Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199

 

Search Uranium Stocks
Uranium Price
Our RSS Feed

Uranium Updates

Enter your email address:

Follow Us on Twitter
Wednesday
Jan272010

The Other Oil Play You Simply Can’t Ignore

Oil and Gas Investment in Alberta.JPG

By Marin Katusa, Senior Energy Strategist, Casey’s Energy Report

The biggest economic shift of our time is under way.

Cheap and easy oil is gone for good. And given our addiction to low-cost oil, the results are about to put the squeeze on your pocket book.

Increasing prices will have a huge effect on every aspect of your life, from the price of your food, to how much you'll pay at the gas pump, to the cost of heating and cooling your home.

Nearly everything in our lives revolves around oil.

While demand for oil continues to grow, we are now coming to the realization that like all other resources, oil is finite and output is now in terminal decline.

This has the oil industry stuck on a treadmill, running faster just to stand still.

The Globe and Mail reports, "conventional oil supply (the type of low-cost fuel you can afford to burn) has not grown since 2005, and may never grow again."

The U.S. Department of Energy has concluded that 2009 will be the last year that oil production will keep up with consumption. And if the government is making this admission, it's safe to say the situation is far more urgent.

On top of this, as the standard of living for people in developing and emerging countries increases, so does their consumption of oil. A recent article in Reuters said that over 1.3 million vehicles were sold in China during the month of September alone, up 77.8% from the same time last year.

Trading bicycles for brand new oil-burning cars is a trend that is quickly gaining momentum.

And so, the question becomes: if demand is already outstripping supply, where will we find the oil needed to satisfy the billions of new consumers just coming online... protect our own lifestyle... and avoid a dangerous global tug-of-war over this dwindling precious resource?

As dire as this situation sounds, the truth is, we're not running out of oil. Far from it in fact. What we are running out of is the supply of cheap, conventional oil we've grown accustomed to. And for investors, this has opened a whole new window of opportunity.

The solution for tomorrow's growing demand will be solved by the industry's other oil play — namely Canada's massive oil-sand deposits.

The promising outlook for the Canadian oil sands is two-fold:

1.the easy oil is not so easy anymore
2.the cost of oil sands production has decreased because of the improvements in technology

And as for why I like Canada (and particularly Alberta) over other sources of oil sands, the answer is simple. Canada has the best upside for oil sands in the world, with ready-available infrastructure and a stable political system. Venezuela and Russia lack important criteria, infrastructure and political stability.

The chart above from Statistics Canada tells an interesting tale. In 2008, investment in Alberta's oil sands reached a record high of $19.2 billion, a 14% increase over 2007, even after oil prices fell below $34 per barrel. Now that prices are close to $80, development and research will only increase in this proven and reliable resource.



Another noteworthy plus for Canada is a change in the accounting principles, providing the majors with a more favorable financial uptick from the oil sands reserves. Within the next few years, this should offer a tremendous upside for the majors, providing excellent growth potential.

If you're interested in learning more about the future of oil, and also which stocks I believe will have the best potential to capitalize on the coming increase in oil prices, now is the ideal time to sign up for my advisory service, Casey's Energy Report. This publication is full of must have information for investors who want to make informed decisions.

Due to extraordinary response, we are extending our special year-end offer... for one week only.

Until January 31st you can get a 1-year subscription of Casey's Energy Report for only $595 – that's $400 off the regular retail price. Plus, as a special gift, you'll receive 12 issues of Casey's Extraordinary Technology – a $995 value – FREE of charge.

In the next year or two, the price of oil will be dramatically higher. That's why there's never been a better time to get on board with my favorite stocks and stake an early positioned in the explosively profitable oil sector. For more details, click here.


All the best.


Got a comment then please add it to this article, all opinions are welcome and appreciated. For those interested in Options Trading please click here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.
Tuesday
Jan262010

Khan Resources Incorporated Up 15.38% Today

KRI Chart 27 January 2010.JPG


Khan Resources Incorporated put on $0.12 to close at $0.90 registering a gain of 15.38% which was on top of a similar gain yesterday.

On 3rd December 2009 we wrote the following: As we can see from the above chart an all cash offer of $0.65 per share could spell the end for Khan Resources Incorporated (KRI) as Russia increases the pressure to gain total control of this asset.

Khan Resources has been embroiled in a dispute with ARMZ over who controls the exploration license for the deposit, which was formerly a Russian open-pit uranium mine, and now that dispute has turned into a hostile takeover with ARMZ making an all-cash offer valued at C$35.1 million or 65 cents per share.

ARMZ is the world’s fifth-largest uranium producer and a subsidiary of the Russian state-owned nuclear energy corporation, Rosatom. In August of this year, Russia signed a joint-venture agreement with Mongolia on the Dornod uranium deposit. This surprisingly bad news for Khan came after the Mongolian government enacted a new nuclear law giving more control of uranium reserves to the state.



At the moment we have not found a reason behind these price increases so maybe one of our readers who is closer to the situation than we are may drop us a line and throw some light on the situation.

As holders of this uranium stock we are grateful for any increase in the price of the stock and hope that it continues to head north.



All the best.

Got a comment then please add it to this article, all opinions are welcome and appreciated. For those interested in Options Trading please click here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

Sunday
Jan242010

Cameco Corporation: End of an Uptrend or Buying Opportunity?

After rising to over $33 as we entered 2010, Cameco Corporation (NYSE:CCJ, TSE:CCO) has undergone a significant correction, falling to nearly $28 in trading at the end of last week.

Cameco Corp: End of an Uptrend or Buying Opportunity?

The question is: Has Cameco broken down from its uptrend over the last six months, or is this an opportunity to acquire this stock at a significant discount?

When we draw a support line for the recent rally, we can see that the recent drop has made CCJ brake down through this support, which is a negative sign. Although we see further support for CCJ at $26, we cannot pinpoint any real level of strong support before then.


However the technical indicators say that this is a good buying opportunity. The MACD and Full STO are on the floor and most notably the RSI is at 29.22, below 30 and in what is usually our strong buy zone.

There are two main things that concern us however. Firstly the recent weakness in Cameco’s stock price coincides with the recent 600 point drop in the DOW industrials. This indicates to us that CCJ may be more correlated with the mainstream equities markets than we are comfortable with, given our present bearish stance on them. Secondly we cannot say that we are completely confident in CCJ and its fundamentals long term, as although Cameco has some of the best brains in the industry, Cigar Lake appears to be a dark cloud that will be hanging over this company for years to come. This is the reason we decided to sell our position in the company quite some time ago and why we continue to have trouble justifying a long term position in the stock.

But if one puts the long term aside for the time being, and see this purely as a short term trade, there could certainly be a trade to be made here. We would consider buying the stock here with a tight stop for a rise back to at least $30 in the next month or so. A more cavalier approach would be an options trade on the Feb-10 $29.00 Calls on CCJ (or equivalent on Canadian markets) which are currently trading for 75-80 cents. We would not hold the calls for more than two weeks and would intend to sell them once the contracts were in the money, ie once CCJ was trading for $29 or more.

Due to the fact that CCJ appears to us to be moving with the general equities markets, we are going to sit this one out and not place a trade. We are bearish on equities and think CCJ could get dragged down with the DOW, which would jeopardize our planned trade. We also do not want CCJ as a long term holding, which could’ve been a plan B if the short term trade didn’t work out. However if you are bullish on Cameco long term, this looks to be a good opportunity to add to your position at a decent discount, and maybe even make a short term trading profit.

