James Dines Predicts a Buying Panic in Uranium

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Over the years, Dines successfully forecast the Internet mania, forecasting the giants of the tech boom, and forecasting the tech bust. A gold bug again, Dines also added uranium as the metal to watch over the coming years, saying, “This is my way of playing the whole coming energy boom.” We talked with Jim Dines about the “melt up” in the uranium sector.
investing, stocks, uranium, mining, oil, gold, utilities, nuclear energy, commodities, bull market, labor shortage, drill rigs, exploration, geologist
Over the years, Dines successfully forecast the Internet mania, forecasting the giants of the tech boom, and forecasting the tech bust. A gold bug again, Dines also added uranium as the metal to watch over the coming years, saying, “This is my way of playing the whole coming energy boom.”

Interviewer: You have been calling a bull market in uranium and, once again, you were the first voice in the now-growing crowd of uranium bulls.

James Dines: What a surprise.

Interviewer: Why are you bullish on uranium?

James Dines: It very important to get into a bull market early. The earlier, the better. That when the biggest percentage gains are made. That why we got into the Internets very early. We got stopped out in 2000. We were in cash for a year and then went to metals, as the way to play the China boom in 2001. Wee still in those. In 2002, we turned bullish on uranium as a unique way to play the coming boom in the whole energy complex.

Interviewer: But why uranium, as opposed to another type of metal?

James Dines: Basically, the western world demand is outpacing supply by about 300 million pounds a year. Global uranium use, excluding the growing usage by China and the former Soviet Union, is running at around 155 million pounds a year, as compared with global production of only around 94 million pounds. There are only about 500 customers for this stuff, not counting terrorists (joke). Because of that, it not a regular commodity. The public can’t go and buy uranium. In August 2003, there was a shocking blackout in Canada. The utilities were shaken. They realized when they don’t pay attention, the lights go out. That was a kick in the shin for utilities to begin immediate investment in the infrastructure of the electricity grid. But what is completely under the world radar is that nuclear plants are also concerned about a shortage of uranium. If they run out of uranium, the lights go out. You can’t switch to another fuel. You can’t toss another log on the fire, so to speak. Because of that, there is a growing panic among the buyers. That why I became what I’m calling myself: The Original Uranium Bug. And calling, or predicting, the coming Uranium Melt Up and buying panic.

Interviewer: A panic over uranium. Why do you say that?

James Dines: There going to be a buying panic. The bottom line is that in 2002, there were 441 nuclear reactors worldwide and another 34 under construction. Six new reactors began commercial production in 2002, three in China, two in South Korea and one in Japan. There was construction begun on six reactors in India and four in South Korea. There are more units coming in Finland, Russia, Ukraine, Romania, and Brazil. China announced recently they were going to build five more nuclear facilities. All of the governments of the world have been frightened by the talk of the difficulty in getting oil. I wouldn’t be surprised if more of them began building up their strategic oil reserves as the US has done. That would turbo the whole carbon-based fuel crisis higher. That makes nuclear more than a competitor. The price of uranium hit $7.10 on Christmas Day 2000, and then began a low, quiet and slow climb. The bottom line, which I outlined in my book on Mass Psychology, is that a new bull market must be invisible to the crowd. The corollary to that is when you see bandwagon on Wall Street, you are too late.

Interviewer: Some are making predictions of $50 uranium or even higher. What do you think?

James Dines: $50, $60, anything is possible. If you are running a utility and your choice was getting uranium at any price or having the lights go out, which would you do? This is my way of playing the whole coming energy boom. I think it the smartest way. This is unique. This metal is just not there. Wee just not going to have it.

Interviewer: How much of a role does Cameco (NYSE: CCJ) play in this market?

James Dines: They control the world largest high-grade reserves and low-cost operations, commanding position. They supply around 20 percent of the western world uranium. It America only uranium producer, in Wyoming and Nebraska. Around 20 percent of America energy is produced by nuclear. That accounts for around 35 percent of the western world consumption.

Interviewer: Is there any other way to play the uranium bull market?

