Tuesday August 07, 2012
by Yiannis Mostrous, editor Passport to ProfitsSince the nuclear disaster in Japan in 2011, uranium investments have encountered a rough ride. However, we believe that concerns of a dramatic reaction against nuclear power in the wake of Fukushima are way overblown.
Global demand for uranium, the key fuel used in nuclear reactors, should continue to grow at a roughly 4 percent annualized pace over the coming decade, largely driven by increased use in emerging markets such as China.
China has taken advantage of weak uranium prices to add to its stockpile whenever the feedstock dips to the low end of its trading range. Investors should follow Beijing's example.
The best way to gain exposure to this investment theme is through Canada's
Cameco (
CCJ). The company is the largest pure-play producer of uranium in the world, accounting for around 16 percent of global production of the metal.
Last year, Cameco produced 22.4 million pounds of uranium from five operating mines. Its McArthur River in Canada is not only one of the world's largest mines but it's one of the world's cheapest to produce, allowing Cameco to earn profits even when uranium prices are weak.
Overseas, Cameco is the 60 percent owner of a joint venture called the Inkai Limited Liability Partnership to mine a site in South Kazakhstan. Its share of production from Inkai should grow to around 3 million pounds per annum over the next few years.
Cameco employs a conservative marketing strategy, selling around 40 percent of its production under long-term contracts at fixed prices that provide a cushion when uranium prices are low.
Learn more about this financial newsletter at Yiannis Mostrous' Passport to Profits.Related articles:
