demand with very little supply.” Adam Schatzker, analyst, RBC Capital Markets
Mine production is now primarily supplemented by ex-military material – the Megatons to Megawatts program. The Highly Enriched Uranium (HEU) Purchase Agreement to convert 500 tonnes of HEU to low enriched uranium (LEU) with Russia will expire in 2013 – Russia has said they will not renew it.
Energy Dependence
While working for Shell Oil during the 1940′s Dr. M. King Hubbert noticed the production of crude oil from individual oil fields plotted a normal bell shaped curve. Roughly half of the oil from a field has been exhausted when the bell curve peaks.
Carrying that insight further he surmised that oil production from a group of oil fields would follow a similar bell shaped pattern.
In 1956 Dr. Hubbert predicted the cumulative group of oil fields within the US would reach peak production in the 1970′s, and thereafter decline – no matter how much money would be thrown at exploration and development of reserves US oil production would not rise higher after this date. Dr. Hubbert’s prediction was uncannily accurate and is not restricted to just US oil field production.
“In most fields, oil production has now peaked…Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabia’s to maintain production, and six Saudi Arabia’s if it is to keep up with the expected increase in demand between now and 2030.” Dr. Fatih Birol chief economist at the International Energy Agency (IEA)
As is the current situation with oil, the USA, and most other countries, are highly reliant on foreign sources for their uranium.
A country’s dependence on imported energy increases its strategic vulnerability. Energy suppliers who are willing to do so (Russian supplying natural gas to Europe comes to mind) can use their energy resources as leverage – holding whole countries hostage – to pursue their own policies.
“Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world.” George W. Bush, 2006 State of the Union Address
Conclusion
Developing countries such as China and India, with 2.3 billion people between them, will, even while increasing their nuclear fleet, drastically increase their consumption of fossil fuels. Oil, natural gas and coal are all going higher in price.
Accessing a sustainable, and secure, supply of raw materials is going to become the number one priority for all countries. Increasingly we are going to see countries ensuring their own industries have first rights of access to internally produced commodities. If any country is to end its dependence on foreign supplied fossil fuels and vastly reduce its carbon footprint it will have to develop its own source(s) of uranium.
Global climate change, reducing our carbon footprints, weaning ourselves off fossil fuels and achieving energy independence are all key issues facing us and future generations and the herd is not paying attention to HOW our future power is going to be supplied.
But as more and more investors figure out how we are going to produce our future energy, companies in the uranium sector could very well deliver spectacular gains for their shareholders. Uranium should be on every investors radar screen.
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