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Riches in Enrichment: Profiting From the Coming Nuclear Energy Crunch

By: Andrew Mickey, Editor, BreakAway Investor

-- Posted Friday, April 13 2007 | Digg This ArticleDigg It! |

President Bush's statement "America is addicted to oil" sent shockwaves through the oil industry. But there's an even greater addiction afflicting not just the United States, but France, Japan, Germany, South Korea, and the United Kingdom.

The United States consumes 25% of the world's oil and natural gas -- and 33% of the world's uranium supply. Yet it accounts for only 2% of global uranium production. (It didn't use to be like this: Just 25 years ago, the U.S. produced four times more uranium than it used.) It's even worse overseas. France, with just 50 million inhabitants, generates 80% of its electricity from nuclear power and produces no uranium at all -- and it gobbles up 15% of world supply. Uranium junkies Japan, Germany, South Korea, and the U.K. consume 24% and combine to produce 0.196% of the world's annual uranium production. Western countries consume 72% of the world's uranium but contribute less than 3% of global supply.

With oil prices high and global warming becoming the latest political fad, nuclear energy is enjoying a comeback -- as a "green" form of energy, out of all things. No surprise that over the past five years, uranium prices have soared more than 1,100%. The few uranium suppliers have these countries over a barrel. And they're willing to hold out when negotiating a sale. This situation isn't going to improve any time soon: There now are 400 exploration and production companies in the great uranium race. But the largest uranium resources in the world have barely been tapped.

Australia, which sits atop 24% of the world's known uranium reserves, limited the number of uranium mines to three in 1982 and the rule is still in effect. As a result, demand is far outstripping supply. In 2005, the latest year we have complete data on, 68,000 tons of raw uranium ore was consumed but only 39,000 were produced. That is a massive 43% gap between supply and demand.

Our current uranium stock investment is generating profits for BreakAway Investor's portfilo right now. For the specific details of Andrew Mickey's recommendation,
click here...

Cold War Legacy

Of course, there's still plenty of uranium floating around -- thanks to the Cold War. The "Megatons for Megawatts" program plans to reduce the highly enriched uranium in thousands of nuclear warheads into low-enriched uranium useful to power plants. The program is sponsored by the United States and Russia and began in 1994.

Since then, it has turned 250 metric tons of highly enriched uranium (that's enough for 10,000 nuclear warheads) into a form usable for energy generation. However, these massive supplies of uranium that were built up during 50 years of Cold War arms race are starting to run low. In just six years, the deal will be over and Russia and the U.S. will quit supplying low-enriched uranium to nuclear power plants.

These will then be in dire need for new supplies of enriched uranium. After all, without it, nuclear power plants are just multi-billion dollar eyesores.

Riches in Enrichment

Before we go on, how about a little refresher in nuclear physics? Highly enriched uranium is made up of 90% U-235 while low-enriched uranium is only 5% U-235. U-235 is the radioactive isotope of uranium that is imperative to creating a nuclear chain reaction for power generation. Only 0.72% of uranium that is mined is U-235 and a concentration of 5% is needed to achieve critical mass and create a sustainable atomic chain reaction.

Freshly mined uranium is actually not very radioactive -- and utterly useless to a nuclear power plant. It must be enriched with a higher concentration of U-235 to be useful. And that's where the best opportunity lies for investors : Because since the Manhattan Project, the world has used just three very inefficient nuclear enrichment processes that were developed in the barren surroundings of Los Alamos, New Mexico. Those three are gas diffusion, centrifuge, and electromagnetic isotope separation (EMIS.)

EMIS enrichment is a terribly inefficient process: It would cost $81,000 to enrich a single pound of uranium. This has only been attempted a large scale by Iraq. That is, until 14 Israeli jets blew the Osirak reactor and the Iraqi nuclear program to smithereens in 1981.

Gas diffusion isn't all that much better. This 1940s-vintage energy-intensive enrichment process was currently accounts for 25% of all enriched uranium. However, it is a process that takes more than 1,400 stages to reach make uranium useful.

The best is the centrifuge process. This process only involves about 20 stages and involves spinning refined uranium in small tube to create a force greater than 100 times gravity. The massive force separates the useless U-238 and radioactive U-235 due to their different molecular weights.

Uranium: Perfect candidate

Right now, the centrifuge technology is taking over the enrichment industry. The United States Enrichment Company (USEC) is building the American Centrifuge plant in Ohio. This project is facing constant delays and budget overruns and won't reach full production until 2012. Also, there is a new enrichment facility under construction in New Mexico. This plant, built by Urenco, won't be running at full capacity until 2017.

As it stands, the world won't have enough enriched uranium to supply the 440 nuclear reactors used to generate 17% of the world's electricity -- let alone enough to supply the more than 200 new reactors either planned or under construction worldwide.

But there is a small company that has spent the last 19 years developing a new uranium enrichment process that is as much as 18 times more efficient than even the centrifuge process. Here's the best part: It doesn't require10 years to build an enrichment plant using this technology. Right now, there's a $350 billion energy company commercializing the process. The president of this energy giant says: "We are very excited about the transaction and the potential of this innovative technology. We are looking forward to the completion of its development and bringing this product to the global marketplace."

So am I. But there's a lot more to the story. Best of all, there is still time to get in on the ground floor of this explosive opportunity. I recommended this company to the readers of my letter, BreakAway Investor, a short while ago. The price hasn't moved much -- yet! Which means you still can get into this investment pretty close to where I recommended it to my readers. Since I consider it my responsibility to not just give you a "stock pick", but also provide you with the vital updates necessary to allow you to respond to changes in price and the markets in a timely fashion, I'd like to have you on my subscriber list for this recommendation.

I've made it as easy as possible for you to get on board: Simply follow this link to sign up.

By Andrew Mickey
Editor in chief,
BreakAway Investor

P.S. You can keep tabs on all the happenings and the uranium and base metals sector by signing up for my free daily e-letter, Fear & Greed, here.

About BreakAway Investor

BreakAway Investor is a monthly financial advisory newsletter published by the Taipan Group LLC, a division of Agora Inc. BreakAway Investor seeks to uncover investment opportunities in companies that are actively expanding market share within growing markets. The compounding returns created by these two elements of growth have historically proven to achieve superior investment results.

BreakAway Investor uses a unique set of investment principles to uncover tremendous growth opportunities that offer limited risk. The top-down analysis of BreakAway Investor analyzes a broad range of industries in order to identify the most attractive opportunities. The system intends to identify the future leaders within their respective industries by focusing on technological development, competitive landscape, and the potential disruptive nature of a new technology that has already started transforming a major customerís operations.

For the latest BreakAway Investor investment strategy, click here.

-- Posted Friday, April 13 2007 | Digg This ArticleDigg It! |

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