, and these countries have little luxury of choice. Coal may be the quick fix, but it’s becoming increasingly expensive as well as laden with carbon-emissions baggage.

With that in mind, events that have garnered a lot of attention in the popular press, such as Germany’s announcement to phase out its nuclear reactors by 2022, shrink into perspective. It’s no real surprise, for one thing: the decision simply reverses one made last year to keep them open (yes, that would be reversing the reversal).

For another, Germany’s 17 reactors accounted for 5% of uranium demand in 2010. By comparison, there are 104 reactors in the United States, 58 in France and dozens being built in China, India, and Russia. Finally, Germany relies on nuclear reactors for 23% of its power, and 2022 is awfully optimistic to ramp up alternative (i.e., other clean) energy technology to fill the gap. So let’s just say we’re skeptical.

On the other side of the equation are pro-nuclear movements in several places around the globe, such as in the Czech Republic. Prague is working to approve a plan to extend the life of the country’s only uranium mine and wants to build three new reactors. It’s labeled uranium a “super strategic” commodity and uranium mining a “strategic advantage for the Czech Republic.”

Where Nuclear Energy Is Headed

Sixty of the 65 reactors currently under construction around the world are in developing countries. China has 27 reactors under construction, 50 planned and another 110 proposed. India has 5 under construction, 18 planned and 40 proposed. Russia has 10 under construction, 14 planned and 30 proposed. These countries need power, and they want to diversify their power sources as they build capacity so that they don’t end up reliant on a single commodity.

In addition, the nuclear industry’s safety record is actually pretty good. Fukushima is only the third serious accident in more than 65 years of nuclear power. No one died at Three Mile Island, and no one has died from radiation effects at Fukushima, though five people died in the hydrogen explosions and in a crane accident. Chernobyl was certainly deadly, but it was human error, not a fault in the system, that was to blame there.

By contrast, thousands of people lose their lives every year in the fossil fuel industry, in coal mine accidents, oil rig explosions, drilling mishaps, pipeline blasts, refinery fires and tanker accidents, not to mention from the raft of illnesses caused by smog and soot.

Power generation is about balancing needs with impacts. Every major power source has drawbacks, but the developing world in particular needs more electricity. In that context, nuclear power is still a necessity – nuclear plants can provide low-emission, reliable, baseload power, precisely the kind that the world needs.

Uranium was a solidly bullish market on March 10, for good reasons that haven’t changed. Even though Fukushima was scary and has illuminated the need for better nuclear power regulations, ultimately it won’t derail an industry that is poised for major growth.

We’re running out of oil, fast – and a “triple threat” makes dealing with that fact more of a challenge than many Americans know. There are many ways savvy investors can profit from this situation, however. Learn how to be among them.

China Is Winning the Energy Race

China Is Winning the Energy Race

By Marin Katusa, Casey’s Energy Opportunities

Stop the presses. The United States is no longer the world’s biggest consumer of energy.

After topping the energy consumption charts for more than a century, the U.S. has been left behind as China leapfrogged past. According to the International Energy Association’s (IEA) latest report, China burned its way through 2,252 million tonnes of oil equivalent last year – about 4% more than the U.S.
(The oil-equivalent measure is a bundle of all forms of energy consumed, including crude, coal, nuclear, natural gas, and renewable resources.)

That’s an astonishing turnaround, according to IEA chief economist Fatih Birol, who noted that as recently as 2000, the U.S. consumed twice as much energy as China.

Energy Consumption Trends of China and the United States 1965 – 2009

Source: BP Statistical Review of World Energy, 2010

It’s no longer 1973, when President Nixon could declare that our status as top energy consumer was “good. That means we are the richest, strongest people in the world.” Today, bragging about winning the energy-eating competition doesn’t gain you any brownie points. Which is probably why Chinese authorities were quick to reject the IEA data as “unreliable,” choosing instead to focus on their intention to sink about 5 trillion RMB (about US$750 billion) into renewable energy projects.

Despite the denials, a new age in the history of energy has begun, and the implications are enormous. China may not want to accept the honors, but the reality is that it’s now the most important player on energy’s demand side.

According to the IEA report, China will be investing more than $4 trillion over the next 20 years to ensure there are no power or fuel shortages, and that there is enough energy to keep feeding its economy. Thus the ever-increasing number of ships steaming out from Canadian and Australian ports: all are bound for Beijing, all loaded with precious energy supplies.

