Summer Doldrums And Gold-Fish Stocks
Rewind to 2001 as that 20-year-old gold bear-market was putting in its sub $260 an ounce lows. You might have been thinking back then how much gold stocks will fly if gold ever trades over its previous $850 highs again. Some arbitrarily imagined $1,000 an ounce was possible, with a few keen observers pointing to gold's inflation-adjusted target being well over $2,000 an ounce - for it to just equal the old 1980 high in today's dollars.
A decade later gold has outperformed most other investments. Gold bullion that is, but strangely not gold stocks. Almost a year after gold made new all-time highs of over $1,900 an ounce, gold has since corrected to just over $1,600 currently. Still, this is down just -15% from gold prices that had shot up over 7-fold over the last 11-years.
The largest gold ETF, SPDR Gold Trust (NYSE: GLD), tends to mirror gold returns and is down -14.44% from its September 6, 2011 closing high. Here's how half of the world's top 10 gold producers have fared since then: Barrick Gold (NYSE: ABX)(TSX: ABX) -38%, Newmont Mining (NYSE: NEM) -30%, Kinross Gold (NYSE: KGC)(TSX: K) -52%, Goldcorp (NYSE: GG)(TSX: G) -33%, Eldorado Gold (NYSE: EGO)(TSX: ELD) -47%.
Gold bullion prices may have been due for a breather, but why did major gold producers decline so much in comparison - double to over triple as much as gold? Is this an opportunity going into the seasonally strong Indian wedding, fall and winter seasons?
Further, why did junior gold stocks fall off a cliff, and is this an opportunity? The TSX Venture Exchange is down 34%, with many resource exploration stocks with seemingly real-projects now beaten down by 50%, 70% to even 90% of prices last fall. Of the over 470 stocks listed in our searchable Small-Cap Directory, around 10% of these have renamed, sold out, merged, consolidated their shares or restructured in other ways this year. You'd swear gold prices were back under $400 an ounce, instead of 4-times this.
We think this year's Summer Doldrums have been especially harsh, with many low-hanging fruit available for those so inclined to bottom-fish and wait. The timing may be right and we are looking at several junior gold and other resource stocks to feature over the next year.
One quick and easy method that our members use to track stocks for timing purposes is to login at our website, select My Portfolio or My Watchlists & Alerts under our My Preferences menu, and add the ticker symbols you follow. You can login and view/edit these anytime, or many find it useful to just update alerts or select when to be emailed - every weekday or just on Friday's, after the markets close.
Uranium's Next Move
Our featured uranium stock continues to be Uranerz Energy (AMEX: URZ)(TSX: URZ). URZ is constructing its first ISR uranium mine in the Powder River Basin of Wyoming that is targeted to open this year. The company has reported NI 43-101 resources of over 19-million pounds of U3O8 from only 7 out of over 30 projects explored so far, and has recently reported finding a new uranium trend on their Monument Project.
Uranerz has another critical asset that resource companies urgently need these days; they still have close to $20-million in cash! As we wait for more URZ mine construction and exploration updates, we should always remember to keep an eye on nuclear energy macro-events globally that can impact all uranium related investments.
Uranium stocks started strong this year, only to fall back again recently. The Global X Uranium ETF (NYSE: URA) is down more than 30% over the past 6-months. However, there seems to be more uranium news than usual recently, and after reading the following nuclear industry snippets and media coverage, you might agree that uranium investments seem poised for another upswing.
Politics Is The Same Everywhere - Let The Back Pedalling Begin
The fact is that nuclear power is safe, efficient, abundant, low-cost and clean energy. To switch now means job losses and higher energy costs, with harmful effects on the economy, the environment, and especially to a politicians chances of being re-elected!
As you will see, politics in Japan and elsewhere is the same as here. Politicians react emotionally at first and then flip-flop as the scientific and economic facts are realized. We have been saying this would happen, with an inevitable revival of uranium stocks despite the Fukushima meltdown of 2011.
