Metals Stocks Poised To Move - Gold & Silver, Uranium Activity; (AMEX/TSX: URZ) Uranerz Energy - InvestorsGuru.com

Gold And Silver Set For Fall Rally?

As the "sell in May and go away" crowd focuses more on their golf-swing, instead of their swing-trades, market volumes and prices tend to sag until the "Summer Doldrums" end, sometime after Labour day. If history serves, while a lot of these funds and day traders remain in sleep mode, the time is right-now for savvy patient investors to quietly build positions in metals and metals stocks in anticipation of a seasonal rebound.

Gold made new all-time highs of $1,923 an ounce this time last year, when it was technically extended and due for a correction. It did, falling back to as low as $1,528 by May 16th of this year. Since then gold has remained flat at around $1,600 for months, well off its highs, now going into the fall and winter seasons when metals and metal stocks are usually strongest. Gold is currently $1,693 and seems to have formed a nice base to build on, trading solidly above $1,600 for over a month now.

Silver peaked over the winter in 2011 at close to $50 an ounce before correcting, pushed even lower this year as gold and the markets in general sold off. Almost cut in half, silver traded as low as $26.30 at the end of June, but for the first time in four months silver is again over $30 an ounce. We are even more bullish on silver than gold, for a variety of reasons from silver's lower price (especially with the "Gold / Silver Ratio" at 52, compared to its historic ratio of as low as 15), to its many more uses as both a precious and industrial metal, to silver's higher demand and much smaller above ground physical supply (in ounces), and the potential leverage all of this may represent compared to gold.

However, most gold and silver stocks have not kept up, not even close, with the great returns seen in precious metals bullion and ETFs over the past decade. Many believe, us included, that mining stocks are overdue to outperform their underlying metal. While some mining stocks may not be as liquid to trade and can be complicated to value, at some point institutional investors should start to recognize how much mining stocks have been discounted, and how much cheaper gold and silver can be bought in the stock market versus owning bullion or their ETFs.

We believe in the long-term uptrend in precious metals; and in silver over gold; and in quality precious metals stocks over bullion or their ETFs. We hope to feature a few emerging precious metals producers and junior explorers this fall and over the winter. To drill-down your own research of individual or groups of companies, search our Small-Cap Directory that lists each stock's market data, news, contact info and description - for close to 500 resource and non-resource stocks.



If proven right that gold can take out its 2011 highs over the next year, then gold's recent 20% selloff will seem like a gift. From a timing-perspective some of the current strength in precious metals ETFs, or what I call e-gold (NYSE: GLD) and e-silver (NYSE: SLV), has to be due to seasonal positioning.

How Can Uranium Prices Stay This Low Much Longer?

Last month we looked at worldwide uranium macro-events from Japan's restarting of its nuclear power fleet, to Germany's recent softening stance going into next year's elections. This report focuses more on the recent developments of specific uranium mining companies.

Uranium metal is the fuel used in nuclear reactors. Uranium and its related mining and exploration stocks sold off dramatically last year after the Fukushima reactor accident. While reactors worldwide had to be stress-tested, 170-million pounds of uranium were still consumed while only 140-million pounds were mined.

This begs the question how can U3O8 prices remain at around $50 a pound much longer? I mean if current mined supply can't even meet demand in a year when many of the world's reactors are shut down, how can demand be met at these prices as the world moves from 435 to 820 reactors?

And new uranium supply keeps getting delayed! For example, flooding has caused Cameco's (NYSE: CCJ)(TSX: CCO) huge high-grade Cigar Lake mine to be delayed a few times, now targeted to open in 2013. Due to low uranium prices, BHP Billiton (NYSE: BHP) just announced delays and that it needs lower cost designs for its massive (world's 2nd largest) Olympic Dam mine in Australia.

Are Utilities Scrambling For Future Uranium Supply?

Uranium is radioactive. For investors, this means they simply need to look at uranium mining stocks, ETFs the like the Global X Uranium ETF (NYSE: URA), or holding companies like Uranium Participation Corp. (TSX: U), as U3O8 can’t be held like bullion.

or ETFs like Uranium Participation Corp. (TSX: U), as U3O8 can't be held like bullion.