Whether it’s coal, gas, uranium, or oil, China’s import numbers are only heading one way – up. Here’s a brief overview.

Coal:

The wealth of Western nations was built on the back of coal, and China plans to be no different.
King Coal, cheap and plentiful in China, accounts for 70% of all energy consumed. Most of that goes to meet the burgeoning demand for power, and with US$30 billion just invested into improving the national electrical grid, we’re not going to see coal taking a backseat anytime soon.

China also needs metallurgical (coking) coal for producing steel – the backbone of an economy. As the construction boom continues, corporations will be crying out for it. But with no higher-grade reserves of its own, China is buying up whatever is in the market, sending coal prices skywards.

Oil:

Beijing continues its relentless courting of oil-rich countries across the globe. Its national oil companies (NOCs) offer debt forgiveness, development packages, infrastructure improvements, and, yes, bribes, in exchange for secure oil contracts, especially in Africa. The net overseas production from the three Chinese NOCs for 2010 will be a record-breaking 1 million barrels a day… that’s enough to fuel all of Australia!

Not content with just acquiring oil assets outright, Chinese NOCs are also tying up partnerships with other oil companies. In fact, the three Chinese NOCs accounted for nearly 20% of all global deal values in the first quarter of 2010.

Nor has China ignored North America. It’s heavily invested in the oil sands of northern Canada. This huge reserve is likely to become the most important source of U.S. oil, and China is making sure its finger is very firmly in the pie.

The U.S. still remains the number one consumer of crude. But over the past three years, China has accounted for at least a third of world demand growth in crude. And with a projected 45% increase in demand in the next five years, Chinese NOCs won’t be hitting the brakes anytime soon.

Gas:

China is throwing itself onto the clean and green bandwagon as well. And the cleaner-burning alternative to oil is its cousin, liquefied natural gas (LNG).

Expectations are for a hike of almost 50% in Chinese demand for LNG by 2020. This year alone, China is expected to boost its LNG imports by about 65%, from 5.5 million tonnes in 2009.

No surprise that China is wedging its foot very firmly into the vast gas reserves of Kazakhstan, Uzbekistan, and Tajikistan. A 1,100-mile-long pipeline has just been completed to link Chinese factories and power plants to Central Asia.

Unconventional gas deposits – like shale gas – will also have a role to play. The country’s shale gas reserves are estimated to be about 26 trillion cubic meters.

As China wakes up to the potential of this energy source, it’s also waking up to the fact that the technology to unlock it is in North America. So planes full of well-heeled Chinese investors are heading on over to woo North American producers.

If you’re a small-capitalization firm, with the potential to lower costs and risks, improve project returns and tap opportunities that are otherwise beyond reach, you’re in demand.

Uranium:

Nuclear power is coming to China in a big way. The country is set to purchase up to 5,000 metric tonnes of uranium this year – more than twice what it needs.

But consider that by the year 2020, China will have at least 60 nuclear reactors up and humming across the country, throwing off 85 gigawatts of output and demanding 20,000 tonnes of fuel per year. That’s nearly 40% of the 50,572 tonnes mined globally in 2009.

Now the hoarding makes more sense.

The result: After a three-year lull, uranium prices are spiking up. Analysts at RBC Capital Markets have predicted a 32% spike in prices for next year – for a uranium company, this is Christmas come early. And while the bull market of 2006 saw at least 27 new uranium mines opening up across the world, it’s not going to be enough. Yellowcake is back, and it’ll be glowing red this time around.

China might not wish to be called the world’s biggest energy consumer, but it’s a fact, and its edge will continue to grow. The process of explosive economic development is like feeding teenagers – they’re never full. And while China continues on this tear to eat up the world’s coal, oil, uranium, and gas, there are some great opportunities unfolding.

Which producers are favorites to supply China?

Which companies are most attractive to Chinese investors, and to the NOCs?

When will uranium prices jump by 200% again?
—-
We’ve put a lot of effort into charting China’s moves on the energy game board, and things are getting exciting. If you’re an investor, this is the perfect time to boost your portfolio with some carefully chosen stocks that will make the trend your friend. Try Casey’s Energy Opportunities for only $39 a year – and with our 3-month money-back guarantee. Read more here.