Investing in Uranium Mining - China's Uranium Fever !
Commodities / Investing Jan 17, 2007 - 08:31 PM
A rush of Chinese miners is heading for Australia right now. We've seen this kind of thing before — in 1851. Back then, the Chinese miners were after gold. This time, they're after another metal ... uranium. Will they find it? If history is any guide, yes.
The Chinese are very good at mining. In fact, they were so good at finding gold that the Australians considered them supernaturally lucky. The animosity was palpable, evident in phrases like “a Chinaman's chance.”
It wasn't just luck, though ... the Chinese used innovative techniques. For example, Western Australia is often bone-dry, and it's hard to find water to separate the gold from the dirt. The Chinese solved the problem by digging out gold-rich creek beds and letting seasonal flooding work its magic.
Fast forward to Australia today. Six Chinese companies are among more than 40 mining concerns competing for a license to explore two uranium prospects south of Alice Springs in central Australia. If the Chinese win out, it will be their first wholly-owned Australian uranium project.
I love when Chinese money flows into Australian uranium projects. In fact, one of my original picks for Red-Hot Asian Tigers was an Australian uranium prospector that received an infusion of Chinese cash. I like the stock so much that I told my subscribers to add more at a later date. The two positions closed last week up 88% and 105% from our tracked entry points!
Of course, uranium investments have been doing well in general ...
Great Things Are Happening for Uranium Around the World
If recent news is any indication, things are only going to get better for uranium in 2007. Take a look at the latest developments ...
In Australia, Prime Minister John Howard is leading the fight to lift his country's restrictive “Three Mines” policy, which allows only three uranium mines to be open at the same time. Restrictions are being rolled back at the state level as well. This means we could see a regular stampede of miners bringing new resources to market.
In Asia, the Chinese are seeking Australian mining licenses for a very good reason — they plan to import 2,500 metric tonnes of Australian uranium per year by 2020.
The really bullish news is that China's expected annual uranium demand is three times as much — 7,500 metric tonnes. Why such strong demand? Because China's nuclear program is kicking into overdrive. And the same thing is happening in Japan, Korea, and India!
In the U.S., utilities are starting to look at building new nuclear power plants again. While the U.S. has 103 working reactors, no new nuclear plant has been started since the 1970s.
Now, because costs are dropping rapidly, the next wave of nuclear power plants should be able to produce electricity at $55 per megawatt-hour vs. the average rate of $50-per-megawatt-hour at a coal plant, according to a new report from Standard & Poor's. Even the $55 figure may prove conservative because the second wave of nuclear plants could benefit from standardization. All told, the cost of a megawatt-hour could potentially drop to about $44!
That's right, nuclear power could end up being cheaper than coal, and without the tons of greenhouse gases and poisonous ashes that coal plants spew into the atmosphere.
In Canada, you'll find some of the best little uranium prospectors on the planet. I'll be speaking to some of them when I head up to the Vancouver Resource Investment Conference in just a few days. I'll use that conference as a base of operations to meet with miners, as well as some of Vancouver's smartest investors. Canada is such a resource investment hub that some of Australia's best miners list their stocks there as well as on the Australian Stock Exchange.
There's Still Time to Get on Board
The Great Uranium Train
The tightening supply/demand squeeze in uranium drove the white-hot metal's per-pound price from $35 to $72 last year. And the picks in my last uranium report catapulted higher — some to triple-digit open gains. But if you haven't gotten a stake in uranium yet, you haven't missed the boat. I expect the squeeze to intensify in 2007 and 2008, in what I call “uranium's second wave.” And I'm finding some incredible bargain-priced stocks set to ride that wave ... shares that trade in Australia, Canada, even the U.S.
By the end of my trip to Vancouver, I expect to have my final picks for a new uranium report I'm working on, The Small Uranium Wonders.
In the meantime, if you want to play the surging bull market in uranium — what could be the biggest bull market of our lifetimes — consider the Uranium Participation Corp., a Canadian fund that tracks uranium by buying and holding uranium oxide and uranium hexafluoride. The symbol is U on the Toronto Stock Exchange. In the U.S., the symbol is URPTF on the Pink Sheets (URPTF.PK on Yahoo).
But for my money, the biggest returns should come from a bunch of small- and micro-cap miners ... the kind of companies that most investors have never heard of. If you'd like more details, plus a heads up on my next three picks, check out this report.
Yours for trading profits,
Sean Brodrick
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