Japan's Government May Restart All 50 Nuclear Reactors
With surging summer energy demands, the Japanese government is encouraging all fifty of Japan's reactors to be restarted. See Japan restarts reactors to avert power crisis.
Kansai Electric Power Company recently restarted two reactors at its Ohi power plant and now says its Takahama plant is most likely next to be restarted. Units 3 and 4 stress tests are almost completed.
But Isn't Everyone In Japan Against Nuclear Energy?
It may surprise you that most people in Japan, even post Fukushima, are NOT against nuclear energy! But it shouldn't, because the facts are that while many thousands died as a result of Japan's record 9.0 earthquake and tsunami on March 11, 2011, not one of those deaths were caused by radiation from the Daiichi nuclear plant accident! Furthermore, it does not appear likely that there ever will be any future deaths attributed to Fukushima. See the following video http://www.world-nuclear.org/fukushima.
An earthquake relief non-profit organization called Earthquake-Report.com shows that as of one-year later, approximately 16,100 have been killed and 3,000 are missing (19,100 in total). Various diagrams and tables break down the earthquake/tsunami related deaths and injuries, the economic costs of $574 billion and 1.2 million buildings damaged etc. It shows Fukushima power plant economic losses, but no nuclear related deaths. Sadly, over 94% of the deaths are tsunami and drowning related.
But What About The Anti-Nuclear Protests In Japan?
From a July 27, 2012 Wall Street Journal article titled, Political Clout of Japan's Anti-Nuke Movement Tested, ... "While the anti-nuclear protests have gotten larger and louder, they have yet to find a home in Japan's mainstream political system. Most in the ruling Democratic Party of Japan have supported restarting Japan's nuclear reactors, idled for maintenance and stress tests after the Fukushima accident. The main opposition party, the Liberal Democratic Party, which had ruled Japan for a half century until 2009, was the engine behind the growth of Japan's nuclear industry.
A few smaller political parties have long opposed nuclear power. The Communist Party and the Social Democratic Party are among them, and they are active participants in the protest marches. And some emerging forces are trying to take advantage of the anti-nuclear sentiment, particularly as prospects grow for imminent general elections. ...
But none seems to have captured the imagination of the protesters, who have gathered every week in recent months to oppose the government's decision to restart nuclear reactors. While no such anti-nuclear party has emerged nationally, sympathetic local candidates have appeared around the country in local elections. Most have failed. In the latest example, the incumbent, pro-nuke governor of Kagoshima prefecture won re-election by a landslide three weeks ago against a nuclear-power critic. ...
One factor that makes it hard for anti-nuclear candidates to win local races is the contribution of nuclear energy to regional economies. While polls of Yamaguchi voters show that as many as 70% oppose the Kaminoseki project, they also show that voters care more about jobs and the economy - the main reason why host communities have been hesitant to shake off their nuclear dependency, even after Fukushima.
Anti-nuclear politics can be even more complicated at the national level. 'No political party that has a shot at becoming a ruling party wants to make nuclear energy an election issue,' said Tomoaki Iwai, a professor of politics at Nihon University. 'The reality of having to draw out an actual energy policy for the major parties makes anti-nukes the stuff of minority opposition parties.'
The political balancing act of opposing nuclear power while assuring a steady power supply, was demonstrated by Mr. Iida's former boss. While Mr. Hashimoto has been critical of nuclear energy in general, he ended up dropping his opposition to the restart of the idled Ohi nuclear reactor in his region after officials said that Osaka could experience an 18% energy deficit in the peak summer months.
And Mr. Hashimoto has declined to back his former adviser in this Sunday's election. He has said it would be 'difficult' for the widely popular local party he heads to endorse Mr. Iida. Indeed, the only established party that has backed Mr. Iida has been the Communists. And even they did so only unofficially - due to Mr. Iida's past ties with Mr. Hashimoto's pro-market, small-government party." ...
But What About Germany's Plans To Totally Exit Nuclear Power?
