Uranium and Coal

S

Sam123

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There has always been a huge stockpile of mined yellow cake making it a buyer’s market, depressing the price. Enough uranium has been mined to supply existing demand for 20 years, I think. Also the demand was always easy to see since it takes time to put a new reactor online, and there were only so many countries that were using nuclear power. Finally, it’s unclear how much uranium the Earth actually has, and unlike the oil industry’s awareness of the Earth’s oil reserves, I don’t think anyone has come up with a “peak uranium.”

Having said that, with China and India as new potentially enormous energy consumers and already proposing scores of new reactors; the reality of expensive oil and diminishing oil reserves; the West’s long-term interest to get off of Muslim oil, and other oil suppliers possessing hostile politics and ideologies; and not to mention how SAFE nuclear energy is today with 4th generation reactors; uranium is becoming a serious alternative.

In addition, uranium is probably the only hope for any practical implementation of a “hydrogen economy,” as it can produce the enormous amount of electricity needed to get the hydrogen out of water for economic consumption. That all depends on where the technology will go, of course. For example, there could be a huge leap in battery technology so that direct transfer of electricity to cars is practical.

But uranium bulls should be paying close attention to coal. Coal is very abundant, if not the most abundant energy source. It’s easy to find and everyone knows where it is. America has the largest reserves, with the former Soviet Union territories as a close second, and then China, possessing about half as much. There have been huge strides in “clean coal” technologies, but I don’t know if this includes the removal of the carbon dioxide greenhouse gas. The other issue is whether a clean coal economy is actually cheaper than a nuclear power economy. They both must be physically mined, and the cost of clean coal technology that removes carbon dioxide may eclipse the high expense of building nuclear power plants.

Perhaps a combination of a yellow-cake and clean-coal economy is a viable alternative to oil and natural gas, especially for America, which hasn’t added a single reactor in the last 20 years. The source of these energies comes from home, and from friendly Western societies. I wouldn’t be surprised if government energy policy continues to push for technological developments associated with these energies, including: nuclear power plant technology, nuclear waste technology, clean-coal technology, mining technology, hydrogen technology, electric storage and transfer technologies, and so on. –So all stocks associated with these technologies may be a good addition to the portfolio.

The uranium companies are where the mining is at: Canada and Australia. I think the third largest mining going on resides in one of the “-istan” countries that used to be part of the former Soviet Union.

At least Toronto’s Cameco (CCO) is listed on NYSE as CCJ, and does not trade as thinly like the others.

Of course, don’t expect any of this to happen if the price of oil returns to the $30-40 level and stays there. That’s why the people who believe the oil industry loves high oil prices, are ill informed. High sustained prices, for whatever reason, will kill the industry. So if the price of oil remains at these levels or higher, it’s because the industry is sincerely unable to meet demand and unable to do anything about it.
 
I agree that coal and nuclear are underutilized energy sources and on balance as environmental sound as the alternatives. I am afraid though that there will not be widespread acceptance of this reality until every journalist who voted against Regan retires.
 
One coal services company to look at is Headwaters, (ticker symbol is HW). They've developed a nano-catalyst tech that aided in the clean coal conversion process. I believe I read something about the process being economical with oil at $35 a barrel. There was a plant liscencing the tech in China, the region was Shenhua. I did a good amount of research on these guys back when the stock was at the $20 level (thier symbol was also HDWR at the time), so If anyone wants more info on them I can update. Sorry if this is off-topic as far as the uranium subject goes.


Disclosure: No longer own any of this stock, but I do in my marketocracy.com ficional energy fund, heh I'm a poor college student.
 
Sam: Thorough summary, much appreciated. Regarding safety, the pebble bed reactor looks very promising:

http://en.wikipedia.org/wiki/Pebble_bed_modular_reactor

"There are firm plans for thirty such plants by 2020 (6 gigawatts). By 2050, China plans to deploy as much as 300 gigawatts of reactors. If PBMRs are successful, there may be a substantial number of reactors deployed. This may be the largest planned nuclear power deployment in history."

China's initiative bodes well for a uranium bull market and is yet another example of how our competitors are taking the lead in securing critical energy sources.
 
Quote from Martin Gale:

Sam: Thorough summary, much appreciated. Regarding safety, the pebble bed reactor looks very promising:

http://en.wikipedia.org/wiki/Pebble_bed_modular_reactor

"There are firm plans for thirty such plants by 2020 (6 gigawatts). By 2050, China plans to deploy as much as 300 gigawatts of reactors. If PBMRs are successful, there may be a substantial number of reactors deployed. This may be the largest planned nuclear power deployment in history."