James Dines: There is no other way to play it, as far I know of. The utilities buy the stuff so you can’t buy the metal. There is no other way. That why I like the uranium way of playing the energy boom. Some of my other predictions, like the Coming Age of the End of Petroleum ?this century is going to see the end of the petroleum age. Wee going to use it up. You have China and India coming onstream. You’ve got the automobile age coming to those two countries. Not even one percent of their citizens own cars yet. With all these cars coming onstream, suddenly everyone is frightened about nailing down their petroleum supplies. I don’t have to tell you how explosive the Middle East could be. Anything could happen there. A revolution in Saudi Arabia ?the most valuable real estate on the planet and it being gunned after by not just Al Qaedah, but every other big player on the land mass is saying, we need oil. That where the pool is. As that pool shrinks, it going to become more and more valuable. There will be more of a stampede into other energy sources. You already see it going into coal and natural gas. Unless theye going to start putting windmills on cars, it over. When it will end, who knows?

Interviewer: Any guesses?

James Dines: You hear all kinds of guesses. There were only so many dinosaurs and ferns. It finite, and it is dirt cheap. People snivel at $1.67 for gasoline, but they pay $10/gallon for Gatorade. White-out is $25/gallon. Evian is $21/gallon. Pepto-Bismol is $123/gallon. People have no concept of how high oil is going to go. Oil is going to go through the roof. A sound energy portfolio should certainly include some oils. But to me, the center of the chessboard is going to be uranium. It going to get a lot worse before it gets better. Once you start getting sky-high prices for oil, there no limit to what uranium could do. Even with an accelerated drilling program, it going to take years to bring it on. And they haven’t even started it yet. There an energy crisis coming of the first magnitude.
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James Dines, editor of The Dines Letter since 1960, has been making recommendations to investors for over 40 years. Recommendations of The Dines Letter are based on mass psychology, technical and fundamental economics thus studying both the company and investor behavior. Mr. Dines’ insights have gained him a reputation as a well-renowned, highly respected and regarded investment advisor.

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How To Choose A Uranium Stock

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Now that the uranium bull market has gone to a new level, a number of exploration stocks made spectacular percentage gains after the International Investment Conference held in San Francisco in late November 2005. We turned to Kevin Bambrough, Market Strategist, and Jean-Francoise Tardif, Portfolio Manager, at Sprott Asset Management for their advice on how to navigate through the more than 250 uranium exploration, development and producing companies available across the glob…
investing, stock market, commodities, energy, utilities, stock tips, stock trading
Now that the uranium bull market has gone to a new level, a number of exploration stocks made spectacular percentage gains after the International Investment Conference held in San Francisco in late November 2005. We turned to Kevin Bambrough, Market Strategist, and Jean-Francoise Tardif, Portfolio Manager, at Sprott Asset Management for their advice on how to navigate through the more than 250 uranium exploration, development and producing companies available across the global investment landscape. Who better to ask than a fund that has invested around $175 million in uranium stocks the past few years, about 6.7 percent of more than $2.5 billion managed by Sprott Asset Management? The Sprott team has bet heavily on a nuclear energy renaissance, and early indications confirm very strong returns in their investments.

Before our taped telephone interview, Kevin Bambrough emailed a few comments, “We would like to make the point about some incredible gains that have been had in the uranium sector. The list is growing but not the quality so investors should use extreme caution. As the uranium price rises, and money pours into exploration, we can expect to see some sizeable discoveries coming down the road. It should be exciting times.?
Prior to StockInterview.com interviews with Mr. Bambrough and Mr. Tardif, they compiled a list of ten tips for investors studying uranium companies. The tips are listed below, followed by an extensive interview, first with Mr. Bambrough (in this installment) and a second installment with Mr. Bambrough and Mr. Tardif.

The Ten Tips Investors Should Know

1. One of the best indicators of a project potential success could be past ownership. It’s best to try to buy any mining stock early in the cycle. Try to pick up properties that were worked by majors during the last bull market but which eventually dropped during the lows of the bear market. During the last uranium boom of the 1970, many majors decided to completely exit the uranium sector.

2. Study the value of ore body with regards to its value per tonne, or its recoverable metal. Estimate the “all in?costs and feel comfortable with what you are paying. Risks-to-reward doesn’t favor pure exploration. Typically, we avoid pure exploration plays unless management is excellent, they have a large prospective land package, and the company is well financed.