The exploration, mining, sale, use and disposal of uranium are also highly regulated. For utilities, this results in long lead times, meaning they have to secure uranium supply years in advance. For competitive reasons, deals between utilities and uranium producers are often secretive, not disclosing certain terms to the public such as prices or even the name of the purchaser.

Uranium prices hit $137 a pound in 2007, but the UxC.com spot price for U3O8 is only $48.00 today! You might be thinking with prices that low, there must be lots of supply available right now. Just look at how far some utilities will go to secure their long-term uranium supply!

Paladin Energy (TSX: PDN)(AMEX: PDN) recently announced a long-term uranium supply contract with an unnamed major utility. What has raised many eyebrows is that the off-take agreement includes a huge US$200 million pre-payment; potentially solving any liquidity issues in ramping up production, and adding to PDN's takeout potential.

Why would a conservative utility accept all the risks with putting up such a landmark pre-payment, for uranium hopefully to be delivered over years, with uranium prices seemingly stuck around $50?

Activity In The Uranium Space Shows Interest Is Steadily Growing

Several analysts have resumed or increased their uranium industry coverage lately. Many of these stocks have seen upgrades because of higher uranium price expectations in general, or because of positive developments with specific companies that are producing uranium, or transitioning to the production stage. A few notable updates:

Cameco has a "Double U" plan to double its annual uranium production to 40M pounds by 2018. On August 26 they announced acquiring the Yeelirrie deposit from BHP Billiton for $430M. Yeelirrie is near the smaller Kintyre deposit that Cameco is currently developing in Western Australia.

Cameco is the world's largest public uranium company and should know when uranium stocks are undervalued. Cameco has completed 17 acquisitions since Fukushima - versus only three in the preceding two years!

One deal that got away from Cameco last year was Hathor's 57.9M pound Roughrider project. Rio Tinto (NYSE: RIO) won that fight by outbidding Cameco. Now RIO has a toehold to build-on in Canada's uranium-rich Athabasca Basin region - that Cameco still dominates.

The question is who's next on these uranium giants' menu? Keep an eye on Denison Mines (TSX: DML)(AMEX: DNN) that recently sold its U.S. mining interests, potentially making it more attractive to a company looking to acquire significant uranium assets in the Athabasca Basin.

Denison also owns a significant chunk of the Midwest JV: Areva (PA: AREVA) 69.16%, Denison Mines 25.17%, OURD Canada 5.67%. This 43.3M pounds of uranium open-pit project just received Canadian Federal Minister of Environment approval of the Midwest Environmental Assessment.

URZ Reports Further Good Uranium Grades And Q2 Financials

Another company to watch closely is our featured stock Uranerz Energy (AMEX: URZ)(TSX: URZ) that is constructing its first ISR uranium mine - targeted to open by the first half of next year! Uranerz has reported NI 43-101 resources of over 19M 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.

From URZ' news release on August 28, "Uranerz Reports Production Well and Development Update - is pleased to report the receipt of further good uranium grades in wells drilled during the Nichols Ranch production well-field installation. As of August 15, 2012 the Company has drilled and cased 205 recovery and injection production wells in Production Area #1 of the Nichols Ranch ISR Mine, located in the Powder River Basin of Wyoming. To date, 22.5% of the installed production wells have resulted in a grade thickness ("GT") near or above 2. This is the third news release issued this year on the continued receipt of good uranium grades as development at Nichols Ranch continues.

Examples of some of the best drilling results from the wells drilled since April 1, 2012 are provided ...

'A hole with a GT of 1 is usually considered good in the ISR uranium mining industry thus we are very encouraged to see that we have been receiving GT's as high as 4.7 in these most recent drill results,' stated Kurtis Brown, Senior Vice President, Geology & Development.

Construction of the central processing plant and installation of the environmental monitor and production wells for ISR mining are proceeding. Concurrently, the Company is pursuing the final authorizations required for commencement of uranium production, including the permits for waste water disposal facilities." ...


Uranerz Energy's Nichols Ranch Mine, Ion Exchange Columns & Sand Filters
- Board of Directors Site Visit, June 2012.
See URZ' mine construction photos: Uranerz.com/s/Photos_Nichols_Ranch.asp

On August 9, Uranerz announced their 2nd Quarter 2012 Financial Results ended June 30, 2012, which showed over $19M in cash, almost $17M in working capital, and no long-term debt. This appears to be a healthy cash position as the cost to construct the Nichols Ranch mine was projected to be around $35M, and my understanding is that the plant is near completion, with the timing of a production start tied mainly to the approval of the company's Deep Disposal Well (DDW) permit.

