By: Sean Brodrick
Boy, I sure hope you're holding some uranium investments … because at the latest auction for the white-hot metal, the spot price of uranium oxide (U3O8) soared $18 to $113 per pound!
That's a 19% rise in just one week. According to Nuclear Market Review, it's the largest single weekly price increase since uranium has been tracked!
And you know what?
You ain't seen nuthin' yet!
I'll give you my favorite ways to ride rising uranium prices in a moment. First, let's talk about something I just touched on last week, something that could be a huge force behind higher uranium prices …
Peak Oil and the Decline of
Peak oil is the theory that global oil production is near a top. Once that point is reached, oil companies can drill more and faster, but they won't be able to keep up their production.
Here's a big sign that this day is rapidly approaching — some of the biggest oil fields in the world are already peaking. I'm talking about the "supergiants," which produce 500,000 to one million barrels per day.
The big Texas oil fields peaked decades ago. Prudhoe Bay in Alaska is seeing production drop like a stone. The North Sea is past peak production. And Kuwait's super-giant Burgan oil field is also in trouble.
This is especially bad news because there aren't many supergiants in the world. Leading up to the 1970s, only eight had been discovered. Two more were discovered through the 1980s. Since then, only one (in Kazakhstan) has been found.
Now, another supergiant is falling apart right in our own backyard — Mexico's Cantarell oil field, which produces one out of every 50 barrels of oil on the world market.
I wrote about Cantarell's decline in early March. I explained how its production was declining even faster than the experts' worst-case scenarios. Well, guess what? It's even worse than we thought just a little while ago!
The verdict: From January 2006 through February 2007, Cantarell lost a staggering one-fifth of its production, with daily output falling from two million barrels per day to just 1.6 million.
In fact, the Wall Street Journal reports that Cantarell is fading so fast that Mexico may become an oil importer within eight years.
This could be catastrophic to Mexico's economy. But let's also think about the effect on the United States' oil and natural gas supplies:
Imagine losing more than one in every 10 barrels of imported oil. What do you think that would do to oil and gasoline prices? Prices at the pump are already expected to get close to $4 per gallon this summer. If over one-tenth of our imported oil disappeared, $4 a gallon might look cheap!
And let me tell you, this could happen sooner than people think …
Reason: Even in a best-case scenario, Cantarell will probably continue to decline by roughly 10% a year, down to a daily average of 600,000 barrels per day in 2013. That's just six years away!
Ironically enough …
It Takes About Six Years To
I'm not including the permitting process, or other regulatory hoops, but working flat-out, it takes about six years to build a new nuclear power plant. So I can only hope U.S. utilities use the next few years wisely.
After all, if we want to prepare for the coming head-on collision with peak oil, we are going to have to build a lot of new nuclear power plants. The U.S. has only 28 applications for new plant licenses between now and 2009 so we need to get on the stick and start building a lot of new nuclear plants soon.
By electrifying railroads and building electric cars (with tax breaks to make them affordable), along with conservation and pursuing alternative fuels, we could rev up our economy and eventually tell OPEC to go stick its oil where the sun don't shine.
An onslaught of new nuclear plants would strain already tight demand for uranium, of course. This year, demand should hit 183 million pounds, exceeding production by 56%, according to figures from industry leader Cameco.
And demand is only going to grow because the rest of the world is already building more nuke plants at a furious pace. There are 435 nuclear reactors operating around the world, with 28 more reactors under construction. Each 1-gigawatt nuclear power plant takes a first fill of uranium of about 600 metric tonnes, then consumes 200 tonnes a year thereafter.
One more thing to consider: It also takes six to eight years to get a new uranium mine permitted. So mines that are already moving along that path, and that have sharp management teams who know how to jump through government hoops, stand to make a killing! And so do investors who invest in the right uranium stocks and funds …
My Favorite Ways to
Last week, I said a pure way to play rising uranium prices is the Uranium Participation Corp., a Canadian fund that tracks uranium. The symbol on the Toronto Stock Exchange is U. In the U.S., the symbol is URPTF on the Pink Sheets. (On Yahoo, that would be URPTF.PK.) And I still think this fund is a good choice.
However, here's another: Fronteer Development Corp (FRG on the American and Toronto Stock Exchanges) is a uranium and gold explorer. It owns 47% of Canadian near-term uranium producer Aurora Energy. In February, Aurora announced that its 100%-owned Michelin and Jacques uranium deposits in Labrador contain a measured and indicated resource of 58 million pounds of uranium (U308), and an additional inferred resource of 38 million pounds of uranium.
In effect, Aurora's uranium resource base has increased 170% in slightly more than 12 months. I expect that Aurora will expand its resource with further drilling, but let's say that the inferred resource is the limit of the recoverable uranium. That's 98 million pounds, worth $11 BILLION at today's spot price!
Uranium in the ground isn't the same as uranium at a mill, so after mining costs, let's say that resource is worth $5 billion. Fronteer's 47% share of that would be $2.3 billion. Meanwhile, Fronteer has a market cap of just $933 million. Talk about a discount!
Readers of my first uranium report, The Golden Age of Uranium, are well acquainted with these names because Fronteer was one of my picks when I published the report on October 3. At the end of last week, Fronteer was up 146% from that day. Over the same period, Aurora posted a solid return of 66%.
Note: Fronteer is also a current pick in my Red-Hot Resources service, which recommends picks in U.S.-listed stocks. The stock is up 24% since I recommended it on March 7.
I believe both Fronteer and Aurora could go substantially higher as global warming heats up, oil peaks, and the uranium supply/demand squeeze sends the price of uranium oxide over $250 per pound.
This is why I prefer investing in individual stocks. You can get a lot more leverage by investing in miners. Just make sure you understand your appetite for risk before you go this route. The profit potential is great, but it won't always be a smooth ride.
Whatever way you decide to go, I think it's time to get on this profit train. Cantarell is just the latest warning sign that we're on a head-on collision with peak oil — and nuclear power is one of the few proven alternatives that we have. Uranium has already enjoyed a great move, but the best is yet to come.
Yours for trading profits,
P.S. If you're looking for my top uranium picks, check out my newest uranium report, The Small Uranium Wonders. It highlights six great mining stocks to jump on right away. I'll also send you four updates throughout the year. Just call us at 800-400-6916 and say you want "The Small Uranium Wonders" report or order online at my secure website.
About MONEY AND MARKETS
For more information and archived issues, visit http://www.moneyandmarkets.com
MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.MoneyandMarkets.com
From time to time, Money and Markets may have information from select third-party advertisers known as "external sponsorships." We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions.
If you have a friend, co-worker or family member who you feel could benefit from Money and Markets, forward this message to a friend.
Would you like to unsubscribe from our mailing list?
To make sure you don't miss our urgent updates, add Weiss Research to your address book. Just follow these simple steps.
© 2007 by Weiss Research, Inc. All rights reserved.
-- Posted Wednesday, April 11 2007 | Digg This Article |
Previous Articles by Guest Authors
UraniumSeek.com, Gold Seek LLC
The content on this site is protected by U.S. and international copyright laws and is the property of UraniumSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on UraniumSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.
The views contained here may not represent the views of UraniumSeek.com, its affiliates or advertisers. UraniumSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of UraniumSeek.com, is strictly prohibited. In no event shall UraniumSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.