Cameco trades on the NYSE under CCJ with a market cap of $11.4B. It has a P/E ratio of 21.99 and earnings of $1.29 per share. Cameco also trades on Toronto under the symbol CCO.


Got a comment then please add it to this article, all opinions are welcome and appreciated. Also, for those interested in Options Trading please click here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.


Thursday
Jan212010

Mickey Fulp: Race to Rare Earths Heats Up

Mickey Fulp.JPG

We have a had a few comments regarding Rare Earths recently so we thought that this article by Mickey Fulp might be of interest to you.


Source: Interviewed by Karen Roche, Publisher, The Energy Report 01/21/2010
http://www.theenergyreport.com/cs/editors/print/na_u/1322

Mercenary Geologist Mickey Fulp says that 2009's "flavor of the year"—rare earth elements—will sport that same label in 2010. A major driving force, the momentum building in green technology, is expected to take global consumption to 200,000 tons annually by 2015 (from approximately 108,000 tons in 2007). At the same time, tight supplies will shrink further for at least another two or three years, until deposits outside China ramp up into production. Among the companies Mickey likes in the space are the integrated mine-to-market players. In this exclusive interview with The Energy Report, he also tells us he's bullish on uranium, too, but finds it scary to see likes of Kazakhstan emerging as the world's top supplier.

The Energy Report: 2009 turned out to be quite a successful year for equities even though a lot of the economic trends showed only mild improvement, if any. How would you summarize what happened in 2009?

Mickey Fulp: The markets were so beat up in 2008 that I think equities became a place of safe haven. A lot of cash—itchy money, if you will—sitting on the sidelines poured into equities. In times of financial duress you'll see times where equities become the preferred investment vehicles. It surprised everybody, I think, but 2009 turned out—especially in our junior resource sector—to be one of the best years on record.

TER: And what do you think 2009's performance means for 2010?

MF: I don't want to venture there right now. I am still digesting things that happened in 2009 and trying to make up my mind about where I see things going. Maybe we can talk about that the next time we talk.

TER: Certainly. You specialize in finding undervalued junior resource companies and clearly there were a lot of them at the end of '08. How does that picture shape up going into 2010?

MF: I don't see a lot of undervalue, except that the uranium sector is still pretty beaten up. There's not a lot of undervalue in the other sectors I follow—mainly precious metals and rare earths—so you have to start looking for specific companies that haven't reacted yet or have catalysts pending. There are a few of those I'm looking at.

TER: Would you say the market's overvalued at this point?

MF: The market is valued at what the market says; it's oftentimes driven simply by psychology, and those are touchy-feely things that are hard to get a handle on. The junior resource sector is certainly valued a lot higher than it was last year. Will it go higher or lower or will we see a correction? I think a lot of that depends on the price of gold.

TER: In your last Mercenary Musing, you wrote about how we are led to believe things from trusted sources such as Santa Claus and the Easter Bunny. More relevant, you discuss the government talking about organizations that are too big to fail that we have to bail out, and pundits telling us that gold prices will climb to multi-thousands of dollars per ounce. As an investor yourself, what are you hearing that really can't be trusted?

MF: I mitigate the risk of promotion with very detailed due diligence and research. As a retail investor, you need to do your own due diligence and your own research on anything you consider, looking at the three key criteria—share structure, people and projects. If you follow my investment philosophy, you're looking for stocks that have a strong chance to double within 12 months. Everything and everyone gets promoted. You can reduce your risk by doing your own research and figuring out what's real and what isn't.

TER: Last October, you talked to us about rare earths as the "flavor of the year." We're now in a new year, a new decade. Will they continue to be the flavor of the year in 2010?

MF: I'll answer that with an emphatic "yes." The U.S. government is partly behind this through the green technology economy, which creates additional demand for rare earths. Rolling Stone came out this summer with an article about Goldman Sachs called "The Great American Bubble Machine." Goldman Sachs is involved with rare earths. Molycorp, owner of the Mountain Pass Mine, is a private company, and Goldman Sachs is a large shareholder.

TER: Hmm.

MF: So I foresee that the rare earth sector will continue to be promoted. Demand certainly will increase. The Chinese are continually making news about curtailing exports. A few weeks ago, The New York Times wrote about the heavy rare earths ionic clays in China, the environmental damage that has gone along with that and the decreasing supply as they enforce environmental regulations., I see increased demand with some supply coming on board in North America or Australia in the short to midterm. I'm still very bullish on the rare earths sector.

TER: Is it a supply-demand issue that's causing rare earths to go up or the fear that China is going to minimize exports and force production in China?

MF: I think both. But I don't see that China will be able to supply the world with rare earths. I recently saw a chart that showed increased Chinese demand and rest of worldwide demand.

TER: So we do have a supply issue. A lot of people are talking about China restricting exports.

MF: They're doing that because they see their own internal demand increasing and they want to take care of their own.

TER: When you look at rare earths, do you have preference over either the light or heavy earths when they're going into production?

MF: The prices for heavies are so much higher than the prices for the lights. The lights trade at generally less than $10 per kilogram and some of the heavies trade in the hundreds of dollars a kilogram. From that viewpoint, the dollars per ton of a heavy rare earth deposit is worth more than a light rare earth deposit. But that said, the heavies are rarer and are contained in much lower concentrations. I think you need to look at good companies with the best deposits, whether those deposits are light or heavy.

TER: What are some of the companies that you are particularly focusing in on now?

MF: I'm a long-term committed shareholder of Avalon Rare Metals (TSX:AVL), which has heavy rare earths in the Northwest Territories and Rare Element Resources Ltd. (TSX.V:RES) with the Bear Lodge light rare earth deposit in Wyoming. It's had very good drill results recently and other drill results pending. Quest Uranium Corporation (TSX-V:QUC), a heavy rare earth company in northern Quebec, is drilling an exciting new discovery called the "B" Zone at Strange Lake with thick intercepts and good assays. Quest also announced a new discovery at Misery Lake, which is another heavy rare earth occurrence. I've been to all these deposits just mentioned: Avalon's Thor Lake, Rare Element's Bear Lodge, and both Quest projects.

TER: How close are these projects are to production?

MF: Avalon will have a pre-feasibility study out toward the end of the first quarter. We could expect production in perhaps 2013 or 2014. Rare Element is in an advanced drill program stage on a light rare earth deposit. Although it's a little bit further behind Avalon's timeframe, Rare Element is progressing nicely and I'd expect a pre-feasibility study sometime within the next year or so. Quest Uranium is a new discovery. They have finished the first drill phase; it could be huge.

TER: Any others on your radar?

MF: Some other companies that may be up-and-comers include Tasman Metals Ltd. (TSX.V:TSM), which is drilling for the first time on its deposit in Sweden. It gives you a little geographic variety in this sector. Hudson Resources Inc. (TSX:HUD) has a light rare earth carbonatite-hosted deposit in Greenland. Hudson drilled its first holes in August and September in Greenland, so will be gearing up for a second phase in the Greenland summer.

Another company I follow is Neo Material Technologies, Inc. (TSX:NEM), a Toronto-based integrator-processor-manufacturer of rare earths. Neo Material and Molycorp are likely to be the two companies that venture into the mine-to-market scenario.

TER: What leads you to believe that?

