The future for nuclear energy is bright. The first nuclear power stations began producing in the 1950s. Nuclear is currently producing 19% of the world’s electricity. These numbers do not include 140 nuclear powered ships and submarines. Sixteen countries currently rely on nuclear power to generate at least a quarter of total electricity. In 2008, the world’s electricity generation was produced by:
- Coal 40.8%
- Gas 21.3%
- Hydro 16.2%
- Nuclear 13.4%
- Oil 5.5%
- Other 2.8%
The US-Russian HEU agreement (Megatons to Megawatts) will not be renewed in 2013. Uranium miners in the United States will need to increase production. Because of this, I would focus on companies in the United States. Contracts have been signed and should continue to do so. With the recent selloff, value can be found in this space. The US based uranium producers provide considerable upside at today’s prices. A recent interview with Alka Singh was also bullish about the space. Here are a few choices in the uranium mining sector.
Uranium Resources (URRE) has a 152.23 million market cap. It has in-ground uranium holdings of 101.7 million pounds. This is a large resource compared with company size. It has the eighth largest in-ground uranium holding in the world. Uranium Resources has produced 8 million pounds of uranium by in-situ methods since inception. It is a pure United States play with locations in New Mexico, and Texas. Its facilities in KVD and Rosita are fully permitted. Uranium Resource’s six locations in New Mexico have the potential to produce 15 to 20 million pounds of uranium per year. For more information on Uranium Resources read this article. This is one of my favorites. It has a very large resource in the ground for a company its size. It is also able to ramp up production if needed. Uranium Resource’s low cost production is also attractive.
Uranerz Energy (URZ) has a market cap of 214.99 million. It is planning for production to come on line sometime next year. Uranerz is awaiting its final materials license prior to mine construction. This company expects to resume in-situ uranium production by the first half of 2012. ISR production is a proven technology. It is the process of disolving uranium in the ground, and then pumping the solution to the surface. In-situ recovery accounted for 36% of world uranium production in 2009. Uranerz has already signed two five year uranium agreements for its uranium production. One of these agreements was with Exelon (EXC). Uranerz is focused in Wyoming’s Powder River Basin and looking to add acreage. A more in depth assessment of Uranerz can be found here. This is also a low cost producer and the new contracts are promising.
Uranium Energy Corp. (UEC) is another way to play uranium production in the United States. UEC is North America’s newest uranium producer. Production commenced in November, 2010. It has $33 million in cash. Its Hobson processing facility is central to all projects in South Texas. Hobson has capacity for three million pounds of uranium per year. It recently announced a merger to acquire a property in Arizona, and purchased a large uranium project in Paraguay. See “Uranium Energy: Helping To Decrease Foreign Uranium Dependence,” for more information on this company. UEC has an advantage being already in production mode. It has low cost in-situ recovery production. I have been impressed with management’s ability to keep the company on schedule.
Hathor Exploration (HTHXF.PK) has a high grade deposit in the Athabasca Basin. In November of last year, Hathor upgraded its mineral resource estimate to 28 M pounds of uranium oxide including high grade zone of 24 M pounds at 11.7% uranium oxide. On May 17 of this year, Roughrider doubled in size as Hathor discovered an additional 30 M pounds at 11.58% uranium oxide for the eastern portion of the Roughrider acreage. I am bullish Hathor based on its high grade in ground resource. Although not in production, there is value in this name. Larger players in the basin such as Cameco (CCJ) may find this location promising.
First Uranium Corp. (FURAF.PK) has a market cap of 136.54 million. It recently halted uranium production. It had shaft problems that have been cleared. The shaft was also upgraded to further increase production. This led to the removal of its production restraint. First Uranium also produces gold. Average cost per oz. of gold is $516, an increase from July of 2010, which was $486. Average cost per pound of uranium is $32 versus July 2010’s $31. The average annual life of mine production for gold is 279,000 oz. The uranium average is 743,000 pounds. The combined life of mine production is 6.8 million oz. of gold and 25 million pounds of uranium. First Uranium estimates gold production from 2011 to 2012 to increase 65% to 75%. Uranium is estimated to grow from 32517 pounds in 2011, to between 180,000 and 220,000 pounds. First Uranium is a gold/uranium play. It is currently increasing production significantly in both metals. Although I would not buy this stock, it is a play on nuclear industry expansion and inflation.
