How To Profit From The Re-Emergence Of Nuclear Energy
The Dynamic Wealth Report
September 16, 2010
by Jay Chernoff, Editor
The age of fossil fuels is rapidly coming to a close. The world is
slowly but surely shifting its dependence on oil, gas, and coal to more
sustainable types of energy. Eventually we will power our planet with
renewable sources such as wind, sun, and water.
The problem is, it could take awhile for renewable energy to become
affordable on a commercial scale. Technology improvements still need to
be made. And in some cases, the energy infrastructure will need to be
redesigned or rebuilt.
We need a potent energy source to bridge the gap between fossil fuels
and renewables.
That’s where nuclear power comes in.
Every day, countries across the globe are turning to nuclear for their
energy needs. Over 100 new reactors will be completed by 2020. That’s a
nearly 25% increase in the number of reactors on the planet. You can’t
question growth.
But here’s the thing… in order to power nuclear reactors, you need lots
of uranium.
Uranium is mined like most metals… with some important differences.
Since it’s a radioactive, special safety steps must be taken. Also,
because of the radioactivity, uranium mining is a heavily regulated
industry.
Despite safety issues, regulations, and mining difficulties, uranium is
actually pretty cheap right now. You can purchase a pound for around
$45. But it won’t stay this low for long… all the new reactors will push
prices higher.
Here’s the bottom line…
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The key to nuclear power is uranium. By investing in uranium, you’re
investing in nuclear energy.
And one of the best uranium mining companies out there is Cameco (NYSE:
CCJ).
Cameco is a mining and nuclear energy company based in Canada. It’s one
of the largest producers in the world. CCJ owns mines in Canada, the
U.S., and Kazakhstan – including the only high grade uranium mines in
the world in Canada.
What really makes this company attractive is their huge stockpile of
uranium.
They hold about $5 billion in uranium reserves. They’re also one of the
few companies in the world which focus on mining this highly sought
after metal. In fact, CCJ produces 16% of uranium across the globe.
You can bet any energy producer needing uranium will call up CCJ. And
because it’s a highly regulated commodity, purchase contracts tend to be
for long periods of time.
Let me give you an example…
China just agreed to a 10-year supply contract with CCJ.
China is going to need tons of uranium over the next decade. They’re
already planning to build 60 new reactors. Plus, they have proposals for
120 more!
Cameco’s hitting the jackpot with this deal.
The company’s other existing contracts are also long-term. So they can
expect steady revenue from these contacts for years to come.
Let’s face it… if they mine it, someone will buy it.
And CCJ already has more than $2 billion a year in revenue. Even better,
the company has a rock solid balance sheet.
CCJ is sitting on a pile of cash… more than $1 billion. They also have
$5 billion in uranium reserves. And current assets are a solid 4.5x
current liabilities.
But here’s the best part…
CCJ shares are positioned for a huge increase.
You see, demand for uranium is ready to go through the roof. And there
isn’t enough uranium to meet rising demand.
Over the next decade, there’s expected to be a 250 million pound
shortfall in uranium. The last time uranium supplies were tight, the
price skyrocketed to over $140 a pound.
Guess who stands to gain?
Uranium mining companies of course… and CCJ is in a great position to
profit.
Take a look at the chart. The last time uranium prices jumped, shares in
CCJ soared. In 2007, share price was more than
double what it is today.
As the price of uranium increases, I expect to see CCJ shares climb once
again. There’s definitely some serious upside potential here!
***Editor's Note*** As most of you know by now,
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One of the most active ETFs this week is the Financial Select
Sector SPDR (XLF). The ETF is up just over 1% in the last
52-week period. However, we’re seeing a lot of action in XLF as banks get
a boost from the Basel III regulations.
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