MF: Molycorp, with the Mountain Pass Mine, which will be coming back into production and is currently processing ore stockpiles, was the world's sole integrated rare earths producer from 1952 to essentially 1990-1991. They controlled the world's supply of rare earths. Combined with an environmental liability, they were forced out when the Chinese cut prices in the early '90s. Molycorp was an integrated mine-to-market company in the past and you would expect them to be again. Neo Materials, having a downstream end now and being a robust cash flow-positive company, is a likely candidate, in my opinion. Rare earth explorers and developers are going to need off-take contracts and perhaps Neo Materials has designs to become a mine-to-market company.

TER: Speaking of off-take contracts, some are speculating that major users of rare earths—let's say Toyota Motor Corporation (NYSE: TM) (see related article) for example—will start to acquire either shares or actual mines. Do you think that's going to be a major trend and how will that impact companies like Avalon, Rare Element and Quest?

MF: I do think this market will evolve to sales through off-take contracts. It will be analogous to the uranium market, where the major amounts of metal are tied up through long-term off-take contracts by specific users. Beyond that, a spot market will serve a minor part of the business as supply and demand ebb and flow.

Certainly, Avalon would be very attractive to car manufacturers; they need heavies for magnets in hybrid cars. Rare Element is different because its deposit resembles Mountain Pass. I'm just speculating here, but perhaps Rare Element would be a takeover candidate by a company that needs light rare earths or has processing facilities and sees increased demand for them. Even a heavy rare earth company that needs some lights might be interested. But the off-take contract concept, I think, is the most likely scenario for Avalon.

TER: What does that mean for long-term investments in rare earths? Is this really more a short-term play while things work their way through or do you consider this a long-term opportunity?

MF: I'm committed to a long-term investment, in particular companies in the rare earth sector. Although it is a bubble being built that will become overvalued and deflate at some time, I personally think that the rare earths are a long-term investment play. I've chosen six or seven companies as the likely candidates to succeed for various reasons. I have a mixed portfolio and I'm looking long term in this sector.

TER: At the San Francisco Hard Assets Investment Conference in November, Jack Lifton indicated that the real race is who can bring rare earth mining into production first. He says that the next two or three companies to get to production can satisfy the rest of the world's demand; so those that are much further behind would not be as good as investment opportunities. How do you feel about that?

MF: I think there's validity to that. It doesn't mean, though, that some of these companies that are just starting out won't be good investments. We don't always need to make mines to make money in the stock market. We can mine the stock market, too.

TER: But that requires a bit more timing.

MF: Yes, it does.

TER: You brought up uranium in the context of off-take contracts. With the green focus that everyone talks about, many say nuclear energy is poised to resurge. However, the Obama administration hasn't really embraced it. Do you expect uranium to make a comeback in 2010 with more nuclear energy on the horizon, or is it a longer-term play?

MF: I personally think we've begun to see resurgence already. If you're talking about prices, no, we haven't seen that, but demand for nuclear fuel for power plants is increasing. A lot of power plants are being built worldwide and those are demand reasons that the world will continue to use more uranium on a yearly basis. My views haven't changed.

You are right about the Obama administration. They talk from both sides of their mouths about nuclear energy, in my opinion. They won't embrace nuclear because that would offend far left wing Democrats, and they can't afford to do that.

TER: If an investor is watching spot prices of uranium, that doesn't necessarily integrate with the profitability of uranium mining companies, does it? How do you factor in the off-take contract element?

MF: You are right. The spot price does not necessarily factor in to profitability because most uranium mining companies have higher long-term prices on their off-take contracts. The average contract price now is somewhere between $60 and $70 a pound. The spot price this week is $43.50. Plus or minus 85% of the world's uranium is supplied on long-term contracts, but some uranium miners will sell on the spot market as utilities have increased demand or want to stockpile some uranium when the spot price is low.

Unfortunately, the uranium equities market trades based on the spot price. It doesn't make a lot of sense from an economic viewpoint, but what causes uranium companies to go up and to go down at times is this weekly spot price. The spot price is very nebulous because what happens is every week a few people look at whether any spot uranium was bought or sold on the open market in the last week and at what price. They'll compare short-term contracts and then publish a spot price for the week.

TER: So how can an investor decide whether to put our money into companies that are fluctuating based on a few people in a room or on a conference call deciding what the spot price is?

MF: That's a good question. I think you've got to look for uranium companies of value. Look for potential developers or explorers in the right part of the world and pick companies that are going to be viable no matter what the spot price does.

My two favorites are Hathor Exploration Limited (TSX-V:HAT) and Strathmore Minerals (TSX-V:STM). Hathor, which has the discovery in the Athabasca Basin, has been beaten down pretty badly. It was $1.70 stock for most of the early winter, but it's had about a 20-cent to 30-cent bump up with volumes up considerably since the first of the year. Hathor will be drilling at Roughrider when freeze-up occurs.

TER: How about Strathmore?

MF: Strathmore is my favorite U.S. uranium development company. I'm a long-term committed investor. There were two bidders on its Pine Tree-Reno Creek properties in Wyoming. Bayswater Uranium Corporation (TSX-V:BAY), the original bidder, matched the Australian company's offer. That's for $17.5 million up front, $2.5 million in stock, and a 5% net smelter return (NSR) Strathmore is doing a private placement that's under market price and is oversubscribed. This is a company of value. It has the two best undeveloped conventional uranium deposits in the U.S. in my opinion—Gas Hills in Wyoming and Roca Honda in New Mexico. Strathmore is undervalued compared to its peers.

TER: Any other comments on uranium?

MF: Sure, I'll give you some supply and demand ideas about uranium. The "Decade of the 'Aughts' ('00s)", if you will, saw uranium's spot price go from about $7 to about $45 a pound—so a 600% increase in a decade. Uranium production must grow because demand is increasing on a yearly basis, driven largely by China but there are many nuclear power plants on the drawing boards or under construction worldwide.

We are losing feed from the conversion of nuclear weapons into low enriched uranium. Deals with the Russians are running down, so with uranium demand increasing, mine production must increase.

A scary thing in all of this is the country that became the world's largest uranium producer in 2009 is Kazakhstan. In the Decade of the Aughts, Kazakhstan went from a 5-million-pound producer to a 36-million-pound producer, and is projecting production of 47 million pounds of uranium in 2010. Kazakhstan's government is very corrupt, and is not especially friendly to the West. Rumors came out early this month that Kazakhstan signed a uranium supply contract with Iran. In terms of production, Kazakhstan has basically become the Saudi Arabia of uranium production. But that production likely is not sustainable as these are ISR fields that will have fast decay curves.

TER: Is the scary part more who Kazakhstan is willing to sell to or that the large supply is in danger because the government is unstable?

MF: Both.

TER: So how should an investor interpret this risk?

MF: It just makes me more bullish on North American prospects for uranium. As I say, I invest in uranium companies that are located in North America, that operate in stable parts of the world, and that are not involved uranium plays in Africa or Asia or Kazakhstan or other relatively unstable places. Although I am willing to invest in gold companies in countries with geopolitical risks, that is not the case for uranium.

Michael S. "Mickey" Fulp—aka The Mercenary Geologist—is a Certified Professional Geologist with a bachelors degree in Earth Sciences with honors from the University of Tulsa (1975), and a master's degree in Geology from the University of New Mexico (1982). He has nearly 30 years' experience as an exploration geologist searching for economic deposits of base and precious metals and other resources. Mickey has worked for junior explorers, major mining companies, private firms and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping, property evaluation and business development. Respected throughout the mining and exploration community due to his ongoing work as an analyst, Mickey launched MercenaryGeologist.com in late April 2008 and can be reached at Mickey@MercenaryGeologist.com.