3. Look for good, proven management, which has been successful in the past.

4. Look for solid shareholders. It is always nice to see that management has a large stake in the company. Often, this makes them value their paper more, and they will be less likely to engage in reckless stock issuance. If not management, I get comfort seeing that successful fund managers have large holdings. It is even better to see that a major company in a related industry has taken an interest in the company.

5. Look at the property infrastructure. Find out about electricity and water costs required for exploration, development and production. Find out about roads, rail, trucking, access and proximity to a mill.

6. Look for hidden value in the company. We always consider the value of existing infrastructure. From time to time we have been able to buy companies where existing facilities, perhaps a mill or shafts more than justify the entire market cap of the company. Past drilling for uranium will save money. Some companies have properties with very expensive shafts and/or mills. There are also companies with large extensive databases like Energy Metals Corporation (TSX: EMC) and Strathmore Minerals (TSX: STM). These databases of past drilling on various properties can be used to continue to acquire good prospects as well as sold in pieces. I would expect that they will also be able to use the data to farm in on other properties or sell other property owners valuable drill-hole data.

7. Buy emerging stories. It is great to find a company before it has any analyst coverage or even covered by letter writers.

8. Find out if the property is in a pro-mining environment. Ultimately, you need to mine. It’s best to have a property in a location where government is pro-mining. We will still invest, though, as long as this factor is discounted in the stock. Some countries are so hungry for investment they will offer favorable tax rates and other incentives. Permitting can be costly and take a long time so this is very important.

9. Study the capital costs for the project and the currency in the country where the project is located. Typically, the lower the capital costs, the less risk in the project. The less a company risks, in time and money, to find out if the mine is economic, the greater its chance of success. Larger capital intensive projects usually take longer to bring on, and you could risk missing an important part of the cycle. I also like to consider currency moves and their possible impact. A strengthening local currency can drive up costs and destroy margins. A falling currency can dramatically improve the economics of the project

10. Funding can improve the story or outlook. Make your cash work. It’s not really an option for a small investor but as an institution we love to invest in companies when we think our cash is going to make a huge difference. Examples include when Aflease (now SXR Uranium One ?TSE: SXR) had cash problems and was being deeply discounted, or our recent Tournigan (TSX: TVC) funding to pay for confirmation drilling and exploration on the Jahodna uranium deposit in Slovakia.

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Foreign Demand May Jeopardize Uranium Supply for U.S. Utilities

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We discussed with Jeff Combs, the Ux Consulting president, from which countries future uranium supplies may come, and who is going after those supplies more aggressively. He warns about the risks and rewards of Kazakhstan and Mongolia, looks to Africa for supplies, and talks about Russia expansion.
uranium, energy, mining, nuclear energy, China, India, Canada, Australia, France, utilities, commodities, electricity, uranium mining, Athabasca Basin
We discussed with the Ux Consulting president from which countries future uranium supplies may come, and who is going after those supplies more aggressively. He warns about the risks and rewards of Kazakhstan and Mongolia, looks to Africa for supplies, and talks about Russia expansion.

StockInterview: How do domestic uranium prospects rate in the eyes of U.S. and foreign utilities?

Jeff Combs: I don’t think that utilities expect the U.S. to be a major supplier of uranium. What youe seeing with China and other countries, where nuclear power is growing, is that theye definitely looking to secure supplies. The Chinese are going to Kazakhstan and also Australia, where there are a lot of uranium reserves, a lot of potential for growth. I think there some potential for growth in the U.S. But if you had a fast growing nuclear power program, I don’t think the U.S. is the first place I’d look. I believe that you can look for some opportunities in the U.S. But in general, the U.S. utilities are basically in competition with some of these newer entrants into the market for available supplies. Those are primarily outside of the U.S., as U.S. utilities also depend on imports for most of their supplies.

StockInterview: It appears many countries are racing to secure uranium supplies outside their borders.

Jeff Combs: Even Russia, which was a major exporter of uranium in the 1990s, is looking to secure additional supply sources, first to Kazakhstan, Kyrgyzstan, and Uzbekistan, former republics of the of Soviet Union, but also to Africa. Russia has an extremely ambitious reactor expansion program, as well as a desire to greatly increase its exports of reactors to countries like China and India. As it stands now, most of the growth in nuclear power is expected to take place in China, India, Russia, as well as Korea and Japan to a certain extent. All these countries are really looking outside their borders for uranium supplies that are going to sustain them for quite a long period in the future. None of them are blessed with very rich and extensive uranium deposits.

StockInterview: Is Russian President Vladimir Putin trying to create something on the order of a Wal-Mart Super Center for the nuclear fuel cycle?

Jeff Combs: Well, you see them doing a joint venture in Kazakhstan. Theye trying to do something with Kyrgyzstan. Theye definitely looking at how they can shore up their supply through imports, in addition to investing a billion dollars in their own internal production. In this respect, they are trying to draw from their old supply chain arrangements. This is to meet their internal needs, as well as the needs of countries to which they have traditionally supplied reactors and the fuel to run these reactors. As Russia looks to expand its reactor sales to countries that don’t have established fuel cycles, they want to be able to supply them with fuel ?possibly even lease them the fuel. This means that they have to be prepared to take back the spent fuel. This is due at least in some measure to nonproliferation concerns, in that you don’t want these new entrants building enrichment or reprocessing plants. While Russia has enrichment capacity and the ability to expand this capacity, they also need uranium to be able to supply these countries with enriched uranium. This is why theye currently focusing on the uranium side of the equation.

StockInterview: Let talk about some of the target countries, where those with the more ambitious nuclear energy programs will want to secure uranium.

Jeff Combs: We have recently done a series of reports, looking at countries where major production is taking place, or could take place. Of course we’ve done them on Canada, Australia, Namibia, South Africa, Kazakhstan, and Uzbekistan. I think the next country might be Mongolia because of the exploration and development activity that is taking place there. Mongolia mining laws are very favorable to foreign companies. Mongolia is also located in that part of the world where the bulk of nuclear power expansion is taking place. The problem in Mongolia now is the lack of infrastructure ?the location of the exploration sites relative to roads and rail lines, and the ability to connect to the electricity grid and water lines.

StockInterview: There has been so much press and chatter about Kazakhstan. Is there substance in these commentaries, or is it mainly hype?

Jeff Combs: They’ve got a lot of uranium resources and reserves. They’ve also got a commitment to expanding production there and a pretty big customer in China. The hype might be related more as to whether they can do it as quickly as they say, as opposed to whether they can eventually get to the levels theye talking about. One of the things that will slow them down is the infrastructure, including the skilled work force, needed to expand at that rate. They have increased production. They definitely will continue to increase production, but perhaps not at the rates they are advertising. They’ve produced a lot in the past, in the old Soviet Union days. I think they can get back up to those production levels, but it going to take some time.

StockInterview: What will be required to get things going in Kazakhstan?

Jeff Combs: It appears they’ve been able to attract capital. A large part of it is just the time is takes to build the infrastructure, including training workers. You can have all of the investment in the world, but it still takes time to get things done, especially if the infrastructure isn’t well developed in the first place. If you look at Kazakhstan on the map, it is very close or adjacent to Russia, China, and India, where the major part of nuclear growth is occurring. I don’t think there will be any shortage of demand for their output.

StockInterview: Where does Japan fit into the current uranium bull market?

Jeff Combs: Japan is definitely a factor in the market. Their growth might not be as rapid as it once was, or once was expected to be. With Japan you have a country that does not really have any indigenous uranium resources to speak of. They really need to import uranium. To facilitate this and to secure future supplies, Japan has historically developed different supply relationships around the world, both by taking positions in uranium mines and by nurturing long-term relationships with producers. I think that it likely the case that this recent price rise caught them somewhat off guard, but recently Japanese utilities have put more effort into shoring up their supply options.

StockInterview: There are countries, which get little media coverage, such as Namibia. How does this country rate?

Jeff Combs: I think Namibia will definitely have an important role in supplying uranium. I don’t think it going to have the expansion potential of Canada, Australia, or Kazakhstan, but I think South Africa, Niger and Namibia are going to be an important component for uranium supply in the future.

StockInterview: You mentioned Niger, which was the world third largest uranium producer, and has now fallen to number four, behind Kazakhstan.

