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Vitality Guru Bill Powers Forecasts Uranium Shortfall in Three Years. Bill Powers focuses on purchase opportunities within the Canadian power sector, mainly independent oil & gas firms and now uranium businesses. We talked with him and he thinks uranium could reach $100/pound this decade.

Interviewer: A great deal of newsletters cover oil and gasoline, but you picked uranium, which hardly anyone was covering until recently?

Bill Powers: I feel the uranium market correct now is the world’s most unbalanced commodity industry. In a sense, the globe, by means of the nuclear power industry, consumes approximately 172 million pounds of uranium per year, and also the globe only produces about 92 million pounds of uranium per year. The supply deficit is produced up by means of above-ground inventories, which are being worked down pretty quickly. People numbers had been supplied by Uranium Info Center. A lot of my details arrives in the U.S. Department of Vitality (DOE) or the Nuclear Regulatory Commission. For illustration, I discovered from them how the U.S. created, via the 1980s, about 43.7 million pounds of uranium. And by 2002, the U.S. only made about 2.34 million pounds of uranium.

Interviewer: In which is uranium getting made within the United States?

Bill Powers: Wyoming. There’s also a uranium facility in Nebraska. I believe there are two in-situ leach plants in Wyoming and an additional 1 in Nebraska. You will find a couple of phosphate farmers in Florida who generate uranium. I believe there is really a facility in Texas that also produces uranium. For that most part, the uranium industry in New Mexico has just about been wiped out. The extremely low costs that we’ve seen, for about twenty years, have pretty a lot wiped out the whole U.S. uranium business. To go from over 43 million pounds to less than 2.5 million pounds, it has actually only allowed the most productive, highest margin and most efficient mines inside the nation to continue operating in that environment.

Interviewer: So that makes the U.S. a net importer of uranium?

Bill Powers: Absolutely. According to the DOE, US imports have gone from three.6 million pounds per year in 1980 to 52.7 million pounds per year in 2002. A great deal of it arrives from Canada, but a significant amount is coming through the Russians, through a program referred to as HEU (highly enriched uranium): the megatons to megawatts program. It is exactly where the United States Enrichment Corporation, as well as its partner in Russia, took highly enriched uranium and broke it down into reduced grade uranium that could be marketed to nuclear power businesses throughout North America and close to the world. This has been 1 with the factors we’ve had reduced costs. All of this uranium has cluttered the market the past handful of several years. And also the US Enrichment Corporation has a lot to do with why we’ve seen low uranium rates here inside the States. I had a conversation with them about the truth that since 1998, when they became a public business (right after being a company that was owned through the U.S. government), their long-term inventories of uranium had declined. When they became a private corporation, the U.S. government gave them seven,000 tons of enriched uranium and 50 tons of highly enriched uranium. They have been promoting about 6 million pounds of uranium into the marketplace each and every year because 1998. According to my conversation with them, they have about three to four a lot more several years of promoting. It’s because the US Enrichment Corporation wants to have out of the uranium storage enterprise, and they want to become within the processing enterprise.

Interviewer: How lengthy will it be, do you consider, prior to USEC is going to stop being a factor about the promoting price tag stress of uranium?

Bill Powers: I would probably say in about three many years. For that uranium they are now promoting, the cost of the uranium to them was zero. This has actually made that company seem very profitable. They are selling about $100 million worth of uranium each and every year, and they intend to do this at no matter what cost. This really is an really bullish scenario correct now simply because uranium rates have touched twenty-year highs, despite the fact that USEC is dumping much more than three percent with the world’s uranium consumption onto the marketplace place. When this dries up, we should see markedly higher uranium costs.

Interviewer: How higher is large when you say that?