Want to read more exclusive Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.

DISCLOSURE:
1) Karen Roche of The Energy Report conducted this interview. She personally and/or her family own none of the companies mentioned in this interview.
2) The following companies mentioned in the interview are sponsors of The Energy Report: Avalon Rare Metals (TSX:AVL), Rare Element Resources Ltd. (TSX.V:RES).
3) Mickey Fulp: I personally and/or my family own the following companies mentioned in this interview: Avalon Rare Metals, Rare Element Resources, Quest Uranium, Tasman Metals, Hudson Resources, Neo-Material Technologies, Hathor Exploration, Strathmore Minerals Corp.
I personally and/or my family am paid by the following companies mentioned in this interview: Avalon Rare Metals, Rare Element Resources, and Strathmore Minerals Corp are sponsors of my website.
Streetwise - The Energy Report is Copyright © 2010 by Streetwise Inc. All rights are reserved. Streetwise Inc. hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.
The Energy Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report.
From time to time, Streetwise Inc. and its  directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
Streetwise Inc. does not guarantee the accuracy or thoroughness of the information reported.
Streetwise Inc. receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.
Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.
Streetwise Inc.
P.O. Box 1099
Kenwood, CA 95452
Tel.: (707) 282-5593
Fax: (707) 282-5592
Email: jmallin@streetwisereports.com


Have a good one.

Please use the comment box to add your opinion on this matter, they really are appreciated whether you agree with us or not.


For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.
Friday
Jan152010

Uranium-Stocks: Portfolio Update 15 January 2010

Uranium Chart 16 Jan 2010.JPG

Chart courtesy of [1] u3o8.biz.

As we can see from the Chart above uranium prices have $44.50/lb and has been more or less at this level for some time now. The knock on effect is to cap the prices of uranium stocks with little movement in most of them.

Here follows our portfolio update as of 15 January 2010:

Denison Mines Corporation – Buy
Bought on 6th January 2009 for $1.66, a uranium stock that we had watched for some time but for various reasons we had never managed to purchase it. We are happy to own some of this stock and believe it to be a good quality acquisition, DNN closed at $1.60 yesterday

Crosshair Exploration and Mining Corporation – Buy
We never expected to see Crosshair trade as low as it is today so we acquired some on 6th January 2009 at a cost of $0.25, again we are pleased to own this uranium stock despite the price falling back over the last few months. CXX closed at $0.21 yesterday.

Cameco Corporation – Watch
This uranium heavyweight closed yesterday at $31.91 and is holding up very well, we have traded CCJ/CCO in the past but do not own of this stock at the moment.

RPT Uranium Corporation – Hold.
We bought RPT on the 19th February 2007 for $0.42 and sold it for $0.62 on the 13th June 2007 for a profit of 47.6% in 4 months. We then bought it back at around 50 cents, however RPT closed yesterday at $0.22 up from $0.175 from last time.

Uranium Participation Limited – Hold
Now trading at $6.51 as compared with $7.90 at the last update . We bought at $11.97 on 21 November 2006 so still in the red with this trade with a long climb ahead.

Strateco Resources Incorporated – Hold
We made a small investment in RSC at $2.30 but it crashed to as low as $0.48 has started to recover slightly to close at $0.85 yesterday. So its still fingers crossed for this one.

Laramide Resources Limited
– Buy
We bought LAM at $5.78 on the 28 July 2006 so again we are still in the red with this one, it was trading at 97 cents recently however has started to recover and closed yesterday at $1.93 having experienced some extreme volatility . When we were sitting on a paper profit of around 80% we sold half of our position in order to buy other uranium stocks, as we needed a bigger spread of stocks at the time.

Mega Uranium Limited – Buy
We bought MEGA at around $4.0 on 27 July 2006. MGA closed yesterday $0.82, again a very volatile and disappointing uranium stock.

Khan Resources Ltd - Hold
We bought Khan on the 5th March at $3.63 and it has since dropped to lower levels due to licensing issues with the Mongolian regulators. So, in anticipation of Khans management team finding a resolution to this problem we decided to buy again. (See Khan Resources: A speculative buy) the stock rallied and we took a profit of 15% in a matter of days before the stock fell back again. Khan is still having a torrid time and was trading at $0.405 recently but it closed yesterday at $0.72.

Aurora Energy Resources
Has now been devoured by FRG which is both a gold and uranium play and we have included it in the gold portfolio.

Strathmore Mineral Corporation - Hold
We bought STM on the 14th April 2007 at $4.96 and it traded as low as $0.24, however, it closed yesterday at $0.48 still a very disappointing performance indeed and extremely volatile.

Ur-Energy
- Hold
We bought Ur-Energy on the 23rd April 2007 at $4.75 and we also bought again on the 24th August 2007 when we acquired more stock at $3.03, it closed yesterday at $0.73 having been up to $0.93 at the last update.

Extract Resources Limited
This is a stock that was brought to our attention by our readership so we placed it in the watch list so we could observe it before actually buying it. At the time it was trading at around $5.00, it then dropped to $3.50 before recovering to close at $8.58 yesterday, having been as high as $11.45.

Kalahari Minerals PLC (KAH.LN), an AIM-listed (London Stock Exchange) mining exploration group with a portfolio of uranium, copper and base metal interests in Namibia, now holds 40% in Extract Resources Limited. Extract trades on the Australian Stock Exchange under the symbol of EXT.AU.

For UK residents who have difficulty in accessing the Australian markets you might want to consider trading Extract and Kalahari via Geiger Counter GCL which is on the LSE International.

For disclosure purposes we do not own either of these stocks yet.

Other than sit tight through these torrid times, there is little we can do right now. This market is moving sideways as we can see by the fairly static nature in most of the stock prices, so we will just have to hold on until the argument for nuclear power begins to take center stage again and gives the uranium price a boost.

Have a good one.

Please use the comment box to add your opinion on this matter, they really are appreciated whether you agree with us or not.


For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.


Friday
Jan152010

Cheap Oil is Gone, and That’s Good News

Contrasting Views Casey.JPG

By Marin Katusa, Senior Energy Strategist, Casey’s Energy Report

Over the next year or two, you will likely find yourself paying a LOT more at the gas pump. Big changes are taking place in the oil industry. With increased global demand and declining supply, easy oil is not so easy anymore.

Everything is about to get more expensive. From gasoline to anti-freeze, life jackets to golf balls, and eye glasses to fertilizer. There are very few things in the modern world that aren't made from oil, made by machines dependant on oil, or shipped by vehicles powered by oil.

The implications, at first glance, appear to be the opposite of good news. In fact, it's enough to strike panic in the hearts and wallets of the average consumer.

And that's exactly why the International Energy Agency just released its annual World Energy Outlook, clearly rejecting the possibility that crude output is now in terminal decline. Their attitude seems to be, what you don't know won't hurt you. For now that is.

The truth however, is beginning to surface, and from an investor's perspective, the truth can mean money in the bank. Right now, the IEA's claim that oil production will be ramped up from its current level of 85 million barrels per day to 105 million barrel per day by 2030 is receiving harsh criticism.


The Guardian reports, "The world is much closer to running out of oil than official estimates admit."
This comes from a whistleblower inside the International Energy Agency who states the fear of triggering panic buying has caused them to intentionally underplay the inevitable shortage.