Jeff Combs: The funny thing about Niger is that in a way it sort of fallen off the radar screen. It produces, but it just doesn’t get the press as other places. If the price increases, it really changes how people look at all these different projects going forward and a lot of things, which might not have been looked at 20 years ago or so, are being reinvestigated. Obviously, there is uranium in Niger. It quite important to the economy there. As I said, they haven’t really been on the radar screen as much as a lot of other regions in the world. Perhaps this is because production there has been controlled by the French for a long time. There are some Canadian companies exploring in Niger now. Since this activity is fairly recent, it won’t likely bear any fruit for five to ten years down the road.

StockInterview: Do you foresee realistic nuclear energy expansion in other parts of the world, such as the Middle East?

Jeff Combs: Frankly, I haven’t focused on that very much. I know that Turkey is looking to do something. At some point, I think you would see more nuclear power in the Middle East just because the oil supplies aren’t going to last indefinitely. We do a headline news service, and it packed full of stories on different countries that are looking at nuclear power. It seems like there is a new country added to the list every day. I know, for instance, that Vietnam is looking pretty seriously at nuclear power. It would not be surprising there would be interest in the Middle East. There is a lot of focus on the problems associated with Iran. Overall, I’m a believer that if you have more nuclear power, then youe going to have fewer problems with energy and more economic development, higher standards of living, and that going to be a big positive that will outweigh the negatives in situations like Iran.

StockInterview: Speaking of Iran, what is Washington sentiment toward nuclear energy, aside from the Bush Administration endorsement?

Jeff Combs: I think there is a growing recognition, even among Democrats, that you need nuclear power as part of the energy mix. Youe not going to get there just by renewable energy sources. With the environmental and overall energy challenges wee facing now, with higher and higher natural gas and oil prices. From the U.S. standpoint the vulnerability with respect to secure energy supplies, I think there is a growing recognition that nuclear power is part of the solution, and this thinking extends outside of the Bush administration. I’ve talked to people, and they believe that even if a Democratic administration came in that you really wouldn’t necessarily put a damper on nuclear power.

StockInterview: What about the Hillary Clinton Factor, if she becomes the next U.S. President?

Jeff Combs: I haven’t really asked her for her views on nuclear power recently. I think the story for nuclear power is not so much what happens in the United States, which certainly could add more reactors. The rest of the world probably looks to what the U.S. does to a certain extent. I think the real growth in nuclear power, and what likely to drive the market in the future, is on the part of the developing countries in the eastern part of the world. These would be China, India, Korea and Russia, where economies are growing a lot more quickly, not the really mature economies like in the U.S. and Europe. Although I would expect to see some growth there as well. In this respect, having a Democratic president would not derail what happening in nuclear power or the uranium market. As mentioned earlier, I think that you see a more general acceptance of nuclear power across party lines, in Europe as well as the U.S., although there are still some factions that are virulently anti-nuclear.

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Explosion in Nuclear Energy Demand Coming

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Sprott Asset Management uranium expert Kevin Bambrough talked with us about the “second leg?of the current uranium bull market. He sees a massive nuclear build up heading our way with “the environmentalists leading the charge.?He said many price projections may be inaccurate because “people are underestimating future demand.?
uranium, China, Russia, HEU, Canada, Athabasca Basin, nuclear energy, mining, Cameco, Australia Sprott Asset Management uranium expert Kevin Bambrough talked with us about the “second leg?of the current uranium bull market. He sees a massive nuclear build up heading our way with “the environmentalists leading the charge.?He said many price projections may be inaccurate because “people are underestimating future demand.?
StockInterview: Price forecasts on spot uranium are widening. Some insiders have predicted uranium prices may drop back into the $30/pound range; others, such as yourself, continue to suggest $50/pound or higher. Any comments on the forecasts others are making?

Kevin Bambrough:
There are many people forecasting uranium prices now. It important to consider their track record of forecasting prices. Look at the contracts that have been written by many companies in the industry, over the last number of years. Anyone who had ceilings, or had signed fixed-priced contracts, has been punished. Very few people in the industry predicted what has happened. Looking forward, I think that in our view, the cost of production of current producers isn’t going to be as relevant as it has been in the past. It will be the more marginal, much higher cost producers who will be setting the price.

