| : Sprott Asset Management uranium expert Kevin | | | | the last 400,000 years. If you look at the work |
| Bambrough talked with us about the second | | | | of people like James Hanson, the correlation |
| leg of the current uranium bull market. He | | | | between CO2 levels and temperature is |
| sees a massive nuclear build up heading our way | | | | undeniable. Basically, mankind has increased the |
| with the environmentalists leading the | | | | CO2 levels beyond a level that hasn’t been |
| charge. He said many price projections may | | | | seen in over a million years. We are just starting |
| be inaccurate because people are | | | | to see the weather impacts. There are problems |
| underestimating future demand. | | | | with droughts across the world as well as |
| StockInterview: Price forecasts on spot uranium | | | | elevated hurricane activity. Going nuclear on a |
| are widening. Some insiders have predicted | | | | mass scale is starting to become recognized as |
| uranium prices may drop back into the $30/pound | | | | one of the only ways to have a real impact. I |
| range; others, such as yourself, continue to | | | | think what we’re going to see is an |
| suggest $50/pound or higher. Any comments on | | | | unprecedented build out in nuclear capacity |
| the forecasts others are making? | | | | throughout the world in the coming years and |
| Kevin Bambrough: | | | | decades. I’d equate this to what happened |
| There are many people forecasting uranium prices | | | | when we went from using oil for just lamps and |
| now. It’s important to consider their track | | | | home heating to using it as a transportation fuel. |
| record of forecasting prices. Look at the | | | | What’s going to happen with the people |
| contracts that have been written by many | | | | who have the higher quality uranium reserves and |
| companies in the industry, over the last number | | | | lower cost production? They are going to be able |
| of years. Anyone who had ceilings, or had signed | | | | to reap massive profits over the coming decades. |
| fixed-priced contracts, has been punished. Very | | | | StockInterview: Looking ahead, do you think |
| few people in the industry predicted what has | | | | we’ll see more deals between a small |
| happened. Looking forward, I think that in our | | | | uranium producer, such as Uranium Resources |
| view, the cost of production of current producers | | | | (OTC BB: URRE) and the Japanese multi-national |
| isn’t going to be as relevant as it has been | | | | conglomerate, Itochu Corporation? |
| in the past. It will be the more marginal, much | | | | Kevin Bambrough: |
| higher cost producers who will be setting the | | | | I have no doubt that it’s going to continue |
| price. | | | | to happen. More importantly, I’ve heard |
| StockInterview: Isn’t there a sense of | | | | that some of the major builders of nuclear |
| false optimism that projects in the pipeline | | | | facilities around the world, companies such as |
| will ensure an ongoing stream of uranium oxide | | | | Areva are quite concerned about the availability of |
| for the nuclear fuel cycle? | | | | supply going forward. When these companies are |
| Kevin Bambrough: | | | | talking to countries and utilities that potentially |
| There are a lot of people looking at the supply | | | | could contract to build nuclear facilities, |
| situation going forward while underestimating | | | | they’re basically being told that buyers |
| future demand. They are very optimistic that | | | | want uranium supply assurances, or they |
| mining projects are going to go as planned. We | | | | aren’t going to give an order to buy a |
| had recent news that Cigar Lake had a problem. | | | | nuclear facility. I’ve heard they are looking |
| There was a flood the. There’s a couple | | | | to do joint ventures or at least contract with |
| million pounds shortfall to most people’s | | | | emerging producers to try to get future supply. |
| models for at least two years. All because of one | | | | Then, they will be able sell their nuclear technology |
| mine’s six month delay. | | | | to countries and ensure supply. |
| StockInterview: Would that have the kind of | | | | StockInterview: Will the Chinese be satisfied with |
| impact the McArthur flooding (Athabasca Basin, | | | | the uranium they plan to buy from Australia, or |
| Cameco) had on the spot uranium price a few | | | | will they have to tap into uranium production from |
| years ago? | | | | another or other countries? |
| Kevin Bambrough: | | | | Kevin Bambrough: |
| I think it could. It was forecast to go up to 18 | | | | I think that the Chinese will probably look |
| million pounds of production. That would have | | | | elsewhere as well. Countries have strategic oil |
| been ten percent of the world’s current | | | | reserves. Why shouldn’t they have |
| consumption. Cigar Lake would need to ramp up | | | | strategic uranium reserves to supply their nuclear |
| over a three year period, once it gets started. | | | | reactors? It makes sense to have a good |
| Now, there is a six month delay. What if | | | | stockpile of uranium considering the relative cost |
| it’s delayed a year? That really changes | | | | of nuclear power versus anything else. I |
| the production profile for the next decade. There | | | | don’t think that the nuclear power industry |
| are many projects that could see delays. The | | | | should operate on a just in time basis, considering |
| mining business is always full of delays. Remember | | | | the costs and the risks of making sure you can |
| that when we bring on new nuclear plants, they | | | | secure supply. Don’t get me wrong. There |
| take on average about 1.6 million lbs when | | | | is plenty of uranium in the world, but we’re |
| commissioning. What will happen, if in a decade, | | | | just going to have to pay up for it. I believe |
| we bring on just 10 or 20 reactors each year? | | | | we’re going to consume lot more than |