Kjell Aleklett, professor of physics at the Uppsala University in Sweden, and co-author of a new report 'The Peak of the Oil Age', states "oil production is more likely to be 75m barrels a day by 2030 than the 'unrealistic' 105m used by the IEA."

According to Professor Aleklett's research, they are making a dangerous and unjustified assumption. One that is dependent upon the oil industry's ability to ramp up production to levels never before achieved.

Are you beginning to see the opportunity here?


Whistleblowers and scientists are not the only ones disputing the IEA's report. The folks who pump oil aren't buying its rosy scenario either.

Total SA, the French oil giant, that is making its move into the Alberta oil sands, doesn't accept the IEA's optimistic claims. The company runs on the belief that oil production won't surpass 95 million barrels.

Former chief executive officer of Canada's Talisman Energy, Jim Buckee, agrees the IEA prediction is nonsense.

Sadad al Husseini, energy consultant and the former exploration and production chief of the world's largest oil company, Saudi Aramco, recently said, "Oil supplies have reached a capacity plateau and will not meet a growth in demand over the next decade."

The Globe and Mail recently joined the debate stating, "New [oil] fields, generally smaller, are less productive than old ones - note the virtual freefall in production rates from the North Sea fields, which reached peak output in 2000. Another reason [for the decline] is development pace, or lack thereof. The yet-to-be-developed reserves in the WEO report cover 1,874 fields of various sizes that would have to come into production in the next 20 years."

That works out to almost eight new fields being brought to production each month. A realistic target? Only time will tell. Even if the oil exists, the next question becomes one of money, and where it will come from in order to keep this pace of development on target.
When you add in professor Aleklett's conclusion that production will shrink to 75 million barrels per day by 2030 — almost one-third less than the IEA's figure and 10 million barrels less than current production, it's easy to see why investors need to take notice.

Shrinking supply and ever-growing global demand are creating the perfect storm for oil prices.
The current price of crude could be the bargain of the century. Understand this and every increase at the pump will give you reason to smile.

If you're looking for the best way to capitalize on the end of cheap oil, there's no better time to sign up for my advisory service, Casey's Energy Report.

Subscribers have been handed 19 consecutive winning stock picks in 11 months. Now you have the opportunity to learn which stocks I believe will profit from the looming oil shortage. For more information click here.



Please use the comment box to add your opinion on this matter, they really are appreciated whether you agree with us or not.


For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.
Thursday
Jan142010

Balancing Security of Supply Worries with Optimism on the R&D Front

John Kaiser.JPG
John Kaiser

Source: Interviewed by Karen Roche, Publisher, The Energy Report  01/14/2010
http://www.theenergyreport.com/pub/na_u/1309

Americans have been bemoaning U.S. dependence on foreign oil for decades and a domestic alternative still seems a distant dream. Meanwhile, the world has changed. On one hand, that dependency now stretches across a broadening spectrum of raw materials, from molybdenum and tungsten to zinc, nickel and chromium to the decade's darling on the periodic table—the rare earths. And on the other, huge emerging economies, primarily that of China, are driving up demand for the raw materials needed to develop infrastructure and making it clear that their own domestic needs take priority. That adds up to what mining analyst John Kaiser describes as "the big theme that underlies the base metals and all the specialty metals markets"—the concept of security of supply—and it's a global issue. In this exclusive Energy Report interview, John identifies a few investment opportunities that are emerging to forestall lack of access to some key ingredients of economic growth. He also registers a clearly optimistic note in anticipating "a period of scientific breakthroughs that's going to pump up the world in a very big way."

The Energy Report: You've previously discussed security-of-supply concerns in the context of China's growth. In addition to unloading U.S. paper assets, China is intent on developing its internal infrastructure to further develop its domestic economy. So they're taking their U.S.-denominated reserves and solving this security-of-supply problem by acquiring deposits and assets around the world to ensure control of key raw materials needed for their long-range plan.

John Kaiser: Let's back up a bit, because the context is much broader than that. For nearly 20 years since the collapse of the Soviet Union, globalization and free markets have allowed producers anywhere in the world to sell raw materials anywhere they want. But that window seems to be closing. Supply channels are fragmenting, which will shake the just-in-time concepts we've become accustomed to. No longer will companies be able—or willing—to say, "We'll order the raw materials when we need them and pay whatever it costs."

The worrisome implication is that the future production from these deposits that the Chinese acquire and develop through state-owned entities will flow directly back to China and bypass the global commodity markets. It is often the case that other branches of the Chinese government will fund infrastructure projects that secure the cooperation of the host country with regard to mine development and off-take agreements. The recent deal Afghanistan negotiated with China on its copper deposits is a good example of a deal that defies the economic logic to which bidders from the western mining industry must adhere. China is not putting these deposits into production so that it can make a profit selling the metal output into the commodity market.

We are shifting to a place where we can't count on molybdenum or rare earths or nickel or chromium to be available when we need it. So end users are looking up the supply chain all the way to where the mining industry normally sits. This is especially the case with the more obscure metals which are tiny but critical inputs for technology and other goods. They're saying, "We have to make sure that we have the raw material inputs in place to execute on our long-term plans, whatever they are." This is one reason why the rare earths sector has become such a media buzz item—although it's only a $2 billion a year market at most.

The big theme that underlies the base metals and all the specialty metals markets is the concept of security of supply.

TER: Are the insecurities due more to insufficient supplies or the fact that we can't produce raw materials at a fast enough rate to satisfy increases in demand?

JK: It's really both. Until the past year, we had a supply-demand imbalance that began to be felt in 2003, but the mining industry didn't believe it was real until 2006. By then it was so well advanced that, because of the three to six years it takes to mobilize new supply, supply hadn't been able to catch up. Demand hit the wall in 2008. Then, even though demand didn't pick up all that much last year, base metal prices bounced back surprisingly well, especially given that the warehouse inventories for metals such as zinc, nickel and copper are far above their 2006 and 2007 levels. Much of the raw materials that were used during the past decade went into the construction of infrastructure and productive capacity that will not generate scrap metal for another couple decades. This is the opposite of what prevailed during the nineties after the collapse of the Soviet Union when strategic stockpiles were dumped and Russia's creaky infrastructure was looted for scrap metal.

TER: So where does that leave us today?

JK: Two things appear to be happening now. One, end users or state entities are engaging in long-term strategic stockpiling to make sure their industries will have raw materials available down the road. Countries such as China are even engaging in what I call distributed stockpiling. They have extended credit to thousands of manufacturers, enabling them to buy more metal than they need. Secondly, low interest rates have created a carry trade that has resulted in speculators buying raw materials. This makes the situation a bit precarious because if a rise in interest rates forces speculators to unload all their investments and flatten out the carry trade, a glut of raw materials may hit the market and result in a price slump.

TER: With stockpiling and speculators buying raw materials, why are major companies looking upstream to secure the supply?

JK: Because of the uncertainty created during the past two years, the mining industry shelved a lot of projects. In fact, a lot of the deposits taken over in the last few years are no closer to production than when they were taken over. So the supply shortage persists. If the global economy rebounds, an off-take of all this speculative raw material that's being hoarded would flatten out supplies over the next few years.

The end user industry is not particularly worried about the near term. They're far more concerned about what happens five years out and beyond. For example, there's enough rare earths supply for the next three to five years. It's what happens down the road, especially if total demand scales up, that has everybody concerned. Long-range planning needs to be done now and there is now a strong awareness that some of these materials come from parts of the world that are potentially unstable.