StockInterview: Isn’t there a sense of false optimism that “projects in the pipeline?will ensure an ongoing stream of uranium oxide for the nuclear fuel cycle?

Kevin Bambrough:
There are a lot of people looking at the supply situation going forward while underestimating future demand. They are very optimistic that mining projects are going to go as planned. We had recent news that Cigar Lake had a problem. There was a flood the. There a couple million pounds shortfall to most people models for at least two years. All because of one mine six month delay.

StockInterview: Would that have the kind of impact the McArthur flooding (Athabasca Basin, Cameco) had on the spot uranium price a few years ago?

Kevin Bambrough:
I think it could. It was forecast to go up to 18 million pounds of production. That would have been ten percent of the world current consumption. Cigar Lake would need to ramp up over a three year period, once it gets started. Now, there is a six month delay. What if it delayed a year? That really changes the production profile for the next decade. There are many projects that could see delays. The mining business is always full of delays. Remember that when we bring on new nuclear plants, they take on average about 1.6 million lbs when commissioning. What will happen, if in a decade, we bring on just 10 or 20 reactors each year? That another 16 to 30 million pounds per year of demand just because of the start up.
StockInterview: Does this mean the current uranium bull market still has strong legs?

Kevin Bambrough:
I think wee entering the second leg of the bull market here. It is going to move away from a supply shortage story, where we focus on the fact that we only get about 60 percent of the current consumption from mines, while the inventories are being worked off. Now, wee moving into a situation where wee seeing an explosion in demand growth. Just a couple of years ago when we first started investing in uranium, we could see probably about a dozen nuclear facilities being planned for construction throughout the world. Now we’ve got well over 100 being planned. It seems there are new additions and talk of more additions every day.

StockInterview: How you envision this nuclear buildup rolling out?

Kevin Bambrough:
I don’t think it unreasonable to think, looking ten to twenty years out, there are going to be a lot of countries that will be trying to get in the position that France is in, with a much higher percentage of their power coming from nuclear generation. We could see a move to where maybe 50 percent of global energy production or more could eventually be supplied by nuclear. There is nothing else that can really step up and fill the void and take care of this problem that wee having. France produces 78 percent of their electricity from nuclear. Why isn’t that reasonable for others? Look out a decade or two, and it doesn’t appear like wee going to have the oil and the gas in order to handle our needs. Obviously we can do more with coal, but if wee going to keep using coal we’ve got to put in place technology to take care of the carbon dioxide sequestration. If you want to have a stable, secure supply of electricity, it seems that youe going to have to go with more nuclear or eventually with these new coal technologies. I think there is going to have to be a balance of both, because the oil and gas just isn’t going to be there.

StockInterview: What do you think is the catalyst for this anticipated growth in nuclear energy demand?

Kevin Bambrough:
The most interesting thing is the fact that some environmentalists are leading the charge to go more nuclear. It because they realize nuclear energy is the only practical alternative and because of the situation with the carbon dioxide (CO2) levels. There have been some recent reports about CO2 levels reaching 381 parts per billion, just spiking out of the range that has kept the world in a relatively stabile environment for the last 400,000 years. If you look at the work of people like James Hanson, the correlation between CO2 levels and temperature is undeniable. Basically, mankind has increased the CO2 levels beyond a level that hasn’t been seen in over a million years. We are just starting to see the weather impacts. There are problems with droughts across the world as well as elevated hurricane activity. Going nuclear on a mass scale is starting to become recognized as one of the only ways to have a real impact. I think what wee going to see is an unprecedented build out in nuclear capacity throughout the world in the coming years and decades. I’d equate this to what happened when we went from using oil for just lamps and home heating to using it as a transportation fuel. What going to happen with the people who have the higher quality uranium reserves and lower cost production? They are going to be able to reap massive profits over the coming decades.

StockInterview: Looking ahead, do you think we’ll see more deals between a small uranium producer, such as Uranium Resources (OTC BB: URRE) and the Japanese multi-national conglomerate, Itochu Corporation?