Laramide Res (LMRXF.PK) has a market cap of 81.73 million. Its Westmoreland project has a mine life of 11 years. Operating costs for the first 6 years are $19.08/lb. of uranium. Years 7 and beyond will have operating costs of $25.17/lb. of uranium. Westmoreland will be supplying uranium to Asia. It has 36 M pounds of indicated resources, and 15.9 M pounds of inferred. Laramide has two projects in the United States. One is in New Mexico, and the other is in Utah. An NI 43-101 compliant resource evaluation completed in 2006, identified 10.4 M pounds of uranium. The New Mexico property plans to begin production in 2013. Its Utah property is in the vicinity of Energy Fuel’s Pinon ridge proposed mill site. 3 M pounds of uranium is planned to be produced in the Utah property. Laramide is positioned to supply the growing uranium needs to China. Its location is strategic for the signing of long term contracts. The same is true in the United States, as Russia has decided to not sign another agreement to dismantle nuclear warheads for conversion to nuclear fuel. Utilities in the United States will be looking for new sources of uranium production.
UEX Corp. (UEXCF.PK) has a market cap of 182.76. It was formed by Cameco and Pioneer Metals Corp. to explore the northern Athabasca Basin. Twenty percent of the world’s uranium comes from this basin. Cameco owns 22.58% of UEX Corp. Its Shea Creek project has approximately 31.15 million pounds indicated resource. Shea also has an approximate 12 million pounds of inferred resource. UEX Corp’s Hidden Bay project has approximately 36.63 million pounds of indicated resource. It has 2.71 million pounds in inferred uranium resource. UEX Corp. owns 49% in the Shea Creek project. The remaining 51% is owned by Areva. Shea Creek is the largest undeveloped uranium deposit in the Athabasca Basin. UEX Corporation’s Hidden Bay project is the 5th largest undeveloped uranium resource in the Athabasca Basin. UEX Corp. is exploring one the best basins in the world for high grade uranium. This small company has large holdings, and more importantly it is backed by some of the best operated companies in the business.
Fission Energy Corp. (FSSIF.PK) has a market cap of 53.42 million. Fission has acres in the Athabasca Basin. Its JV (Korea Waterbury Uranium Limited Partnership) owns 40% of Fission. There are over 80 M pounds of uranium, in multiple deposits, with in 4KM of Fission’s J-Zone. Fission has 14 total projects. These projects are in Canada and Peru. Dieter Lake has 43-101 inferred resources of 10.3 million pounds at 159%, and 24.4 million pounds at .057%. Historical resource estimates have a range of 20 to 110 million pounds of uranium. Although this company may have upside due to industry dynamics, there are other names I find more interesting.
Titan Uranium Inc. (TUEFF.PK) has a market cap of 29.17 million. It is focused on Sheep Mountain, Wyoming. It has 100% interest in this project. Sheep Mountain has NI 43-101 compliant probable reserve of 14.2 M pounds of uranium. The uranium has 6.4 tons at an average grade of .111%. Operating expense is $26.76/pound in American dollars. Titan has NI43-101 compliant indicated resource of 30.4 M pounds of uranium. Titan’s costs are low with respect to uranium production. I would look to other United States plays with signed contracts for production.
Strateco Resources Inc. (SRSIF.PK) has a market cap of 75.61 million. On March 11it filed to terminate its reporting obligations in the United States, but will still be traded in Canada. Matoush has some of the highest uranium grades outside of the Athabasca Basin. Indicated resource is estimated at 436000 tonnes graded at .78% uranium containing 7.46 million pounds. Total inferred 1157000 tonnes graded at .50% uranium containing 12.777 million pounds. Its operating costs are $23.66/pound of uranium in US dollars. It expects to start producing in the second half of 2014. Strateco states it will terminate trade in America based on cost savings. Due to its change in reporting, I would stay away from this investment. It has high grade resource, but it is not even close to that of the Athabasca Basin.
All of the names listed are on sale. The recent pullback is a second opportunity to purchase names that may never be this low again. Countries are trying to decrease pollution. Although coal is plentiful it has turned China’s eastern coastline dark and cloudy. Others worry about global warming, but have limited access to natural gas. Non-baseload green energies are more expensive, and only produce when the sun is shining or the wind is blowing. In the short term, countries may suspend nuclear programs, but in a few years things will change. It seems we will continue to struggle with meeting energy demands, and may have to use all methods to accomplish this goal.