Jordan Wealth Management Group - ScotiaMcLeod Truro

For the longest time, uranium went for twenty-five dollars or less. When commodities, especially oil, had their big run up peaking in 2007, uranium topped out at almost one hundred and forty dollars a pound.

The reason for this large move up was because speculators using massive leverage were buying any and all commodities, and they were playing in to the world’s psyche that we need alternative energy, especially when oil is over $100 a barrel. The thesis was that the current supply of uranium is only sufficient to meet the need of existing nuclear power facilities, and that there was a 40% increase in nuclear power plants either being built or being planned over the next decade, a 60% increase from plants being proposed - and the uranium supply is not there. This was exacerbated by the understanding that a significant percentage of the uranium supply had been coming from the Russians selling their surplus uranium that was coming from their decommissioning some of their older nuclear weapons – and this was about to end.

The subsequent sell-off was magnified by the forced unwinding of these speculative positions by traders to cover margin calls during our stock market correction, the fact that oil prices and coal prices dropped and nobody was talking conservation anymore, and the new world order where no money is available for anything made everyone realize these plants were not going to get built anytime soon.

So where are we now? The plants are still in the construction,planning or proposal stages. Capital is still not accessible, but is showing signs of loosening up. World demand for electricity is still forcasted to increase beyond capacity. The environmental movement is gaining traction with Obama and the Democrats in power. There is still a large debate over the NIBMY attitude (not in my back yard). Those who benefit the most from uranium produced power do not necessarily pay the cost – those who live next door to the plant or the uranium mine do not enjoy a cheaper electricity cost to compensate them for the additional risk to their health. That being said, the choice unfortunately will come down to – do you want to burn more coal, or accept nuclear? Which of the two is worse for the planet? Likely uranium plants will win more than one of these debates.

If they do, the price of uranium will have to increase, asminers need much more than forty dollars a pound to make it economical for themto build or expand a mine.