All I have to say about the DDW permit process is that there has never been an application denied that I know of, and that URZ’ DDW would tie into the same stratigraphy (rock layers) used by DDWs of two other uranium producers in the region. One can only presume that "any day now" is a best guess.

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Bottom-Fishing Gold & Other Metals; Uranium's Next Move; (AMEX/TSX: URZ) Uranerz Energy - InvestorsGuru.com

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.

South Korea

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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Russell Indexes: Two Uranium Small-Caps Remain; (AMEX/TSX: URZ) Uranerz Energy Discovers New Uranium Trend - InvestorsGuru.com

Russell Indexes Drop All But Two Small-Cap Uranium Companies

Russell indices are widely used by investors for index funds and around $4-trillion in institutional assets are currently benchmarked to them. For small-caps, the most widely followed Russell index is the Russell 2000. As the Russell membership lists change, index investors are usually bound to add or drop company holdings accordingly.

Last year we wrote about how being inducted to the Russell Indexes can have a material impact on the share volumes and prices of many listed companies. See our May 24, 2011 newsletter, "Will Uranerz Be Inducted To The Russell 2000 Index Next Month?", and June 20, 2011 newsletter, "Uranerz To Be Added To Russell Indexes".

Some of these companies rally or sell-off early in June, in anticipation going into the Russell Indexes annual reconstitution; others react after Russell's reconstitution has been finalized going into July. This is especially so for newly inducted small-cap companies, which we generally define as having a market capitalization of less than $500 million.

This time last year, the small-cap uranium companies that we could identify that were being newly added, or already part of, the Russell Family of Indexes were: Uranerz Energy (AMEX: URZ), Uranium Energy Corp (AMEX: UEC), Ur-Energy (AMEX: URG) and Uranium Resources (NASDAQ: URRE).

Russell Indexes has just completed the 2012 reconstitution and finalized its additions and deletions. On the Russell Global Indexes you can still find large-cap uranium producers under their country of origin, such as: Cameco Corp (NYSE: CCJ)(TSX: CCO) and Uranium One (TSX: UUU) under Canada, or BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RIO) under Australia, for example.

However, the only small-cap uranium companies that I can find remaining on the Russell 2000, Russell 3000, Russell Microcap, Russell Global, or any Russell Indexes for that matter, are our featured stock Uranerz Energy URZ, and UEC.

Uranerz Energy Discovers New Uranium Trend

Our last newsletter mentioned that Uranerz Energy (AMEX: URZ)(TSX: URZ)(FF: U9E) is particularly interesting because it is both a high-growth exploration story and because it will soon be entering the production stage. URZ' Nichols Ranch ISR mine is targeted to commence uranium production this year!

Uranerz holds one of the largest land packages in the (PRB) Powder River Basin of Wyoming. Two major miners already produce uranium in the PRB, including the world's largest public uranium company, Cameco, who operates the largest U.S. uranium mine just south of URZ' projects.

Uranerz' Resource & Technical Reports page show attributable NI 43-101 resources of over 19-million pounds of U3O8 uranium in the measured, indicated and inferred categories. This is from only 7 uranium properties explored so far, out of over 30 uranium projects covering over 80,000 acres in the PRB.

Uranerz has several projects they plan to produce uranium from. These include their Nichols Ranch, Hank, Jane Dough, Reno Creek, West North-Butte, and North Rolling Pin Properties. The first two of these are already permitted for construction and the third is being permitted. The extracted uranium loaded solution can be either piped or trucked to URZ' nearby Nichols Ranch ISR mine for processing.

This property map shows Uranerz' projects explored so far, plus the new Monument area project, and their relation to Cameco Corp and Uranium One's properties in the PRB.



On June 21, URZ announced results from its exploration-drilling program that began in April 2012. The news release, entitled "Uranerz Discovers New Uranium Trend in the Powder River Basin", reports drill results from the company's Monument project located approximately 15 miles southeast of the Nichols Ranch project where Uranerz is building its first ISR uranium mine.