Bill Powers: I would say up to $100 per pound. Before the end of this decade, uranium will probably be $100/pound. The Russians are likely to be holding back some of their output through the megatons to megawatts project. Their (the Russian) uranium is going to be necessary for internal consumption. Russia has a growing nuclear power market. They have to have uranium supplies available. They’re not likely to be marketing as much as they had in previous years. It appears it is planning to be extremely crucial to factor in reduced Russian supplies as properly as when USEC gets out from the company.

Interviewer: How can a sophisticated investor benefit from uranium’s rising price tag?

Bill Powers: The most leveraged investments would be the Canadian juniors. I believe Cameco (NYSE: CCJ) has other businesses away from uranium exploration and production, and it can be a very safe solution to perform uranium. But I believe you can find far far better opportunities out there. One of my favorite businesses is Strathmore Minerals (TSX-V: STM) I really like their business model of acquiring a great deal of very prospective uranium properties at bargain basement rates. They’re able to do this because, right now, uranium has gone via a twenty-year depression. The prices for some of these pretty far advanced projects are very cheap. I believe they are well leveraged for that. One more safe solution to perform uranium is Denison Mines (TSX: DEN) They generate about 1.three million pounds per year. They have properties are in McLean Lake, Saskatchewan, which is component with the Athabasca Basin. What I like about them is they are in a position to use their money flow from their existing production to further expand some of their properties. With UEX Corporation (TSX: UEX), Cameco was the shareholder. UEX was founded several several years ago with Pioneer Minerals. Equally with the businesses place in properties. It’s seem like they are rapidly advancing some of their properties in Athabasca. I believe they have about eleven properties they have an interest in.

Interviewer: What about other energy elements, this sort of as crude oil, and what do you see happening there?

Bill Powers: I would say crude oil is heading much greater. We have reached the worldwide production peak of crude oil, or we are extremely close to it. This is not very nicely recognized. As demand continues to rise, and planet manufacturing starts a downward slope, we’re heading for very much greater crude oil costs. I see a lot greater rates later this decade, if nothing goes wrong. What I mean by that is the normal industry equilibrium price tag of crude oil ought to be $50 inside the next eighteen months. And possibly over $100 by the finish of this decade if nothing goes dramatically wrong. That would come through the natural decline of existing reservoirs, limited new discoveries, and increasing demand. Nevertheless, if a country, such as Saudi Arabia, had been to possess a regime change…

Interviewer: Are you looking for a regime change in Saudi Arabia?

Bill Powers: Yes, there can be a entire body of evidence that supports this. Terrorist incidents are becoming a lot more violent and closer together in Saudi Arabia. Proper now, we’re seeing those attacks targeted to the oil workers. I believe it won’t be too lengthy just before those attacks are focused more for the royal family. I believe that may be the following stage in Saudi Arabia. There’s a extremely excellent possibility, which history supports, is when there are sudden regime changes in oil-exporting countries, oil exports from individuals countries drop substantially. Regardless of what had been to happen, as far as the political situation, a lot of their fields, particularly Ghawar, which is the biggest oilfield within the planet – it produces between four and 4.5 million barrels per day – there’s evidence that this field could decline relatively soon. Saudi-Aramco has been injecting substantial amounts of h2o into injection wells to push the retain manufacturing flat What this has carried out is it keeps manufacturing flat, but it is sort of an illusionary fountain of youth. Should you maintain injecting h2o, the amount of water you produce, along with the oil, continues to rise. As the h2o cut continues to improve, the amount of oil produced can fall dramatically. If that have been to happen, if Ghawar have been to go into a permanent and irreversible decline – nicely, it could happen relatively quickly. There are other fields inside the Middle East, such as Yibal in Oman, where they had a lot of water flooding and horizontal well drilling. Yibal has gone from 250,000 barrels per day in the late 1990s to about 80,000 barrels per day now. If we have been to have that form of decline in Ghawar, the world is planning to be seeing higher costs just on that. Right now, there’s not any excess oil production supply anywhere in the world. A relatively little reduction in availability of supply will lead to an exponentially higher oil price tag.

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