| "> | | | | development sector is the lack of proven miners. |
| In mid September, Mitchell Dong, chief investment | | | | Over the past year, a few existing U.S. uranium |
| officer of Solios Asset Management told a news | | | | producers experienced employee raids by the |
| wire service, "I think we are seeing the tip of the | | | | newly arrived development companies. We |
| iceberg of financial investors entering the physical | | | | suspect more will take place, as several |
| uranium market." At the Platts Nuclear Fuel | | | | companies move closer to the mine development |
| Strategies conference in Washington, this past | | | | stage. Raids are taking place because of a lack of |
| week, Mitchell Dong was a pit bull. Not only did he | | | | skilled and proven personnel. |
| take extensive notes during the speeches, but he | | | | Patricia Mohr brought up another of many |
| was first-in-line to question the majority of the | | | | interesting points. Increased mining output during |
| speakers after their presentations. | | | | 2004 and 2005, but in the first half of 2006 Mohr |
| Clearly, whatever initial purchases his fund or | | | | observed, "Mine production probably dropped in |
| funds had made, in entering the physical uranium | | | | the first half of 2006." She believes production |
| and equities markets, he probably wasn't finished | | | | was about 20 percent of companies planned. She |
| loading up. Nearby, a trio of Greenwich, | | | | pointed out Australia's Ranger mine production |
| Connecticut hedge fund managers quietly listened | | | | was lower because of a cyclone; Olympic Dam |
| to the presentations. Later, they lunched alone at | | | | because of declining ore grades. Rugged granite, |
| their table while we observed them huddled in | | | | from which Namibian uranium is mined, has |
| deep discussions about what bets they might | | | | reportedly caused problems at this country's |
| place in the uranium bull market. | | | | Rossing mine. Mohr believes the mine's output |
| Long-time insiders have kept trying to put this bull | | | | could slow down in the second half of the year. |
| market into whatever context they could. A | | | | We believe the production costs for many of the |
| difficult task since many of them endured a | | | | up-and-coming projects are going to be greater |
| twenty-plus-year uranium drought, which only | | | | than expected. When was the last time a new |
| came out of hibernation the past few years. | | | | uranium mill was built? Not in this century. When |
| Some admitted they had nearly given up on the | | | | was the last great uranium deposit discovered? |
| sector as the years passed by. Now, they and | | | | Twenty years ago. How does a new company |
| everyone else involved is trying to figure out how | | | | calculate its start-up and operating mining and |
| to make the Big Score on this amazing nuclear | | | | milling costs in today's dollars? Some might believe |
| renaissance. | | | | they know the answer, but we won't really know |
| Of course there were opposing views on how to | | | | until the actual production scenario takes place. |
| deal with the uranium price. Charles Peterson, an | | | | And that might be two years down the road at |
| attorney at DC-based Pillsbury Winthrop Shaw | | | | the very earliest. Factors such as those do puzzle |
| Pittman LLP, hinted at a more transparent | | | | the forecasters, the analysts and the industry |
| market, hoping uranium might be offered on a | | | | insiders. They truly do not have a proven |
| future exchange. He compared to the accessibility | | | | benchmark against which to make an accurate |
| of other metals where traders use speculators. | | | | evaluation. The last time they could was during |
| Later in the day, Patricia Mohr, Vice President for | | | | the uranium bull market of the 1970s. |
| Economics, at Canada's Scotiabank warned the | | | | What about those 400 uranium companies? "Do |
| industry that if uranium were traded on a futures | | | | you read their news releases?" asked Nancy Roth. |
| market, its volatility might already have it trading | | | | She does, we read many of them. "Aren't most |
| at $100/pound. | | | | of them just hype?" she inquired. We had to |
| Again, the uranium price worried many at the | | | | agree with her assessment. But in understanding |