The monument project is on the Arkose Mining Venture property, a joint venture between Uranerz Energy (81%) and United Nuclear, LLC (19%). From the news release, here's the part that caught my eye, "The Monument project is proximal to the Company's other projects in the Powder River Basin. A total of 30 new uranium trend and delineation holes were drilled in a single section of the Monument project area. The 30 new holes followed up on the 48 widely spaced exploration holes drilled last year throughout the Monument area. A total of 120 exploration holes are planned for 2012."

Obviously last year's 48 widely spaced holes in the Monument area warranted follow-up drilling. This spring they focused 30 holes in a single section. From this, URZ announced the discovery of a new uranium trend. This year Uranerz plans around 100,000 feet of drilling, each hole over 800 feet deep, including and focused on the new Monument area.

Redox Boundaries Clearly Seen On Uranerz' Properties

Uranium deposits in the Powder River Basin occur along reduction-oxidation boundaries. These "redox boundaries" weave and look like worms on a map. The topographical map below shows the outline of the uranium deposits for Uranerz Energy's Nichols Ranch, Hank and Jane Dough projects, which occur along redox boundaries.

Uranerz Energy's first ISR uranium mine is being built in the middle of the A-shaped redox boundary that you can easily see inside the red Nichols Ranch Unit area. Leached uranium can be piped to the mine from redox boundaries at Nichols Ranch and from the nearby Jane Dough Unit. The redox boundary on the Hank Unit may also be close enough to have its uranium piped, or if too far a satellite plant may be required to do initial processing and then the uranium loaded resins can be trucked to Cameco's processing plant.



The Monument project area is 15 miles from Uranerz' ISR mine site, so its uranium would likely be trucked to Nichols Ranch. There may even be a better option. Uranerz already has an agreement in place, signed last November with Cameco, for final uranium-loaded resin processing at the Smith Ranch Highland mine.

Cameco's mine might be closer than Uranerz' mine, to do both the initial and final processing of Monument's uranium. This assumes that Uranerz doesn't expand the Nichols Ranch mine to do its own final processing, and that Monument doesn't become big enough to justify its own mine. Uranerz has many options; it's just too early to know at this point.

As Uranerz fully defines the scope of its new Monument uranium trend discovery, investors should be able to look forward to more drilling news this year. Hopefully this will also lead to an update of URZ' uranium resources at some point. The Monument area would then have to be permitted, however Uranerz should be able to save years by adding this new project under the amendment provisions of their existing permits.

This new uranium trend discovery, the Monument area, is just another example of the high-growth exploration story that I indicated URZ could be... on top of Uranerz Energy becoming the next uranium producer.

URZ Outperforming Other Uranium Stocks Again

Uranium stocks, like all stocks, can be affected by any number of external factors. Market moves in general can affect uranium miners, to even oil price swings as nuclear power is a competing source of energy and uranium is the fuel for nuclear reactors.

Considering all the market noise out of Europe lately, the market has shown surprising strength over the past couple of weeks. Perhaps this is just a bounce off the June lows, or perhaps it's the early signs of a rare summer rally. Summer rallies have been scarce over the past decade, but then again this is a U.S. election year.

In any event the DJIA bottomed on June 4th at 12,101 and has rallied around 7% since. On that date oil was just under $84 and is now over $87, up around 4%. Uranium stocks, which have been beaten up for a while now, have shown mixed returns lately. From worst to first since June 4th, here is the performance of the uranium stocks mentioned above:

URG -12 %, URRE -9 %, UEC +8 %, BHP +9 %, RIO +15 %, UUU +17 %, CCJ +21 %. URZ is now $1.58, up +27 % since June 4th, making Uranerz Energy the best uranium performer since the market bottomed last month. Visit Uranerz.com and put URZ on your radar screen!

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Real Energy Independence and Nuclear Powered Stocks; InvestorsGuru.com: (AMEX/TSX: URZ) Uranerz Energy

Energy Solutions Versus Political Sound-Bites

Morning business shows often debate the path to energy independence. Everyone agrees we need a plan fast, and that there's no silver-bullet solution.

One guest may support drill-drill-drill more oil, another is for switching to natural gas, or for expanding so-called clean-coal. But looking to shale, fracking or better filters are not game changers.

Dirty solutions equal more pollution! And then soon enough, it runs out again.

