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Uranium's Secret Comeback

Why Right Now is the Time to Acquire Uranium Assets

Written by Luke Burgess
Posted December 28, 2010

Precious and base metal prices hit record highs in 2010, as economic uncertainty rattled the globe.

We saw gold breach $1,430 an ounce and silver top $30/oz during the fourth quarter of the year. Meanwhile, base metals like copper and nickel also rallied in the final quarter of 2010.

But there is another metal — outside of the precious and base metal families — that will wrap up the year outperforming most others...

I'm talking about uranium.

In the past eight weeks, the price of uranium has jumped 19.4%; since October, the radioactive metal is up 30.9%.

Take a look:

dec 2010 uranium chart

Manufacturers, academics, and analysts agree that the long-term fundamentals for uranium prices continue to be compelling.

The International Atomic Energy Agency estimates that in addition to 436 reactors now operating in the world, there are 56 under construction and 200 more planned.

Those nuclear reactors are responsible for 15% of the world's electrical power generation — and that number is increasing.

China alone is expected to double its uranium purchases to around 5,000 tonnes this year to build stockpiles for new reactors, according to Thomas Neff, a physicist and uranium industry analyst at the Massachusetts Institute of Technology in Cambridge.

The rapidly increasing worldwide demand for uranium has prompted most major producing countries to recently increase activity, and expenditures to identify and secure new economically-feasible uranium deposits and bring them into production.

The rush is on because future uranium supplies may not be able to meet demand. In such a case, uranium prices would be expected to react positively.

Each year, the world's nuclear power plants require approximately 77,000 tonnes of uranium oxide (U3O8) concentrate containing 63,000 tonnes of uranium (tU).

But in 2009, mine production was only able to supply 60,000 tonnes of U3O8 containing 51,000 tU.

The supply deficit had to be made up from secondary sources, including stockpiled uranium held by governments and utilities.

But it's well-known that many civil uranium stockpiles have been largely depleted... So it seems as if it's only a matter of time until tapping into reserves isn't going to be enough to satisfy demand.

And with 56 new nuclear power plants under construction right now — and 200 more planned — global demand for uranium may soon exceed supply and drive uranium prices back over $100 per pound and beyond.

Don't miss uranium's comeback

The price of uranium has moved significantly higher in the past several weeks, trading at multi-monthly highs and prompting interest in the sector from commercial and retail investors.

The overall market seems bullish with many new large buyers emerging over the past several weeks. The volume of uranium and number of registered spot market deals have climbed in the past few weeks.

All this leads me to believe uranium prices will continue to head higher in 2011.

And that means right now may be the best time to start acquiring high-quality uranium assets.

Good Investing,

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Luke Burgess
Editor, Wealth Daily
Investment Director, Hard Money Millionaire and Underground Profits

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