| conference. Ending the HEU hung around at the | | | | the junior uranium companies, it is the news |
| back of the minds of utility executives probably | | | | release which attracts investors to provide |
| because many wondered where future SWU | | | | market support for their stock prices. Some have |
| would come from, should the Russians terminate | | | | no real plans but to mine the stock market, as |
| supplies to U.S. utilities. Should preparations not be | | | | author and long-time uranium insider Julian Steyn |
| taken at this time, it would not surprise us to see | | | | once told us. Over dinner, Ms. Roth provided us |
| a super-spike in the price of uranium which Sprott | | | | with an important insight. She covers the NRC |
| Asset Management's Kevin Bambrough has | | | | hearings for various companies hoping to move |
| occasionally warned us about. U.S. utilities remain | | | | their projects forward. Those who are actually |
| complacent, assured the Department of Energy | | | | meeting with NRC aren't doing so for a free trip |
| will come to the rescue at the last minute. But will | | | | to Washington at the expense of their |
| they? | | | | shareholders, but instead to bring their project |
| On the outside chance we might get insights into | | | | into the mine development stage. Among the |
| the complex and secretive Russian mind, we | | | | most recent applicants were some of our |
| cornered Andrey A. Orekhov, counselor for the | | | | favorites, such as Uranerz Energy (AMEX: URZ), |
| Science and Technology Department at the | | | | UR-Energy (TSX: URE) and Energy Metals (TSX: |
| Embassy of the Russian Federation. He briefly | | | | EMC). Another was the privately held Concentric |
| attended the conference to eavesdrop on what | | | | Energy Corp. |
| Ronald Lorentzen, Director of the Office of Policy | | | | Coincidentally, StockInterview fan Laura Stein had |
| within the U.S. Department of Commerce, had to | | | | been emailing us to meet with Ralph Kettell, Chief |
| say at his presentation with regards to ongoing | | | | Executive of Concentric Energy. Because of Ms. |
| Russo-U.S. negotiations. We tested the waters by | | | | Stein's insistence, and our review of Mr. Kettell, |
| talking about the new generation of nuclear | | | | we met with him about his project. Aptly, he |
| reactors, and brashly asking him if he could | | | | chose the Greenbelt exit on the |
| introduce us to Sergei Kirienko, head of Russia's | | | | Baltimore-Washington Parkway. For those |
| atomic energy agency, Rosatom. Instead he | | | | unfamiliar with this exit, it is the road to NASA. As |
| referred us to a lesser light for an interview. | | | | an electrical engineer, it was for NASA that Kettell |
| Then, we asked him if we had been accurate in | | | | designed the radio frequency (RF) portion of the |
| reporting that Russia's aggressive nuclear | | | | Space to Space Communications System used in |
| ambitions would drive the uranium price to $100 | | | | the construction of the International Space |
| pound. Pondering our question for a while, as if | | | | Station. Kettell also likes to seriously dabble in |
| weighing whether the wrong answer would lead | | | | natural resource stocks, having been the lead |
| to his next meal in a Russian prison, Orekhov | | | | investor and a director in AuEx Ventures. |
| looked off into a far corner of the room and | | | | No stranger to the uranium market, he had |
| responded, "Who knows?" | | | | written an article for a resource website in 2003, |
| His question concisely summarized the collective | | | | proclaiming the coming bull market in uranium. |
| thoughts of the conference. No one really knows | | | | Kettell forecast that some of his favorite stock |
| how much higher the price of uranium will run, | | | | picks, such as Strathmore Minerals - then trading |
| whether it will reach $100/pound (and higher) and | | | | for about C$0.30/share, would jump by 1000 |
| how soon it might arrive at the century mark. As | | | | percent. Strathmore's 2006 high was C$3.00. |
| we noted in an earlier part of this series, Dustin | | | | Kettell had created an index of five uranium |
| Garrow remarked of a possible run to the $80 to | | | | stocks (there weren't 400 to choose from, back |