Solar and various other renewables also get lots of press and should help some day, but the technology is not there yet to do more than scratch the surface of the problem. Even in combination, none of the above come close to doing the trick.

We usually think of energy independence as a supply problem. The lineups and empty gas pumps in the 1970's were real supply problems. Today we remain complacent because we haven't seen anything like this - yet!

All this really means for us right now is higher energy prices. But when someone else controls your supply of energy, and the price of it, they effectively control the growth prospects of your whole economy in a real way.

We need to stop thinking of energy just in terms of new sources of oil and other fossil fuels. Burning dirty fuels don't cut it anymore, and renewables won't help meaningfully for at least a few decades.

An energy solution starts with a clear definition. Energy independence should simply mean a safe, abundant, cost effective, and environmentally friendly, long-term energy supply.

Think EROEI

What I'm talking about is "EROEI" or Energy Return On Energy Invested.

Oil industry backed experts, politicians and economists continue to claim there will always be enough oil and other non-renewable fuels because of free market mechanisms. Simply put, prices will go higher causing demand destruction until there is supply/demand equilibrium... problem solved.

As ridiculous as all this sounds, it's just as bad to close your eyes on a hope and a prayer that future lower-cost extraction technologies will save the day. That's a big, dangerous bet!

Even if you could afford to keep paying higher and higher prices, economists can't answer the problem of when it costs more than a barrel of oil for every barrel of oil you get out of the ground. In other words you are using more energy than what you are getting back. At that point the oil just sits there.

The facts are that going into the 20th century, and for the first few decades, oil used to return the equivalent of around 300 barrels for every barrel invested. As the richest oil reserves started drying up, the EROEI steadily dropped to a 30 to 1 return. Then lower, and lower... you get the idea.

Today the general consensus puts the EROEI for most tar sands and oil shale projects in the single digits, many as low as 1.5 to 1. Keep in mind that even if there were gazillions of barrels of oil equivalents available, if the EROEI falls to a 1 to 1 ratio, these projects don't get developed or get shut in.

EROEI cost effectiveness trumps availability and is key to real energy independence!



Why Don't We Hear More Positive News About Nuclear Power?

Did you know that the world has been generating electricity from nuclear power plants for over 50-years? That's an impressive track record!

But other than mentions in our newsletter, when is the last time you heard anything in the news about nuclear power? It seems like nuclear power is forgotten.

Over the past two decades since the end of the Cold War and after accidents at Chernobyl, and more recently at Fukushima Japan, it seems like nuclear power has been swept aside. Why? I can't recall anyone ignoring oil, or calling an end to the use of it, after the BP Gulf of Mexico oil spill in 2010.

However, times are a changing! Nuclear power has come a long way since the US power grid started receiving electricity from the first nuclear reactor in the 1950s.

Today, people living in countries that use nuclear reactors to produce electricity represent two-thirds of the world’s population.

In fact, the World Nuclear Association says there are 433 nuclear reactors generating electricity globally. On top of this are 63 reactors under construction, 160 planned, and 329 proposed.

The WNA at world-nuclear.org also shows that nuclear power safely produces 15% of the world's electricity. More than 15 countries get 25% or more of their electricity from nuclear reactors.

Nuclear Power Is The Only Cost Effective Solution

So how are countries heavily dependent on nuclear power doing versus others? Here’s a real eye opener to consider.

France's population is 61 million and gets almost 80% of its electrical power from nuclear reactors. Did you know that France is also the world's largest net exporter of electricity?

On the other hand, next door is Italy, also with 61 million people, but has absolutely no nuclear power. Surprise, surprise... Italy is the world's largest importer of electricity (probably from France!)

It only makes sense why more and more countries worldwide are planning to add nuclear power to meet their future energy needs.

Take a look at this WNA graph of Global Clean-Energy Need & Supply for the 21st century.



World energy usage will conservatively more than double over the next 25 years. The graph above clearly shows that when Hydroelectric, New Renewables, Fossil Fuels, and Nuclear Power are stacked on top of each other, there is still a huge Clean-Energy Gap.

This energy supply gap has to be filled somehow! Fossil fuel production is stressed and reserves continue to decline, while renewables like solar and wind have many limitations and high costs.

Nuclear power is not just the only way to close today’s energy supply gap; it is also the most cost effective way to fill our growing energy needs of tomorrow. This means Nuclear power usage could skyrocket in just a few years!