In addition, we may see the global supply channels disrupted as the United States and possibly Europe deal with trade imbalances created by the disparity in cost structures with China. That disparity prevents the western world from competing in terms of manufactured goods. A form of protectionism may emerge in which it's not so easy to move copper or nickel to any point on the planet.

TER: Will protectionism take the form of trade embargos or import taxes so that goods or resources from China are priced similar to what we pay in the U.S.?

JK: Globalization and free market theory say the old-fashioned tariff system to allow domestic industry to be competitive with cheaper imported goods is bad because it makes everything expensive for everybody, but we now find ourselves in an anomalous situation. Part of the world with a very large population spent a good part of the past century trapped in a communist rut and ended up with a fairly low standard of living. Now, all of a sudden they throw off half the trappings of communism and start competing with the rest of the world on sort of capitalist terms.

The wrinkle is that they're doing it from an enormous cost advantage in the form of an abundance of people willing to work for very low wages in a setting where health and safety costs are minimal. They also deal with very little in terms of emission controls, which is the complete opposite of what has evolved in the western world. Finally, because China is a new type of central command economy that outsources production, its ability to make things happen at home and abroad is not constrained by free market principles. Of course, businesses always move production to wherever they can get it done the cheapest. In terms of very, very cheap goods being available in the western world, this has enhanced our standard of living. But in the process, it has hollowed out our industrial base, shifted us into more of a service economy and accumulated a massive trade deficit which is not sustainable in the long run.

TER: So what are the options?

JK: There are no happy options. If we throw up big tariffs, the cost of everything will go way up. If we bully the Chinese into allowing their currency to rise against the U.S. dollar, everything will become more expensive as well, but we'd at least be able to justify building factories again. What I think will happen is that the concern about fossil fuel dependency and climate change, and the resulting interest in changing the energy infrastructure in much of the world, will give rise to rules that say we do not want goods subsidized by processes that harm the environment, such as is happening in China.

TER: Another form of protectionism.

JK: Yes, green protectionism. It's a different type of protectionism that encourages the relocation of manufacturing capacity back to places like the United States and restores viable long-term economies. Although it will further fragment global trade, it is my view that some sort of green-based protectionism will be the strategy to deploy over the next three to five years.

KR: Will that be a government strategy or a grassroots strategy?

JK: It's not going to be ground up from the people because everybody will always want to buy the cheapest good available. Sure, a small percentage will go to the green store and buy more expensive clothing made in an environmentally sound manner, but the majority will still go down to Wal-Mart and, of course, Wal-Mart sources its goods in the lowest-cost jurisdiction in the world. That's not going to change.

So it has to be a top-down legislative strategy, but it also has to be developed and implemented very carefully. Doing it too abruptly would pull the rug out from under China. We want to level the playing field, but nobody wants to see China implode. Even in strictly economic terms, we need China's large population (and India's) to become consumers of the kinds of goods that westerners take for granted. The obvious hope is that an emerging middle class in China will erode the competitive advantage of the China Price, but my concern is that this will not happen fast enough to salvage western economies and keep smaller emerging economies alive. I see green protectionism, possibly implemented in the form of a transportation distance tax, as a transitional measure that offsets the cost structure disparity.

TER: But all the alternatives you offered—bullying the Chinese to decouple the currency, put tariffs in or implement green protectionism—would increase prices in the short term.

JK: Yes. We're facing a period of relative wealth deflation. The era of consumption that we became accustomed to during the past decade—with the help of consumer debt and mortgages we couldn't afford and so on—has come to an end. The last year has been absolutely miserable for a lot of people. They are in the process of adjusting to a new reality, which will be a lower consumption footprint. This does not mean Americans will become as poor as the average Chinese citizen, whose standard of living is on an improvement track. Having a lower consumption footprint need not be a bad thing if people learn to view their standard of living in terms of quality of life rather than quantity.

TER: Even in an era of wealth deflation, where do you see opportunities for investment and wealth creation in light of these themes you've been talking about?

JK: The area that has fascinated me particularly in the past year has been the rare earths. A lot of the functionality of green technologies, in fact, depends on the addition of these elements. The security of supply problem with the rare earths is that in the last 20 years, China has emerged as the overwhelmingly dominant supplier. In part, it's because they have an abundance of such raw materials, but it's also partly because they extract them under conditions that are not acceptable in the West. Combining that supply situation with their low-cost structure has enabled the Chinese to marginalize rare earth deposits everywhere else.

Yet we talk about electrifying the car industry. We talk about turbine technology providing wind power. We talk about creating huge fields of solar panels. If all of this becomes reality, demand for rare earths will scale up dramatically, maybe 10-fold over the next 10 to 20 years. So the end users are saying, "Oh, boy, we're dependent on China." China itself has come out saying they need to do these things too because they have lousy coal reserves and a minimal oil reserve base. They're making noises about making sure domestic needs are taken care of first, which creates a problem in the western world. If we want to build our wind turbines and hybrid cars, we better secure a raw material supply that cannot be commandeered and used for national policy purposes.

So we're scrambling to get the rare earths deposits we found decades ago into production, so that raw material inputs are available for the plans of the western countries to transform to a more green-based energy infrastructure.

TER: Are there some specific companies involved in this scramble that interest you?

JK: I've actually created an index of about 14 companies in that space. One in which I have a personal investment is Quest Uranium Corporation (TSX-V:QUC). They've done sufficient drilling at their Strange Lake deposit in northern Quebec this past summer to outline a very significant deposit. It's world-class in size, reasonable grade, and has a full distribution of all the rare earths metals, from lights to heavies. I suspect perhaps even a consortium of end users will end up acquiring this project and developing it almost like a private rare earths warehouse.

TER: Any others?

JK: Rare Element Resources Ltd. (TSX.V:RES) has the Bear Lodge deposit in Wyoming and Ucore Uranium (UCU:TSX.V) has the Bokan deposit near Ketchikan in Alaska. They're not huge in the sense that the Strange Lake deposit is. Bear Lodge is a fairly good grade light rare earths deposit and the Bokan project is more dominated by the heavy rare earths. The USGS actually spent a bunch of money documenting the nature of the Bokan deposit in the late '80s when we were still concerned about where the Soviet Union was going with its policies.

Both Bear Lodge and Bokan are very interesting because the U.S. government is now investigating its own security of supply for the rare earths through the RESTART bill. The military in particular—which spends a good portion of its $600 billion annual budget on hardware—has awakened to the fact that some functionality of its critical hardware depends on rare earths inputs that now come only from China. Some consortium of defense contractors could end up taking over these projects and developing them as small-scale mines. They'd use government funded R&D to figure out process technology for getting these elements out of the mineral assemblages within which they are embedded, and probably share that technology with the private sector so other deposits can be developed to ensure the commercial market also has a supply as well from other rare earth deposits outside of China.

TER: Except for Rare Element Resources, the companies you mentioned are obviously involved in uranium as well as rare earths. What's your outlook for uranium?

JK: Quest and Ucore both started as uranium exploration juniors. Because rare earth deposits can occur in geological settings conducive for uranium deposits, it is natural for open-minded geologists to recognize the rare earth potential of certain projects. Both companies have now shifted their focus to rare earths. I think the uranium sector will make a comeback in 2010. Uranium prices went way up in the past five years because it is very difficult to get new uranium supply on stream and we had a temporary spot market shortage. We now see uranium in the $40 to $50 range and it might increase $10 to $20 or so longer-term.