| $100/pound level. The Florida Power and Light | | | | in 2003) from which he started at a base number |
| spokesman believed $52/pound was too high. | | | | of 100. Kettel's favorite stocks were Cameco |
| Renaissance Could Hit a Wall | | | | Corp (NYSE: CCJ), Denison (TSX: DEN), |
| Garrow made an interesting point at the beginning | | | | International Uranium Corp (TSX: IUC), JNN |
| of his presentation, announcing, "There are now | | | | Resources (TSX: JNR) and Strathmore Minerals |
| more than 400 uranium companies." The | | | | (TSX: STM). He told us this past spring, the value |
| implications of his comment are wide-ranging | | | | of his index had soared to the 3,000 level - up 30 |
| should one pause to ponder what he meant. Fuel | | | | times from when he began tracking his favorite |
| Cycle Week senior editor Nancy Roth addressed | | | | uranium stocks. Since then, the index had dropped |
| this in the October 3rd issue. She reported upon | | | | to 2,200. We asked him in which direction he |
| the events and revelations at the Platts | | | | believed it was heading next. He responded, "I've |
| conference, writing, "Several speakers mentioned | | | | looked at the technicals (technical analysis), and it |
| serious technology and equipment deficits that are | | | | should blow through the 3,000 level in 2007." |
| a legacy of this dormant period (the uranium | | | | By early 2007, Kettell believes his private |
| depression: 1980 - 2003), along with the dearth of | | | | company, Concentric Energy, should be publicly |
| nuclear personnel from uranium miners to nuclear | | | | trading. He told us he had rounded up the support |
| engineers." | | | | of Jim Dines, Doug Casey and other newsletter |
| These observations swipe at both sides: uranium | | | | writers for his private placement stock. Kettell |
| producers and utility end-users of the uranium. If | | | | said Pinetree Capital (TSX: PNP) was one |
| the labor and equipment shortages fail to provide | | | | institution backing his project. His company plans |
| sufficient uranium for utilities, then the price is | | | | to develop the Anderson uranium mine, about 75 |
| likely to rise much higher. At the same time, | | | | miles northwest of Phoenix, Arizona. The property |
| should nuclear power plants fail to staff up their | | | | had produced about 33,000 pounds in the 1950s. |
| operations, or construction delays impact the | | | | Additional exploration by Unocal and |
| building of new reactors, a lesser quantity of | | | | Urangesellschaft in the late 1970s demonstrated |
| supply, less than what has been projected, will be | | | | sufficient promise in the property. He told us |
| required. | | | | Unocal was planning a 2,000-ton-day mill in 1978 |
| To make it short and simple: this industry is still | | | | for a proposed open pit mine. |
| too 'new' to realize all of the complications | | | | We mention this meeting to bring home a very |
| required to move forward. As Ms. Roth wrote in | | | | strong point about the future price of uranium. |
| an email to us, "I think the uranium industry has a | | | | Upon our asking Mr. Kettell what his operating |
| real chicken-and-egg problem in reinventing itself, | | | | costs for the milling and mining operations at the |
| and I think a key indicator of the severity of the | | | | Anderson property, he told us, "About $65 |
| problem might be in these production costs." The | | | | pound." At least he was honest. This may not be |
| cost to which she was referring was the expense | | | | the price level U.S. utilities want to hear about, but |
| required to extract uranium from the ground. In | | | | it might become the floor price for the future |
| the United States, there are a handful of in situ | | | | price of uranium. Perhaps, Mr. Kundalkar, the vice |
| recovery operations. That is an insufficient | | | | president from Florida Power and Light whom we |
| number to adequately calculate an average | | | | mentioned during the first article in this series, |
| production cost for a mining operation. | | | | should pay attention to what the uranium miners |
| What happens when another half dozen uranium | | | | are saying. We are. |
| properties commence new mining operations? | | | | COPYRIGHT © 2007 by StockInterview, Inc. |
| One of the hidden problems within the uranium | | | | ALL RIGHTS RESERVED. |