This also means huge demand for U3O8 uranium; the rare metal that fuels nuclear power reactors.

More Nuclear Reactors Means More Uranium

Uranium is a silvery white metal capable of producing tremendous amounts of energy. Here’s how it works.

The uranium 235 isotope is put into a reactor and bombarded by neutrons. These collisions break up the uranium 235 atoms, releasing massive amounts of energy. In other words, fission of a little bit of metal is how all nuclear reactors create energy.

While uranium is more abundant in the earth’s crust than even tin, only concentrated amounts are economical to mine. The WNA reports that 64% of the world’s uranium comes from just three countries: Kazakhstan 36%, Canada 17% and Australia 11%.

Uranium mining is also more regulated than most other types of mining. Uranium is radioactive and miners need to be protected from harmful radiation. This is why it is so costly, complicated, and takes so long to get uranium mines licensed.

With demand ready to soar, and all these hoops to jump through for any new mines to open, you might think uranium must be an expensive commodity! It’s actually very cheap!

In 2007, with record high oil prices and a stronger economy, uranium peaked at $137 a pound. Today U3O8 is trading for only $52 per pound and hasn’t changed much in months.

Why Is Such A Strategic Metal So Cheap?

Uranium is trading at 2006 prices!

To compare, oil is now at $90 while uranium sits at $52. Even on a pound for pound basis uranium holds much more energy than oil.

And oil causes massive pollution. I’m not talking about oil-related accidents… just when it’s used as intended!

To make matters worse, the world’s population steadily keeps growing, while more of us move to the city. Energy demand will only go higher and higher.

Nuclear power is the only realistic solution, and uranium is extremely important to our future energy needs.

The Entire World Rides The Next Nuclear Power Wave

There are 552 nuclear reactors now under construction, planned or proposed. In total, that’s more than double the 433 reactors now operating worldwide.

Several major countries are now aggressively developing nuclear power. Why? Because it’s the most efficient way to create commercial amounts of energy.

Here’s the simple proof that might shock you!

A typical U.S. power plant for a city of one million people needs this much fuel per day:

• 9,000 Tons of Coal; or
• 40,000 Barrels of Oil; or
• Less than 7 Pounds of Uranium (Nuclear Power)

That amazing! Not even 7 pounds of uranium will fuel a power plant. The daily fuel cost is $3,600,000 at $90 oil, or only $360 at $52 uranium. That’s 1/10,000th the cost!

Put another way, the average U.S. residential use of electricity for an entire year is equivalent to consuming:

• 5.5 Tons of Coal; or
• 800 Gallons of Oil; or
• 110,000 Cubic Feet of Natural Gas; or
• Less than 1 Ounce of Uranium!

The bonus is that nuclear power is much cleaner than coal or oil, and leaves almost no carbon footprint. Nuclear by-products are reused as more energy, and the remaining waste is safely stored.

How much storage are we talking about? We would only need one football field around four feet high to hold all the nuclear waste we ever produced.

Our recent newsletters described the NRC’s construction approval this year of two new nuclear power reactors in Georgia. The U.S. government doesn’t just get all of this, they are loaning $8 billion to build the first new nuclear reactors in the U.S. since 1978.

This all means that nuclear power is here to stay! We can deny it all we want, but its importance to filling the energy supply gap will just keep growing. And with this, the future of uranium has never looked better!

Remember that uranium is rare as there aren’t that many economical uranium deposits. Uranium mining is complicated, costly, highly regulated, time consuming and can be dangerous.

However, uranium’s extremely low-cost and high energy-efficiency as a fuel compared to oil and coal can’t be ignored. It’s the only way that growing economies can bridge the energy supply gap.

Russia, India, South Korea and China are just a few countries that plan to or are already building nuclear power plants. These new reactors will create hundreds of thousands of pounds of extra uranium demand each year.

Some experts predict there will be a 250 million pound shortfall within a decade. If so, there just won’t be enough to go around and this spells much higher uranium prices!

Uranium Miners - The Real Nuclear Powered Stocks

Nuclear power companies are utilities. To them, higher uranium prices just mean higher operating costs. Uranium itself is radioactive and highly regulated, so it can’t be held like gold bullion. To participate in a boom in uranium prices, you need to look at uranium miners.