From a July 17, 2012 Bloomberg report titled, Germany May Scrap Energy-Source Goal as Nuclear Overhaul Stumbles ... "Economy Minister Philipp Roesler told today's Bild newspaper that Germany may readjust targets linked to the plan to exit nuclear energy-generation by 2022 if jobs are threatened. The comments came a day after Environment Minister Peter Altmaier told Bild the coalition may fail to reach a goal to cut power consumption 10 percent by 2020. Merkel said July 14 that Germany probably won't use carbon capture and storage facilities after passing the required bill in parliament.
'Instead of questioning targets or declaring the entire energy switch a failure, we now need the right decisions for more energy efficiency, grid expansion and smart market design,' Claudia Kemfert, the chief energy expert at the Berlin-based DIW economic institute, said today by e-mail.
The government is struggling to grasp the scale of the effort needed to shift Germany away from nuclear power 16 months after Merkel promised to phase out reactors in favor of renewable such as solar and wind following the meltdown in Japan." ...
It will be interesting to see if Merkel's anti-nuclear stance softens further as the power shift gathers pace going into Germany's 2013 fall elections.
Global Nuclear Power Momentum Builds
From a July 26, 2012 joint report by the OECD Nuclear Energy Agency (NEA) and the International Atomic Energy Agency (IAEA), ... "Demand for uranium is expected to continue to rise for the foreseeable future. Although the Fukushima Daiichi nuclear accident has affected nuclear power projects and policies in some countries, nuclear power remains a key part of the global energy mix. Several governments have plans for new nuclear power plant construction, with the strongest expansion expected in China, India, the Republic of Korea and the Russian Federation. The speed and magnitude of growth in generating capacity elsewhere is still to be determined.
By the year 2035, according to the joint NEA-IAEA Secretariat, world nuclear electricity generating capacity is projected to grow from 375 GWe net (at the end of 2010) to between 540 GWe net in the low demand case and 746 GWe net in the high demand case, increases of 44% and 99% respectively. Accordingly, world annual reactor-related uranium requirements are projected to rise from 63 875 tonnes of uranium metal (tU) at the end of 2010 to between 98 000 tU and 136 000 tU by 2035." ...
Here are some recent media snippets of nuclear power project updates in these countries:
China And Canada
From a July 20, 2012 China Daily business report, Govt set to resume nuclear projects, "China is ready to resume nuclear power project approval, suspended last year in the wake of the Fukushima nuclear disaster in Japan, according to the former head of the National Energy Administration."
Four plants that had been approved, located in Fujian, Zhejiang, Guangdong and Shandong provinces, would now be cleared for construction.
And from a July 20, 2012 StarPhoenix article, Canadian uranium china-bound, "Canadian companies are now able to export Canadian uranium to China under a deal signed ...
'This does give some certainty to Cameco and the future of the industry in Canada. China is the world's fastest-growing nuclear program and obviously the fastest-growing market for uranium, so that offers significant opportunities.'
China is one of the world's largest consumers of nuclear energy. According to the World Nuclear Association, there are 14 reactors in operation in the country, 26 under construction and there are additional units in the planning stage."
Cameco Corp. (NYSE: CCJ)(TSX: CCO) is a major benefactor of the deal and has stated it wants to increase annual uranium production to 40-million pounds by 2018. China plans to build 100 nuclear reactors by 2030.
June 26, 2012 World-Nuclear.org, "About 15% of Canada's electricity comes from nuclear power, with 17 reactors in three provinces providing over 12 GWe of power capacity. Canada plans to expand its nuclear capacity over the next decade by building two more new reactors.
For many years Canada has been a leader in nuclear research and technology, exporting reactor systems developed in Canada as well as a high proportion of the world supply of radioisotopes used in medical diagnosis and cancer therapy." ...
India And Russia
How urgent is the world’s need for more power? Just look at India today! As I write this, the news wires are reporting about total blackouts affecting half of India’s population – 670-million people, or over 10% of the world’s population! Electricity is a luxury in India and rolling blackouts happen every day, with one-third of India’s households not even connected to the grid.