China's initiative bodes well for a uranium bull market and is yet another example of how our competitors are taking the lead in securing critical energy sources.
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Yes, the industry has come a long way since the big push for reactors almost a half-century ago. Articles about nuclear power are beginning to appear in unlikely places. The WSJ had an article last week about France producing most of its electricity from nuclear energy. National Geographic had one: “It’s controversial. It’s expensive. And it might save the Earth.” (4/06 pg 54.)

But the superstitions remain, which makes this a great opportunity for speculators.

Here’s an interesting recorded debate on nuclear power. Scroll down to “Nuclear Power, Climate Change and the Next 10,000 Years,” and download the MP3 file:

http://www.longnow.org/shop/free-downloads/seminars/

The debate is between Peter Schwartz and Ralph Cavanagh. Schwartz is for nuclear power, and Cavanagh is against it. I think Cavanagh is a better debater, but I think he’s wrong, and he mirrors the superstitions. He represents the “California mentality” which is based on the notion that everything can be solved with wind, solar, and bio fuels.

Unlike coal and oil, the price of Uranium can reach $400-500 without effecting the cost of the energy, since most of the expense comes from the technology and power plants that turn fission into electricity.

Since there is renewed (albeit reluctant) interest by energy policy makers because of global warming concerns, and because of new demand from emerging economies, and because the current stockpiles can’t rely on recycled warheads forever, there is growing pressure to mine for more.

Here’s another:
"Uranium May Lead Rally in Metals on Nuclear Revival"

http://www.bloomberg.com/apps/news?pid=10000082&sid=ag5rXrCA9E_s&refer=canada
 
Coal tends to follow crude prices. The US market and the rest of the international market are two separate beasts. Coal has already been fully priced in anticipation of reverting to a leading fuel again. The problem is something like the EU emissions trading scheme for CO2. The dark spread measures the profit a generator makes between selling power and buying coal. Generally it's higher than for the spark spread (i.e. using gas). However, when factoring in emissions costs, the clean dark spread is much lower than the clean spark spread. Clean coal technologies usually refer to flue gas desulphurisation (FGD, which is expensive to retrofit to power plants) and carbon sequestration and storing of emissions in underground reservoirs. Also expensive and as yet unproven.

Nuclear is probably going to come out tops unless there is a public outcry on safety. On the other hand, coal comes from 'safe' countries, is harmless (albeit dirty), can be stored, is cheap (ex emissions) and the power technology is proved.

All of this is already factored into market prices. I once thought that a coal ETF would be a great idea for the investing public but the problem is that coal cannot be stored for long periods i.e. it tends to self-combust in stockpiles. The logistics and quality issues surrounding coal are incredibly complex.
 
Quote from contango:

Coal tends to follow crude prices. The US market and the rest of the international market are two separate beasts. Coal has already been fully priced in anticipation of reverting to a leading fuel again. The problem is something like the EU emissions trading scheme for CO2. The dark spread measures the profit a generator makes between selling power and buying coal. Generally it's higher than for the spark spread (i.e. using gas). However, when factoring in emissions costs, the clean dark spread is much lower than the clean spark spread. Clean coal technologies usually refer to flue gas desulphurisation (FGD, which is expensive to retrofit to power plants) and carbon sequestration and storing of emissions in underground reservoirs. Also expensive and as yet unproven.

Nuclear is probably going to come out tops unless there is a public outcry on safety. On the other hand, coal comes from 'safe' countries, is harmless (albeit dirty), can be stored, is cheap (ex emissions) and the power technology is proved.

All of this is already factored into market prices. I once thought that a coal ETF would be a great idea for the investing public but the problem is that coal cannot be stored for long periods i.e. it tends to self-combust in stockpiles. The logistics and quality issues surrounding coal are incredibly complex.
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Very interesting perspective, Contango. A well written post.
 
Thanks. I was one of the original founders of www.globalcoal.com - an online marketplace for coal and good reference for international coal prices. Now I work as an energy consultant so coal, crude oil, freight etc. are all right up my street. :)
 
Quote from contango:

Thanks. I was one of the original founders of www.globalcoal.com - an online marketplace for coal and good reference for international coal prices. Now I work as an energy consultant so coal, crude oil, freight etc. are all right up my street. :)
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I am heavily invested in uranium from back when it was selling for $9.50/lb on the spot market. It has been the best investment I have ever made. I'm still long mostly Canadian stocks and a couple of Australian. The downside and the pullbacks have been very shallow.
 
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