Uranium mining stocks were flying high last year until the earthquake and tsunami hit Fukushima Japan. Here’s how much some of the largest uranium producers have come down in price since then: (NYSE: CCJ)(TSX: CCO) Cameco Corp. –53%, (TSX: UUU) Uranium One –63% and (NYSE: RIO) Rio Tinto –40%.

These are all multi-billion dollar companies but we tend to focus more on small-cap stocks with a higher growth profile. Let’s take a look at one of our Featured Stocks (AMEX: URZ)(TSX: URZ)(FF: U9E) Uranerz Energy Corp.

URZ is particularly interesting because it is both a high-growth exploration story and because it will soon be entering the production stage. I’ll break this down for you.

Uranerz is focused on developing its over 90,000 acres in Wyoming’s Powder River Basin, a prolific uranium-mining district. Several major miners are already producing uranium there, and URZ holds one of the largest land packages. The largest uranium mine in the U.S. is in the Powder River basin, operated by Cameco, the world’s largest public uranium company.

The beauty of the Powder River Basin is that you don’t have to go underground to get the uranium. A mining process called (ISR) In Situ Recovery allows you to drill into the ore, inject a leaching solution that dissolves the uranium, and then suck it all out.

The uranium from this pumped solution bonds to ionized resin. The uranium is stripped and then processed into U3O8 yellowcake, the fuel used in nuclear reactors.

ISR mining has several advantages over other types of mining. Capital costs are low, as you don’t need the heavy machinery associated with underground mines. The simplicity of the ISR process also means low operating costs. Even labour costs are minimal.

ISR is not only the safest and cheapest way to mine uranium, it’s also environmentally friendly. The solution pumped underground is essentially baking soda, carbon dioxide and oxygen.

Uranerz’ management has a record of licensing, designing, constructing and operating several commercial ISR projects. URZ has its NRC Source Material license and the Wyoming State Permit to Mine. Last August construction started at their Nichols Ranch Project, URZ’ first mine targeted to open this year.

Uranerz’ goal is to ramp up uranium production to 1.3 million pounds per year. At $52 a pound, that puts revenue at around $68 million a year. Believers include (NYSE: EXC) Excelon Corp. and another major U.S. utility; both signed long-term sales contracts with URZ.

This production is based on only a small portion of Uranerz’ properties. Don’t forget that I also mentioned URZ as an exploration play. The vast majority of their properties have yet to be drilled, which could extend mine life and expand the magnitude of the whole play.

Here’s some more potential leverage of URZ’ revenues. Uranerz expects to produce uranium for around $35 per pound. That’s around $17 lower than the current spot price. If uranium bumps up just 33%, from $52 to $69, URZ could double its gross profit margins.

Imagine what happens to URZ’ revenues if uranium goes back to 2007 prices, as high as $137 a pound. That’s almost three times today’s price. Now let’s look at URZ’ share price when uranium peaked back then.



URZ traded at over $7 per share in 2007. It was around $5.50 a month before Fukushima last year. But URZ is currently $1.40, down 80% from 2007’s high or 75% from 2011’s high.

Why? Back in 2007 Uranerz was mainly just drilling. Later they developed a mineable resource and commenced the licensing process. But the company didn’t have all of their permits approved to construct a mine until last summer.

Uranerz Energy should now be only months away from opening its first uranium mine! Achieving producer status is when institutional investors usually take note. URZ should be flying higher now! Instead, URZ was beaten down with the rest of the uranium market.

I blame the recent sell-off in uranium stocks on any number of short-term events, from Fukushima, to a soft gold market, to Greece etc. However, as shown, the near and long-term prospects for nuclear power and uranium have never been brighter.

As a contrarian trader and value investor, the uranium market spells opportunity to me. Visit Uranerz.com and put URZ on your radar screen!

Sign-up at InvestorsGuru.com (or blog.InvestorsGuru.com) for our Small Cap Stock Observer newsletter, and to set-up your own My Portfolio, My Watchlist & Alerts and News by Email preferences, or to post at our URZ AnyTicker.com Bulletin Board. Free!

Please note that nothing in this report should be taken as a recommendation in any way, and that everything from InvestorsGuru.com is subject to the terms of our Privacy Policy and Disclaimer.