The hope is that the Obama administration warms up to the idea that nuclear energy is an excellent carbon-free source of electricity. The Chinese have lots of uranium-based nuclear power reactors on the drawing board, but they are also looking at thorium, another candidate for nuclear energy but without the weapons-making capability. I don't see demand for uranium going through the roof the way it can for the rare earths. The difference between uranium and the rare earths sectors is uranium essentially has two uses. One is to make nuclear weapons, and we really don't want demand to go up there. The other is for nuclear power, and that demand can be quantified quite well in advance.

In contrast, the rare earths have a wild demand dynamic because ongoing R&D keeps coming up with ways to work with these elements' interesting properties. All kinds of technologies already exist that can't even be commercialized because there's not a sufficient supply of these rare earths in existence.

As the additional rare earth deposits get into production, the logical economic objection is that all this new supply will glut the market. But not in this case. As the supply becomes available, end users will have the confidence to commercialize applications with functionality superior to prior applications, so I would expect the supply to actually be readily absorbed.

Not only that, you also will see a scramble to make more efficient use of these rare earths, particularly if China stops subsidizing the cost structure of rare earth production and allows the price to rise. There's something called Jevons paradox that drives the scarcity people crazy; namely, in response to scarce supply of a raw material, you engage in R&D to increase the efficiency of its usage and as a result total demand for it actually goes up. This would not apply to uranium because of its limited uses, but it would certainly apply to rare earths and other technology metals.

I think we are on the frontier of a material science boom coming on the heels of three decades dominated by information and biotechnology booms. An awful lot of money, both from the private sector and government, will go toward seeing if we can push elements to do far more than has ever been done before. One area is, of course, efficiency and durability. But another area is emerging as the new Holy Grail. If you can produce energy at a lower per-unit cost than the current norm, and the "fuel" for doing so is readily available, you will give the world a massive boost in its overall wealth or standard of living. The United States has excelled in that regard in the past and could excel again and buy itself another 20 to 30 years of leadership in the world.

TER: So you feel that the U.S. should focus on the R&D specifically related to energy?

JK: Absolutely. As we all know, one of the biggest problems with renewable energy such as solar and wind is that those are intermittent sources. You need incredible capacity to provide a baseload supply, which naturally increases the per-unit cost of the electricity produced. One answer is battery storage capacity. If you compare this issue to computer memory, I was just reading where one terabyte of storage capacity—which 10 years ago cost $1 million to produce, today costs only $100. Why don't we have a battery that can very efficiently and safely store a massive amount of electricity? A battery that can do that when the wind is blowing hard and the sun is cooking hot is the Manhattan Project of the future. The R&D that goes into this will likely have many other spinoffs as they really push all these materials to the limit.

I think we're entering a period of scientific breakthroughs that's going to pump up the world in a very big way. One of my hopes for the new decade is that we enter a whole new world of scientific developments that give us back a sense of optimism.

TER: While you're envisioning this next decade, have you found some companies that are starting to excel in those areas?

JK: That's not an area that I read a lot about, but a lot is always going on in Silicon Valley. And, of course, China's goal is to eclipse the United States as the technological leader. They have a reputation for stealing technology, but they have reached the critical mass where they are saying they have to do it internally. They have surplus capital available to fund R&D and are pouring enormous effort into it. China is not a hotbed of private innovation because it has weak intellectual property rights. But it does have an abundance of scientists, many of them trained in western universities, who are being recruited to conduct pure research funded by the state.

TER: So it's a race.

JK: Yes, it's a technology race. The United States, Europe and Japan need to stay on top of it.

TER: Any more thoughts in terms of investment opportunities on the scarcity of supply and green protectionism themes?

JK: Cliffs Natural Resources Inc. (NYSE:CLF) , which supplies the U.S. steel-making industry with coking coal and iron ore pellets, recently made a $250 million takeover bid for Freewest Resources Canada Inc. (TSX-V: FWR), whose primary asset is a chromite deposit in northern Ontario. This is regarded as a very strange event because South Africa and Kazakhstan currently supply all of the world's chromium for making stainless steel. The northern Ontario deposits are not as high-grade as South Africa's, yet Cliffs is paying $250 million and will need to invest up to $2 billion to bring this deposit to production. A lot of people wonder why.

Well, Cliffs is deploying strategic logic in place of economic logic. It's looking ahead of the curve, anticipating a supply disruption in South Africa and making an investment now to ensure being able to supply the U.S. with all the chromium its steelmaking industry needs.

And this same company just did a deal with First Point Minerals Corp. (TSX-V:FPX), which came up with an innovative concept of mining low-grade nickel in very large deposits in British Columbia where the nickel occurs in a form called nickel iron alloy. This form of nickel does not have the energy- and chemical-intensive separation costs of nickel laterite and sulphite deposits. First Point in the process of tying up similar deposits around the world.

So here's a fairly cheap company with out-of-the-box thinking in terms of security of supply. I'm guessing that Cliffs may end up also buying it out down the road because its gamble is that energy costs—and as a result, nickel costs—will go up. But because it controls a supply of nickel whose cost structure will not rise with the rising cost of energy, it will stand to benefit.

TER: Those are great examples. Any others?

JW: Lithic Resources Ltd. (TSX-V: LTH) comes to mind. It's trading around 30 cents and its market cap is only $15 million and it's entering the next stage of development work on a deposit in Utah. There are not many zinc mines in the U.S. Zinc has been out of favor for a very long time, but it's going to do very well in the next couple of years. Because zinc has been such a dog metal, not a lot of new supply has been developed, and in 2011 a large number of major zinc mines will shut down as a result of depletion.

Lithic Resources has a special wrinkle, too. Its deposit in Utah has a fairly high grade of indium in it. That's another specialty metal used in flat panel displays and certain types of solar cell. To commercialize those solar cells will require a lot more indium supply. So here's a hybrid situation where if they develop this deposit, they probably will get a better zinc price down the road and also produce indium as a byproduct. Because this deposit has only about $4 billion worth of metal in the ground, it's regarded as kind of small, but the contained indium is enough for almost two years of total world demand. Such a company becomes a potential target for an end user who wants security of supply for indium.

TER: We're back to the security of supply issue again.

JK: There will be a lot of interest in seeing base metal mines developed in the U.S. to minimize dependence on raw materials mined elsewhere in the world. It is worth noting that China, the biggest supplier of zinc, is now a net importer. China has emerged as a net importer of molybdenum and tungsten, too, for which we've also had a long-term dependency on China. So long-held assumptions about where these materials will come from in the future have to be re-thought.

TER: Are you following any other security of supply stories?

JK: Amazon Mining Holding Plc (TSX-V:AMZ) is in the process of demonstrating that a potash deposit in southern Brazil, which is lower grade than the traditional potassium chloride mined in places such as Saskatchewan, can be of economic value in the special circumstances of southern Brazil. The combination of acid soils and torrential rains there reduces the efficiency of traditional chloride-based potassium because it dissolves too quickly in that type of soil. The type of deposit Amazon is working with is a silicate deposit called glauconite, which is lower grade and does not dissolve as easily; but as a result it also has a higher, more energy-intensive processing cost. In 2008 they staked a huge swath of land where this stuff sits at surface, so they avoid the high extraction costs that underground mining of the Saskatchewan deposits entail.

