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Deepcaster correctly Forecast at the beginning of the Summer, 2006 that crude oil prices would be taken down, and that other fossil fuel based energy sources would suffer similar price pullbacks. Nonetheless, there is one energy source which, while it may suffer periodic price corrections, is and should continue to be, in a Major Bull Run - - Uranium. Uranium prices hit a low in mid-2001 and have been increasing ever since. Prior to this low, from about 1982 to 2001, uranium prices were in the doldrums, ranging from $10 to $20 a pound. This price depression was, in part, a result of the disfavoring of the use of nuclear power as a result of the 3 Mile Island and Chernobyl disasters. Depressed prices also resulted from the availability of uranium coming from the decommissioning of nuclear weapons in the Soviet Union. But beginning in 2002, uranium began what turned out to be a meteoric rise. Recently the price of uranium per pound hit $72. The uranium price chart has gone practically parabolic. Normally, parabolic price increases signal that it is time to sell. But not, we believe, in the case of uranium. At least not yet anyway. Uranium production from mines currently in operation is only about 60% of the annual consumption for the existing 450 nuclear reactors around the world! Moreover, about 130 new nuclear power plants will likely be built in the next 15 years according to a report by the International Atomic Energy Agency. Of these, China expects to build 40. With Russia already using natural gas supplies as a political weapon, and with crude oil supplies subject to disruption, the demand for uranium can only increase. This price rise has spawned renewed interest in uranium mining. But exploring and developing mines to production requires a multi-year-long lead-time. The World Nuclear Association estimates that it takes 8 years for a new mine to get online and start processing uranium. So most of the mines that were little more than a glimmer in their entrepreneurs’ eye in 2002 will not come into production until 2010. Thus, given the price surge that began in 2002 we still have about a four-year gap before significant new production comes online. To compound the supply shortage problem, the industry’s leading uranium miner and processor, Cameco, suffered a major flood disaster last Fall at its Cigar Lake mine in Canada. Cigar Lake was projected to be the richest uranium mine in the world and to eventually supply up to 20% of the world’s demand for uranium. Now it is sitting in water. Of course Cameco has already begun a remediation project and seems cautiously optimistic. Nonetheless, the delay (at the very least) in production from Cigar Lake has made the supply situation tighter than ever. There are other reasons to think that demand for nuclear power will boom. First, nuclear power creates virtually none of the pollution that causes climate change and also produces electricity more cheaply than do other forms of generation. In the United States, it has reduced the emission of greenhouse gasses by over 120 trillion tons a year. Worldwide it has reduced carbon dioxide emission by over 1.5 billion tons. As well, it has kept over 90,000 tons of toxic heavy metals (which are the byproduct of burning coal for electricity) out of the air. Moreover, above ground supplies continue to diminish. Commercial reserves of uranium aboveground fell by 50% from 1985 to 2003 according to International Nuclear Inc. It also reported, “in 2004 only 54% of the uranium consumed in the world came from mining.” (The rest came from depleting above ground stocks.) Specifically, demand for uranium for nuclear power plants is about 170+ million pounds per year according to a Raymond James report. However, during 2005, only just over 100 million pounds was provided from mines. Yet currently there are two dozen nuclear power reactors being constructed around the world, an additional 41 being planned, and still another 13 being proposed, according to Raymond James. So, it is not surprising that both Deepcaster Fortress Assets Letter and Deepcaster High Potential Speculator (both found at www.deepcaster.com) have current “Buy” recommendations on selected uranium stocks. The bottom line is that uranium demand already exceeds supply by 140%. China alone has recently committed $50 billion to build more than 30 new reactors. Imports of uranium to China are projected to increase from over 2 million pounds a year to over 40 million a year, according to the Australian Foreign Ministry. Thus, The Uranium Bull Run is likely not done.
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