Tuesday, December 18, 2012

Uranium Really Is The Ultimate Contrarian Play

Published on Wednesday December 19 2012 (AEST)  


There is a sound investment case behind it. 

Yet I can’t think of a tougher commodity to get investors interested in. It’s the ‘pariah’ of the resource community. 

Everyone Hates It. 

But there are two blunt forces in play that could make that irrelevant. Firstly, 2013 will see the global supply of uranium chopped off at the knees. This is because the ‘Megatons to Megawatts’ program, which has been converting Russian warheads into nuclear fuel, expires in 2013. 

For years, this has met a big chunk of global demand, and without it there will be a gaping hole in the market. Secondly, even after Fukushima, the world is still building a huge fleet of nuclear reactors. China is the elephant in the room here, and may have been quiet on the subject, but is still full steam ahead with its nuclear plans. In a recent report from Resource Capital Research, the analysts said: ‘Strong growth in nuclear reactor construction is expected to continue globally with 484 planned and proposed nuclear reactors (Nov ’12) up 2 from 482 pre-Fukushima (Mar ’11). 

Growth is expected to remain particularly strong in Asia, with Chinese expansion continuing to lead the pack. China’s official installed nuclear capacity projections are 70-80 GWe by 2020, 200 GWe by 2030 and 400-500 GWe by 2050. This compares with a 12 GWe capacity today (15 reactors). China has 26 reactors currently under construction. ‘Support and demand for new nuclear power reactors is expected not only from China and India, but also South Korea, USA, UK, the Middle East, Russia and Ukraine. ‘Demand for uranium is expected to increase from around 164mlbspa U3O8 in 2011 to 226mlbspa by 2020 and 280mlbspa by 2030. Current primary supply of uranium (139mlbs U3O8 2011) is only around 50% of expected uranium demand in 2020.’ This is a very bullish scenario. 

And as my colleague Callum Newman wrote to you recently, ‘Uranium is shaping up to be a classic resource scenario [...] a supply/demand imbalance in a market everybody hates.’ Cal is right. It’s hard to find a more contrarian commodity investment proposition. I mean, the market REALLY hates uranium. But…just maybe…it’s time to give this ‘pariah’ another go. 

Uranium looks like being a resource to watch in 2013.




Australian ASX Listed Exploration Stocks That Have Exposure To Uranium Tenements As At October 2012 List Will Be Periodically Updated As New IPO's Evolve.
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