Kevin Bambrough:
I have no doubt that it going to continue to happen. More importantly, I’ve heard that some of the major builders of nuclear facilities around the world, companies such as Areva are quite concerned about the availability of supply going forward. When these companies are talking to countries and utilities that potentially could contract to build nuclear facilities, theye basically being told that buyers want uranium supply assurances, or they aren’t going to give an order to buy a nuclear facility. I’ve heard they are looking to do joint ventures or at least contract with emerging producers to try to get future supply. Then, they will be able sell their nuclear technology to countries and ensure supply.

StockInterview: Will the Chinese be satisfied with the uranium they plan to buy from Australia, or will they have to tap into uranium production from another or other countries?

Kevin Bambrough:
I think that the Chinese will probably look elsewhere as well. Countries have strategic oil reserves. Why shouldn’t they have strategic uranium reserves to supply their nuclear reactors? It makes sense to have a good stockpile of uranium considering the relative cost of nuclear power versus anything else. I don’t think that the nuclear power industry should operate on a just in time basis, considering the costs and the risks of making sure you can secure supply. Don’t get me wrong. There is plenty of uranium in the world, but wee just going to have to pay up for it. I believe wee going to consume lot more than what wee consuming nowadays ?a decade or two out. The world is waking up to the reality of peak oil production, and how it is going to affect all aspects of energy production.

StockInterview: How much of a factor will Russia play in the nuclear build up?

Kevin Bambrough:
Looking at some of the recent statements made by Russian officials, it completely clear to me that we’ve been correct in what we’ve been thinking for a long time: the HEU agreement (to deliver highly enriched uranium and have it blended down) is probably not going to be renewed. The Russians are planning to make nuclear technology a key export for them, really as a value added product to go with uranium production. They desire to be able to offer a complete solution, not just uranium, but the actual building and technology around the nuclear facilities themselves. They will also have growing uranium demands domestically and have voiced concern about being able to meet their own needs beyond 2015.

StockInterview: But nuclear energy critics claim all of these power plants won’t secure financing and most plans are just pipe dreams never to be built.

Kevin Bambrough:
Two years ago, the critics said there would never be any more nuclear plants built in the U.S. People used to say nuclear was over for Germany, and that many countries would exit nuclear power. Now wee seeing the exact opposite. Wee seeing proposals being done, incentives put in place, and a multitude of projects moving ahead. If what the leading scientists from NASA, the NOAA and from many organizations around the world are saying about global warming, and the acceleration we’ve recently seen continues, people are going to be begging to have more nuclear facilities and cut CO2 emissions. The environmentalists will be leading the charge.

StockInterview: How long will it take before the proposed nuclear build up impacts the uranium mining companies?

Kevin Bambrough:
The actual build of all this takes time. I think the increase in the positive perception, of the nuclear industry is going to continue to accelerate. All demand for uranium can come from just the planning stage for nuclear power plants, as companies look forward and try to contract future supply. Ultimately, that what will keep driving the uranium price higher.

StockInterview: How seriously is the nuclear industry taking the global build up?

Kevin Bambrough:
I think the industry is starting to take it very seriously. That why the uranium price keeps pushing higher. People are going around trying to contract for uranium, and they are finding it more difficult. People are also starting to realize that as you have problems, such as the McArthur River flooding, which got the uranium bull market jump started, and now a problem at Cigar Lake, you really should have a good build up of inventory in order to protect yourself in this environment. Especially when the relative cost of having to switch off a nuclear facility to go to something else in a pinch is multiples higher.

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How To Rate Your Favorite Uranium Company

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Many investors invested in the Great Uranium Bull Market with little rationale behind their speculation. Through the robust rallies of the past two years, it was easy to play the momentum of a newsletter writer recommendation. Quite a few did so, often employing the ‘greater fool strategy?and hoping the last and dumbest investor would provide an exit strategy for the early and nimble speculator.

We have created a 7-point ratings system to help you in determining which c…
uranium, nuclear power, electricity, utilities, stocks, mining, exploration, Canada, Wyoming, energy
Many investors invested in the Great Uranium Bull Market with little rationale behind their speculation. Through the robust rallies of the past two years, it was easy to play the momentum of a newsletter writer recommendation. Quite a few did so, often employing the ‘greater fool strategy?and hoping the last and dumbest investor would provide an exit strategy for the early and nimble speculator.

