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« Nuclear Power: The Future | Main | RPT Uranium Corp: Buy »
Tuesday
Jul312007

Saudi Australia: The Future of Down Under?

With 24% of all known global uranium reserves, Australia is the largest player in the park when it comes to yellowcake. As a result of this, some links have been made between Australia in the uranium industry and Saudi Arabia in the oil sector, due to the similar nature of these two countries positions within their respective industries.

So is Australia set to become the next Saudi Arabia as the world moves away from fossil fuels and towards nuclear energy?


In 2003, Saudi Arabia claimed to be in possession of 260.1 billion barrels of oil reserves which was about 24% of the world's proven total petroleum reserves so they held roughly the same proportion of the world’s oil as Australia does of the world’s uranium.

Hopefully Australia will make sure they get a better deal out of their reserves than Saudi Arabia has. What we mean is, although Saudi Arabia has done well in producing large amounts of oil, it has not done so well in managing the wealth and making sure the people of the country benefit from the resource. Australia is in a better position as it is a democracy and so the people have more say in how the country is run than in countries like Saudi Arabia, where the state is run by a dictatorial government.

Another good sign is that Australia has kept its uranium under the ground for a while and has not allowed the expansion of mining yellowcake for some time. It has not keeled over to pressure from China and India to the north or to the Western powers for supplies of uranium. This shows that they are not simply prepared to sell for a quick buck, but are smart enough to wait and manage the resource in a sensible way so that it will work to the benefit of all Australians.

Saudi Arabia has somewhat squandered their incredible resource wealth, allowing countries like the USA to pump oil like crazy so another Saudi “Prince” can get rich quick and build himself a few more palaces and shrines to himself. Nowhere near enough money has been invested into the country to give the economy some diversity to survive after the oil runs out. They have only recently made a move to invest in their future by building the $26.6 billion city that is named "King Abdullah Economic City”. However it may be too late and the fact that the aristocracy has been living in tremendous luxury for so long in a country where many are still very poor, leads us to question the political stability of Saudi Arabia.

What we hope will happen is that Australia will utilize their fantastic uranium resources for the good of the coutry as a whole. Saudi Arabia has seen its GDP increase massively due to oil, almost doubling in the last 25 years and it has increased even more dramatically over the last century with the oil industry still making up over 40% of GDP.

So is it feasible that Australia could double their GDP due to an increase uranium mining?


The CIA and International Monetary Fund have Australia ranked as the 17th biggest country in the world according to GDP and the World Bank places it at 16th. If we double its current GDP, Australia is near the top ten, hot on the heels of economic giants such as Russia. Now an increase of that magnitude may appear to be a little unlikely as it represents an increase of roughly $645 billion, more than ten times the entire market cap of every uranium company on the stock market today combined!

So a rise that large does not appear to be possible in the near future, but never rule anything out, nothing is impossible. However, what is more likely is that Australia’s economy will get a fairly decent boost from the eventual expansion of the uranium sector and this could move it from a super-middleweight to a cruiserweight in the international arena.

Whether uranium can send Australia to the heavyweight league remains to be seen. We think a lot will depend on how well the Australians manage the money generated from uranium mining. For example, they could invest tax revenues from uranium into specialized research centres, focused of the uranium industry and nuclear technology and so could become a world leader in not only the mining of uranium, but uranium enrichment and transport as well as the construction and maintenance of nuclear power plants, designed of course to use more of Australia’s uranium! Of course they could go the other way and invest in sectors that had little to do with uranium, such finance, agriculture, manufacturing, retail, leisure, tourism or other energy sectors such as solar power or wind energy.

It does not really matter which sector Australia invests in, it may be advisable to invest in all of them, but the key thing is that they must invest in something in order to make sure that they do not squander the resource wealth they have as Saudi Arabia has done. In conclusion, we hope that Australia does not become like Saudi Arabia, but sets a better example of how to use a magnificent resource for the good of the country and its people.

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