Power Guru Bill Powers Forecasts Uranium Shortfall in Three Years. Bill Powers focuses on purchase opportunities within the Canadian vitality sector, mainly independent oil & fuel companies and now uranium businesses. We talked with him and he thinks uranium could reach $100/pound this decade.
Interviewer: A lot of newsletters cover oil and gasoline, but you picked uranium, which hardly anyone was covering until recently?
Bill Powers: I feel the uranium market correct now could be the world’s most unbalanced commodity marketplace. Inside a sense, the world, through the nuclear power market, consumes approximately 172 million pounds of uranium per year, and also the planet only produces about 92 million pounds of uranium per year. The supply deficit is created up through above-ground inventories, which are becoming worked down pretty quickly. Those numbers have been supplied by Uranium Information Center. A lot of my information arrives in the U.S. Department of Power (DOE) or the Nuclear Regulatory Commission. For instance, I discovered from them how the U.S. produced, by means of the 1980s, about 43.seven million pounds of uranium. And by 2002, the U.S. only made about 2.34 million pounds of uranium.
Interviewer: In which is uranium becoming made within the United States?
Bill Powers: Wyoming. There is also a uranium facility in Nebraska. I believe there are two in-situ leach plants in Wyoming and an additional 1 in Nebraska. You can find a couple of phosphate farmers in Florida who create uranium. I believe there is really a facility in Texas that also produces uranium. For that most part, the uranium business in New Mexico has just about been wiped out. The really low prices that we’ve seen, for about twenty several years, have pretty very much wiped out the entire U.S. uranium business. To go from over 43 million pounds to less than 2.five million pounds, it has actually only allowed the most productive, highest margin and most efficient mines in the nation to continue operating in that environment.
Interviewer: So that makes the U.S. a net importer of uranium?
Bill Powers: Absolutely. According to the DOE, US imports have gone from 3.6 million pounds per year in 1980 to 52.7 million pounds per year in 2002. A great deal of it arrives from Canada, but a considerable amount is coming in the Russians, via a program known as HEU (highly enriched uranium): the megatons to megawatts program. It is in which the United States Enrichment Corporation, as nicely as its partner in Russia, took highly enriched uranium and broke it down into reduced grade uranium that might be marketed to nuclear power companies throughout North America and close to the planet. This has been one of the reasons we’ve had lower costs. All of this uranium has cluttered the marketplace the past handful of many years. And the US Enrichment Corporation has a whole lot to do with why we’ve seen low uranium rates here in the States. I had a conversation with them concerning the fact that because 1998, when they became a public company (following getting a organization that was owned from the U.S. government), their long-term inventories of uranium had declined. When they became a private corporation, the U.S. government gave them seven,000 tons of enriched uranium and 50 tons of highly enriched uranium. They have been promoting about 6 million pounds of uranium into the marketplace each year since 1998. According to my conversation with them, they have about three to four much more several years of selling. It’s because the US Enrichment Corporation wants to get out of the uranium storage enterprise, and they want to become within the processing business.
Interviewer: How extended will it be, do you believe, before USEC is going to stop getting a factor for the marketing price tag stress of uranium?
Bill Powers: I would possibly say in about three several years. For the uranium they are now selling, the price from the uranium to them was zero. This has really made that organization appear extremely profitable. They are selling about $100 million worth of uranium every year, and they intend to do this at regardless of what price. This really is an extremely bullish scenario correct now because uranium costs have touched twenty-year highs, despite the fact that USEC is dumping much more than three % from the world’s uranium consumption onto the industry location. When this dries up, we ought to see markedly increased uranium costs.
Interviewer: How high is higher once you say that?
Bill Powers: I would say up to $100 per pound. Before the end of this decade, uranium will most likely be $100/pound. The Russians are going to be holding back again some of their output from the megatons to megawatts project. Their (the Russian) uranium is going to be necessary for internal consumption. Russia has a growing nuclear power market. They need to have uranium supplies offered. They’re not likely to be promoting as a lot as they had in prior several years. It appears it can be likely to be really crucial to factor in reduced Russian supplies as well as when USEC gets out from the enterprise.
Interviewer: How can a sophisticated investor benefit from uranium’s rising cost?
Bill Powers: The most leveraged investments are the Canadian juniors. I believe Cameco (NYSE: CCJ) has other businesses out of uranium exploration and production, and it is really a really safe method to perform uranium. But I believe there are far far better opportunities out there. Among my favorite firms is Strathmore Minerals (TSX-V: STM) I really like their company model of acquiring a great deal of extremely prospective uranium properties at bargain basement prices. They’re in a position to do this due to the fact, correct now, uranium has gone via a twenty-year depression. The prices for some of these pretty far advanced projects are very cheap. I consider they are well leveraged for that. An additional safe way to play uranium is Denison Mines (TSX: DEN) They produce about 1.3 million pounds per year. They have properties are in McLean Lake, Saskatchewan, which is part from the Athabasca Basin. What I like about them is they are in a position to use their cash flow from their existing production to further expand some of their properties. With UEX Corporation (TSX: UEX), Cameco was the shareholder. UEX was founded a number of years ago with Pioneer Minerals. Equally with the companies put in properties. It is look like they are rapidly advancing some of their properties in Athabasca. I believe they have about eleven properties they have an interest in.
Interviewer: What about other power elements, such as crude oil, and what do you see happening there?
Bill Powers: I would say crude oil is heading a lot increased. We have reached the worldwide production peak of crude oil, or we are very close to it. This really is not really nicely recognized. As demand continues to rise, and planet manufacturing starts a downward slope, we’re heading for a lot higher crude oil rates. I see very much increased rates later this decade, if nothing goes wrong. What I mean by that is the normal market equilibrium price tag of crude oil must be $50 inside of the next eighteen months. And probably over $100 through the end of this decade if nothing goes dramatically wrong. That would appear from the natural decline of existing reservoirs, limited new discoveries, and increasing demand. However, if a nation, such as Saudi Arabia, had been to have a regime change…
Interviewer: Are you looking for a regime change in Saudi Arabia?
Bill Powers: Yes, there is really a entire body of evidence that supports this. Terrorist incidents are becoming much more violent and closer together in Saudi Arabia. Proper now, we’re seeing those attacks targeted towards the oil workers. I believe it will not be too extended prior to people attacks are focused much more for the royal family. I believe which will be the next stage in Saudi Arabia. There’s a very excellent opportunity, which history supports, is when you can find sudden regime changes in oil-exporting countries, oil exports from people countries drop significantly. Regardless of what have been to happen, as far as the political situation, a lot of their fields, particularly Ghawar, which could be the biggest oilfield within the planet – it produces in between four and four.5 million barrels per day – there is evidence that this field could decline relatively soon. Saudi-Aramco has been injecting substantial amounts of water into injection wells to push the maintain manufacturing flat What this has carried out is it keeps production flat, but it is sort of an illusionary fountain of youth. Should you maintain injecting water, the amount of water you create, along while using oil, continues to rise. As the h2o cut continues to increase, the amount of oil created can fall dramatically. If that had been to happen, if Ghawar had been to go right into a permanent and irreversible decline – well, it could happen relatively quickly. There are other fields within the Middle East, this sort of as Yibal in Oman, exactly where they had a lot of water flooding and horizontal properly drilling. Yibal has gone from 250,000 barrels per day in the late 1990s to about 80,000 barrels per day now. If we were to obtain that form of decline in Ghawar, the planet is likely to be seeing greater prices just on that. Right now, there is certainly not any excess oil production supply anywhere inside the globe. A relatively small reduction in availability of supply will lead to an exponentially increased oil price tag.
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