We have created a 7-point ratings system to help you in determining which companies might be best suited for your degree of investment risk. It a guideline you can use, and we’ve not assigned a weighting to each item. Nor have we named any uranium companies. This is a do-it-yourself ratings system, which requires but two actions on your part: (a) be persistent in your data-gathering from each company by asking the questions we posed below, and (b) be honest in your assessment when you review this data.

Some of the more speculative, pure exploration plays might abandon their properties by the end of the year or in 2007. Those would include under-capitalized companies with the more speculative properties and who also fare poorly on our ratings system. This ratings checklist would also apply to the pure specs. We began with our article, “How to Choose a Uranium Stock,?featuring Sprott Asset Management Market Strategist Kevin Bambrough and Senior Portfolio Manager Jean Francois Tardif, as a starting point to create a more advanced ratings system for you.

Uranium producers are likely to make a strong comeback as they cross over or switch to more lucrative long-term contracts. But, it could be the smaller, but more solid, uranium development companies which could emerge as the preferred investment vehicles, when the bull resumes the next leg of its long run. Now that we have had a shakeout, with possibly another one on the horizon, it is wise to properly evaluate the important merits of the more serious uranium development companies.

Below are some of the key criteria we are using in our ratings system to objectively evaluate uranium companies covered in our new book, “Investing in the Great Uranium Bull Market: A Practical Investor Guide to Uranium Stocks.?Please determine if your favorite exploration and/or development company meets these standards. This is one way of obtaining sufficient data to help you form a snapshot of a company prospects.

1.Cash Position. The more cash a company has in its treasury, the longer it can survive. Find out if your favorite company has a minimum of $20 million in cash. More than $30 million gives a company some breathing room. Exploration and development are very expensive propositions. Raising money in a down market is very tough.

2.National Instrument 43-101. This independent geological assessment determines how many pounds of uranium a company property hosts. While there are flaws with this system, it can be a workable yardstick. Find out if your favorite company has a minimum of 20 million pounds of a NI 43-101-compliant uranium resource. One should consider historical resources inadequate for evaluation purposes. They may also be misleading and open to hyperbole.

3.Pedigree of Known Deposits. Many of the uranium development companies hold properties, which were once held by the minerals or uranium divisions of major oil companies. Some were continuously held, during the 20-year bear market in uranium by one company or another, and then abandoned during the nadir of the drought. Find out if your favorite uranium company primary properties were continuously held until 2000 or a bit longer, but before the spot uranium market reversed. The earlier a company acquired its properties, the greater the probability that company got the best ones. Those who came into the game late often got the crumbs.

4.Drill Databases. Those previous land tenants, the major oil companies, who spent tens of millions of dollars drilling the uranium properties, accumulated drill databases. Some companies got the property, but not the drill databases. Some companies bought the drill database as part of their property acquisition. Find out if the company primary properties also have the drill database accompanying it. You may be surprised at what you find.

5.Pedigree of Uranium District. There are several premier uranium districts, which have a history of large-scale uranium production: Athabasca, Australia Northern Territories or South Australia, Grant New Mexico, Wyoming, Kazakhstan, Niger, and Namibia. Find out if your favorite company has holdings in these districts. Some companies have holdings in multiple uranium districts, which may also become recognized as a wise decision by their management.

6.Management Technical Experience. There are three categories of uranium experience: exploration geologist, project geologist and mine operations. Find out how much experience your company geological team has in each of those three categories. Those with less than 100 man-years of uranium experience behind them may be lacking. Those companies which have strength in all three categories could become the next uranium producers.

7.Political or Environmental Risk of Primary Assets. Finally, you should assess the risk of the company primary assets with regards to its location. Primary uranium assets in North America or Australia Northern Territories hold the lowest risk. Those companies exploring or developing in Niger, Namibia or Brazil have slightly higher political risk. Companies with prospects in countries such as the Democratic Republic of Congo, Kazakhstan or Mongolia hold more risk than some investors may wish to tolerate. Areas which forbid mining such as Queensland, Western Australia or the U.S. state of Virginia carry an enormous degree of risk and a Kierkegaardian leap of faith.

Now you can rate your favorite uranium company and use this ratings system to help you sift through the more than 300 potential stocks in which you might have considered investing.

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