| That’s another 16 to 30 million pounds per | | | | what we’re consuming nowadays — |
| year of demand just because of the start up. | | | | a decade or two out. The world is waking up to |
| StockInterview: Does this mean the current | | | | the reality of peak oil production, and how it is |
| uranium bull market still has strong legs? | | | | going to affect all aspects of energy production. |
| Kevin Bambrough: | | | | StockInterview: How much of a factor will Russia |
| I think we’re entering the second leg of | | | | play in the nuclear build up? |
| the bull market here. It is going to move away | | | | Kevin Bambrough: |
| from a supply shortage story, where we focus | | | | Looking at some of the recent statements made |
| on the fact that we only get about 60 percent of | | | | by Russian officials, it’s completely clear to |
| the current consumption from mines, while the | | | | me that we’ve been correct in what |
| inventories are being worked off. Now, | | | | we’ve been thinking for a long time: the |
| we’re moving into a situation where | | | | HEU agreement (to deliver highly enriched uranium |
| we’re seeing an explosion in demand | | | | and have it blended down) is probably not going |
| growth. Just a couple of years ago when we first | | | | to be renewed. The Russians are planning to |
| started investing in uranium, we could see | | | | make nuclear technology a key export for them, |
| probably about a dozen nuclear facilities being | | | | really as a value added product to go with |
| planned for construction throughout the world. | | | | uranium production. They desire to be able to |
| Now we’ve got well over 100 being | | | | offer a complete solution, not just uranium, but |
| planned. It seems there are new additions and talk | | | | the actual building and technology around the |
| of more additions every day. | | | | nuclear facilities themselves. They will also have |
| StockInterview: How you envision this nuclear | | | | growing uranium demands domestically and have |
| buildup rolling out? | | | | voiced concern about being able to meet their |
| Kevin Bambrough: | | | | own needs beyond 2015. |
| I don’t think it’s unreasonable to | | | | StockInterview: But nuclear energy critics claim all |
| think, looking ten to twenty years out, there are | | | | of these power plants won’t secure |
| going to be a lot of countries that will be trying to | | | | financing and most plans are just pipe dreams |
| get in the position that France is in, with a much | | | | never to be built. |
| higher percentage of their power coming from | | | | Kevin Bambrough: |
| nuclear generation. We could see a move to | | | | Two years ago, the critics said there would never |
| where maybe 50 percent of global energy | | | | be any more nuclear plants built in the U.S. People |
| production or more could eventually be supplied | | | | used to say nuclear was over for Germany, and |
| by nuclear. There is nothing else that can really | | | | that many countries would exit nuclear power. |
| step up and fill the void and take care of this | | | | Now we’re seeing the exact opposite. |
| problem that we’re having. France | | | | We’re seeing proposals being done, |
| produces 78 percent of their electricity from | | | | incentives put in place, and a multitude of projects |
| nuclear. Why isn’t that reasonable for | | | | moving ahead. If what the leading scientists from |
| others? Look out a decade or two, and it | | | | NASA, the NOAA and from many organizations |
| doesn’t appear like we’re going to | | | | around the world are saying about global warming, |
| have the oil and the gas in order to handle our | | | | and the acceleration we’ve recently seen |
| needs. Obviously we can do more with coal, but if | | | | continues, people are going to be begging to have |
| we’re going to keep using coal | | | | more nuclear facilities and cut CO2 emissions. The |
| we’ve got to put in place technology to | | | | environmentalists will be leading the charge. |
| take care of the carbon dioxide sequestration. If | | | | StockInterview: How long will it take before the |
| you want to have a stable, secure supply of | | | | proposed nuclear build up impacts the uranium |
| electricity, it seems that you’re going to | | | | mining companies? |
| have to go with more nuclear or eventually with | | | | Kevin Bambrough: |
| these new coal technologies. I think there is going | | | | The actual build of all this takes time. I think the |
| to have to be a balance of both, because the oil | | | | increase in the positive perception, of the nuclear |
| and gas just isn’t going to be there. | | | | industry is going to continue to accelerate. All |
| StockInterview: What do you think is the catalyst | | | | demand for uranium can come from just the |
| for this anticipated growth in nuclear energy | | | | planning stage for nuclear power plants, as |
| demand? | | | | companies look forward and try to contract |
| Kevin Bambrough: | | | | future supply. Ultimately, that’s what will |
| The most interesting thing is the fact that some | | | | keep driving the uranium price higher. |
| environmentalists are leading the charge to go | | | | StockInterview: How seriously is the nuclear |
| more nuclear. It’s because they realize | | | | industry taking the global build up? |
| nuclear energy is the only practical alternative and | | | | Kevin Bambrough: |
| because of the situation with the carbon dioxide | | | | I think the industry is starting to take it very |
| (CO2) levels. There have been some recent | | | | seriously. That’s why the uranium price |
| reports about CO2 levels reaching 381 parts per | | | | keeps pushing higher. People are going around |
| billion, just spiking out of the range that has kept | | | | trying to contract for uranium, and they are |
| the world in a relatively stabile environment for | | | | finding it more difficult. |