See articles: August 1, 2012 NyTimes.com, July 31, 2012 HuffingtonPost.com, August 1, 2012 China.org.cn … "Prof SK Gupta, Delhi-based expert, citing Indian Planning Commission figures, said that the government must take steps to start full production of nuclear power in atomic plants across the country, by putting an end to protests by locals against nuclear power plants. 'All developed countries depend to some extent on atomic power. India claims to be a superpower. So, it needs to start the production of nuclear power to meet the growing needs.'" …
Last week India and Russia signed a deal by which Moscow will finance two new reactors in Tamil Nadu through an export credit of $US3.4 billion. See July 18, 2012 FirstPost.com article, India, Russia sign Kudankulam project funding protocol.
India says it will increase its nuclear generation capacity over 12-fold from 5,000 MW to 63,000 MW by 2030. Russia has affirmed its plans to double nuclear capacity by 2020 from 24,000 MW currently.
From a July 20, 2012 World Nuclear News article, "South Korea's newest nuclear power reactor has entered commercial operation. The country now has 23 nuclear units that together supply about one third of its electricity." ...
South Korea has another nuclear reactor under construction at Shin-Wolsong, with two more units currently being built at Shin-Kori. A further six more units are planned to begin operation in the next nine years as part of a program to establish nuclear power at 59% of supply by 2030.
Saudi Arabia And Other Major Oil & Gas Producing Gulf States
Coming soon to a desert near you - nuclear power! Can you believe that even Saudi Arabia, which recently surpassed Russia as the world's largest oil exporter, and other major oil & gas producing Gulf States want nuclear power?
The United Arab Emirates (UAE), Qatar, Jordan, Morocco and Libya all want nuclear power to lower their energy costs. Abu Dhabi's environmental agency has approved plans for a four-reactor nuclear plant that has already started full construction this month, due to start generating power in 2020.
Ironic, but this actually makes sense when you consider that Gulf States heavily subsidize their citizens electricity needs, where air conditioners are on non-stop, and they are giving up billions of dollars from oil sales by not switching to lower cost nuclear power.
New And Existing Nuclear Programs Expand
Many countries with existing nuclear power programs (Argentina, Armenia, Brazil, Bulgaria, Canada, China, Czech Rep., Finland, France, India, Japan, Pakistan, Romania, Russia, Slovakia, South Korea, South Africa, Taiwan, Ukraine, UK, USA) have plans to build new power reactors (beyond those now under construction).
Emerging nuclear power projects include: Bangladesh, Belarus, Kazakhstan, Lithuania, Poland, Turkey, Vietnam and others. Others are uprating existing reactors as a cost-effective way to expand nuclear power capacity, instead of planning new reactors at this time.
Nuclear Power And Uranium Fundamentals Remain Robust
Fukushima has affected nuclear power in the short-term, but only to the extent that projects needed to be safety checked. This pause in the pre-Fukushima uranium bull-market has severely depressed prices of uranium investments. This, despite the long-term growing need for more and more clean, low-cost energy, has at least produced nuclear safety improvements.
However, far from halting nuclear power generation in 2011, it is estimated that 170-million pounds of uranium were used while only 140-million pounds were mined. If this is the supply/demand equation during a year when many reactors globally were shut down to be stress-checked, imagine future uranium demand and prices as the world moves from 435 to 820 reactors!
Uranium supply has to catch-up quickly just to meet current demand! Past shortfalls have been met by the Megatons to Megawatts program, established by the USA and Russia to convert weapons-grade uranium into civil fuel. Most of this excess uranium is now gone, and unless renewed the program is scheduled to end in 2013. And some of the world’s largest uranium projects have seen delays, such as flooding at Cameco’s high-grade Cigar Lake mine now targeted to open in 2013. Unless prices move higher, BHP Billiton (NYSE: BHP) is likely to delay a $30-billion expansion at its Olympic Dam mine in Australia (world’s 2nd largest uranium mine), see July 29, 2012 Reuters.com report.
The bottom line remains that there is no reasonable alternative to nuclear power, and the growth fundamentals of uranium investments have never looked better. For bottom-fishers of gold, uranium (like URZ) and other metal resource stocks, you have to be asking yourself if the timing will ever be better than right now!
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