Glauconite was discovered in the '80s but shelved because it was so much cheaper to use imported potash. Brazil currently imports 90% of its potash fertilizer needs, and agriculture is a huge part of its economy. Now with concerns about global potash demand and rising demand for its agricultural products, the Brazilian government is supporting this company's work.

We should know in about six months where this project stands. If they can demonstrate that this source is more efficient in terms of providing nutrients that the plants need and can absorb and that the cost is reasonably constrained, this company with a current market cap of $50 million or $60 million will become the linchpin for a multi-billion dollar agricultural industry. A company like this will end up being absorbed at a much higher price than its current $2 trading range.

TER: So is the key factor the effectiveness of the potash as a fertilizer or being able to mine it economically?

JK: It's both. But it's also a security-of-supply issue. It's creating a domestic alternative to imported potash. Even if it costs a bit more, it's in the interest of Brazil's agricultural sector to offset its dependence on foreign sources.

John Kaiser, a mining analyst with 25-plus years of experience, produces the Kaiser Bottom-Fish Report. It specializes in high-risk Canadian resource sector securities and seeks to provide investors with a framework for intelligent speculation. His investment approach integrates his "bottom-fishing strategy" with his "rational speculation model." After graduating from the University of British Columbia in 1982, John joined Continental Carlisle Douglas, a Vancouver brokerage firm that specialized in Vancouver Stock Exchange listed securities, as a research assistant. Six years later, he moved to Pacific International Securities as research director and also became a registered investment adviser. Not long after moving to the U.S. with his family in 1994, John cast his own line in the water, so to speak, with publication of the premier edition of the Kaiser Bottom-Fish Report.

Want to read more exclusive Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.

DISCLOSURE:
1) Karen Roche of The Energy Report, conducted this interview. She personally and/or her family own none of the companies mentioned in this interview.
2) The following companies mentioned in the interview are sponsors of The Energy Report., Amazon Mining Holding Plc (TSX-V:AMZ) and Rare Element Resources Ltd. (TSX-V:RES)
3) John Kaiser: I personally and/or my family own the following companies mentioned in this interview: Quest Uranium, First Point and Lithic. I personally and/or my family am paid by the following companies mentioned in this interview: None
Streetwise - The Energy Report is Copyright © 2010 by Streetwise Inc. All rights are reserved. Streetwise Inc. hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.
The Energy Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report.
From time to time, Streetwise Inc. and its  directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
Streetwise Inc. does not guarantee the accuracy or thoroughness of the information reported.
Streetwise Inc. receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.
Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.
Streetwise Inc.
P.O. Box 1099
Kenwood, CA 95452
Tel.: (707) 282-5593
Fax: (707) 282-5592
Email: jmallin@streetwisereports.com


Please use the comment box to add your opinion on this matter, they really are appreciated whether you agree with us or not.


For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

Wednesday
Dec162009

What Does Global Warming Have to Do with Energy Stocks?

Global warming.JPG


By Dr. Marc Bustin, Editor, Casey’s Energy Report

Over the last couple of years, consideration of the effect of climate change has become increasingly important in analyzing a company or market trend — particularly in the energy sector. For example, our very bearish view on the thermal coal producers in North America is due exclusively to the high levels of carbon dioxide that coal-fired power plants generate, and the widely held belief that these emissions contribute to global warming.

As researchers who like to chase down facts, we know that credible scientists continue to debate whether and how much humans really do contribute to global warming. However, it's the rare politician who acknowledges this controversy. Instead, they join the herd of scientists and pseudo-scientists who tend to cherry pick among the findings to fit their preconceived conclusions. An unfortunate state of affairs, but, alas, a consequential one, because these same politicians are awfully fond of regulation — and they’re becoming more so.

So it's not surprising that we are on course for a real mess in terms of government regulations concerning carbon emissions, taxes, tariffs, and such. Detrimental results are likely for certain sectors of the economy, such as the oil and coal sectors and associated refiners, heavy industry, and the transportation sector.

As a scientist, I currently accept the near-unequivocal evidence that Earth is in a warming spell, but I also know that in past geological times, there have been many such periods of warming and cooling. I remain on the fence as to what impact anthropogenic (human-sponsored) emissions are having on the global trend. Perhaps more importantly, at some level I am haunted by the belief that even if we are responsible for global warming, we are too late, and there is nothing we can do about it.

Pragmatically, our job at Casey is to point our subscribers toward prudent investments, and it is pretty clear that there is opportunity and danger in industry that is regulated, subsidized, and penalized by government. It's also clear we are just now at the beginning of what will be pronounced government intervention — for example, the U.S. House of Representatives bill (H.R.2454) aimed at reducing U.S. greenhouse gas emissions 17% from 2005 levels by 2020 and 83% by 2050. The bill allows tariffs on carbon-intensive goods (such as steel, cement, paper, and glass) if they are produced in countries the United States judges to be shirking their responsibility in reducing greenhouse gas emissions.

Herein lies the problem, even if you believe cutting emissions will make a difference: the new big greenhouse gas emitters (i.e., China, whose growing use of coal recently pushed it to the #1 spot in greenhouse emissions, with India rushing to catch up) must curb their emissions... but in doing so, they will be denied the standard of living that in theory those of us who screwed up the atmosphere in the first place enjoy. This is hypocritical, and the hypocrisy is not lost on the developing nations. That’s why I think that global accords on emissions are not going to work.

Going forward, I see the impact of climate change regulations – tariffs, taxes on emissions, subsidies, carbon credits, and carbon trading – becoming a major factor in not only the energy sector but also the associated technology sector. And since governments tend to be rather fickle and make decisions that defy logic, our job at Casey Research has gotten that much more titillating.

Every month, we’ll bring you analysis of everything that’s pulling at the energy sector — logic-defying governments included —in Casey’s Energy Report. With a subscription, you’ll also get Casey’s Energy Opportunities and, until December 18, a free subscription to Casey’s Extraordinary Technology. To top it off, you get all this at 40% off the regular price and with a no-risk 90-day trial. Click here to learn more — and be sure to do it before or on December 18!

Please use the comment box to add your opinion on this matter, they really are appreciated whether you agree with us or not.


For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.






Wednesday
Dec162009

Happy Christmas and a Prosperous New Year to All of our Readers


Team,

This is just a quick note to wish you all a Happy Christmas and an energetic New Year. Have a really good holiday and come back refreshed and ready for action in 2010 where we expect uranium prices to make slow but steady progress.

All the best

uranium-stocks.net
Monday
Dec142009

Scaled Down Nuclear Plants

Nuscale Modular Power Plant 15 Dec 09.JPG


The New York Times is carrying an interesting article entitled 'A New Scale for Nuclear Power' which we think is well worth the read. The theme is about the use of multiple small reactors as oppose to the traditional methods of construction which require a football field or two to accommodate their size.

Apart from the technological advances in the nuclear space a smaller, cleaner, better looking power plant would go a long way to being accepted by the public when the proposal to build a new plant enters the planning phase. Having an ugly monstrosity on your door step is difficult to accept so the way forward could be one of numerous small power plants located close to the end user. It doesn't change the fact that it is a 'nuke' and that the environment still needs protection but maybe the environmental impact on one particular area of the countryside will be lessened.


Please click here to read the article in full.

If you are not familiar with the mini nukes being developed by such groups as Hyperion please click here to read more.



Please use the comment box to add your opinion on this matter, they really are appreciated whether you agree with us or not.


For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.