Why Investors Should Follow Cameco, Uranerz Energy, and Other Uranium Miners in Wyoming
Right now, new uranium mines in Wyoming are the key to the future of power generation in the US as the import program with Russia comes to an end.
Uranium miners that are close to production in Wyoming are gaining a lot of enthusiastic interest from investors over the past few weeks. Some of the miners out of Wyoming have made huge percentage gains, such as Uranerz Energy (URZ), UR-Energy (URG), Cameco (CCJ), and Uranium One, as more mines are expected to receive permits to begin operation. There are currently 13 mines being developed in Wyoming, and the state produces the largest amount of domestic uranium with Cameco's Smith Ranch Mine -- which is also the largest US facility.
There have been developments with the recent issuance of the Moore Ranch project to Uranium One, which is partially owned by the Russian government. Just recently, Uranium One's Moore Ranch received its NRC license, making it the first uranium mine to be permitted in several years and resulting in a major milestone for the industry. Unfortunately, due to Uranium One being largely owned by the Russian government, Congressional members wrote a letter explaining their concern about the possibility of US uranium supplying Iran.
America is one of the largest consumers of uranium and a great deal of the supply comes from Russian nuclear warheads. More than 90% of uranium used in this country is imported. However, the program with Russia is coming to an end by the close of 2013 and the US will need to find alternate supplies. Investors realizing this crunch are buying these miners with great enthusiasm. Right now, the new mines from Wyoming are key to the future of power generation in the United States. Investors are seeing the concerns related to the future of local uranium supply, one being that many foreign countries are controlling US uranium which is vital to the US's future power generation. It's likely that these small miners will be acquired at premiums or be subject to hostile takeovers in 2011 as they move closer to production.
Cameco recently had an offtake agreement with China, which will also put pressure on supply over the next few years. I expect more agreements with miners to be announced as foreign investors scramble for future supply.
I believe these assets provide dollar diversification in low-risk mining jurisdictions. Uranium could see parabolic moves as more power plants are built and supply dwindles.
Wyoming is a friendly mining jurisdiction and many of these projects are in situ mining, which means they have to dispose of water. Groundwater contamination is the greatest concern for local residents. Investors must research which projects have local support and permits for water disposal as the Environmental Protection Agency could hold a project up for this reason.
Although many commodities have reached new highs, uranium stocks are just beginning their major move. Nuclear growth and supply-demand constraints will likely drive uranium prices very high: Over 20% of the US's power is derived from nuclear power plants. There's been bilateral political support to increase nuclear energy to reduce carbon emissions and it's an essential component of the clean-energy push. Expect to hear more news of acquisitions as miners make progress and move closer to production.
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