The Push for Uranium

In its 2009

report, the International Energy Agency estimated the world must invest US$26 trillion over the next 20 years to meet projected demand for energy, an amount that even its prim language called "huge" (you can download the free 17-page executive summary in PDF format http://www.iea.org/Textbase/npsum/weo2009sum.pdf ) It also asserted that future demand will cause a rapid rise in greenhouse gases unless countries adapt energy policies away from fossil fuels.

Of the so-called clean energies (that is, low carbon emitters), only geothermal and nuclear can stand on their own feet economically. And while we like many geothermal projects, nuclear power also has some strong advantages – its plants are modular and expandable, there’s no geological "leash" to work around, and their electrical grunt for the buck is hard to beat… that is, provided one can cover the costs of building a plant and the neighborhood isn’t plagued by NIMBY ("not in my backyard").

Public perception is a tricky factor in what is already a complicated equation to project future demand. The short version is that demand has long outpaced production and will do so in the future. And anti-nuclear attitudes are waning. For example, Sweden, at the forefront of the anti-nuclear movement since the early 1980s, lifted its ban on new plants last year, citing energy security and concern for greenhouse gases. Opposition has also been softening in Germany, another bastion of anti-nuclear sentiment.

Supply, as opposed to production, is currently abundant, thanks in fair part to the Megatons-to-Megawatts program. But as I mentioned in the introduction, that arrangement is going away in 2013. Even if it’s extended again, Russia is far from the beggar it was in the early 1990s and will push for more incentives.

Put together, we can’t see the uranium market headed anywhere but up within the next few years. The investment recommendation that follows is a company with the biggest thumb in the uranium pie, with expectations to bring more online.

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