| Summary: Sprott Asset Management uranium expert | | | | just starting to see the weather impacts. There are |
| Kevin Bambrough talked with us about the "second | | | | problems with droughts across the world as well as |
| leg" of the current uranium bull market. He sees a | | | | elevated hurricane activity. Going nuclear on a mass |
| massive nuclear build up heading our way with "the | | | | scale is starting to become recognized as one of the |
| environmentalists leading the charge." He said many | | | | only ways to have a real impact. I think what we're |
| price projections may be inaccurate because "people | | | | going to see is an unprecedented build out in nuclear |
| are underestimating future demand." | | | | capacity throughout the world in the coming years |
| StockInterview: Price forecasts on spot uranium are | | | | and decades. I'd equate this to what happened when |
| widening. Some insiders have predicted uranium prices | | | | we went from using oil for just lamps and home |
| may drop back into the $30/pound range; others, | | | | heating to using it as a transportation fuel. What's |
| such as yourself, continue to suggest $50/pound or | | | | going to happen with the people who have the |
| higher. Any comments on the forecasts others are | | | | higher quality uranium reserves and lower cost |
| making? | | | | production? They are going to be able to reap |
| Kevin Bambrough: | | | | massive profits over the coming decades. |
| There are many people forecasting uranium prices | | | | StockInterview: Looking ahead, do you think we'll see |
| now. It's important to consider their track record of | | | | more deals between a small uranium producer, such |
| forecasting prices. Look at the contracts that have | | | | as Uranium Resources (OTC BB: URRE) and the |
| been written by many companies in the industry, | | | | Japanese multi-national conglomerate, Itochu |
| over the last number of years. Anyone who had | | | | Corporation? |
| ceilings, or had signed fixed-priced contracts, has | | | | Kevin Bambrough: |
| been punished. Very few people in the industry | | | | I have no doubt that it's going to continue to happen. |
| predicted what has happened. Looking forward, I | | | | More importantly, I've heard that some of the major |
| think that in our view, the cost of production of | | | | builders of nuclear facilities around the world, |
| current producers isn't going to be as relevant as it | | | | companies such as Areva are quite concerned about |
| has been in the past. It will be the more marginal, | | | | the availability of supply going forward. When these |
| much higher cost producers who will be setting the | | | | companies are talking to countries and utilities that |
| price. | | | | potentially could contract to build nuclear facilities, |
| StockInterview: Isn't there a sense of false optimism | | | | they're basically being told that buyers want uranium |
| that "projects in the pipeline" will ensure an ongoing | | | | supply assurances, or they aren't going to give an |
| stream of uranium oxide for the nuclear fuel cycle? | | | | order to buy a nuclear facility. I've heard they are |
| Kevin Bambrough: | | | | looking to do joint ventures or at least contract with |
| There are a lot of people looking at the supply | | | | emerging producers to try to get future supply. |
| situation going forward while underestimating future | | | | Then, they will be able sell their nuclear technology to |
| demand. They are very optimistic that mining | | | | countries and ensure supply. |
| projects are going to go as planned. We had recent | | | | StockInterview: Will the Chinese be satisfied with the |
| news that Cigar Lake had a problem. There was a | | | | uranium they plan to buy from Australia, or will they |
| flood the. There's a couple million pounds shortfall to | | | | have to tap into uranium production from another or |
| most people's models for at least two years. All | | | | other countries? |
| because of one mine's six month delay. | | | | Kevin Bambrough: |
| StockInterview: Would that have the kind of impact | | | | I think that the Chinese will probably look elsewhere |
| the McArthur flooding (Athabasca Basin, Cameco) had | | | | as well. Countries have strategic oil reserves. Why |
| on the spot uranium price a few years ago? | | | | shouldn't they have strategic uranium reserves to |
| Kevin Bambrough: | | | | supply their nuclear reactors? It makes sense to |
| I think it could. It was forecast to go up to 18 million | | | | have a good stockpile of uranium considering the |
| pounds of production. That would have been ten | | | | relative cost of nuclear power versus anything else. I |
| percent of the world's current consumption. Cigar | | | | don't think that the nuclear power industry should |
| Lake would need to ramp up over a three year | | | | operate on a just in time basis, considering the costs |
| period, once it gets started. Now, there is a six | | | | and the risks of making sure you can secure supply. |
| month delay. What if it's delayed a year? That really | | | | Don't get me wrong. There is plenty of uranium in |
| changes the production profile for the next decade. | | | | the world, but we're just going to have to pay up |
| There are many projects that could see delays. The | | | | for it. I believe we're going to consume lot more than |
| mining business is always full of delays. Remember | | | | what we're consuming nowadays - a decade or two |
| that when we bring on new nuclear plants, they take | | | | out. The world is waking up to the reality of peak oil |
| on average about 1.6 million lbs when commissioning. | | | | production, and how it is going to affect all aspects |
| What will happen, if in a decade, we bring on just 10 | | | | of energy production. |
| or 20 reactors each year? That's another 16 to 30 | | | | StockInterview: How much of a factor will Russia |
| million pounds per year of demand just because of | | | | play in the nuclear build up? |
| the start up. | | | | Kevin Bambrough: |
| StockInterview: Does this mean the current uranium | | | | Looking at some of the recent statements made by |
| bull market still has strong legs? | | | | Russian officials, it's completely clear to me that |
| Kevin Bambrough: | | | | we've been correct in what we've been thinking for |
| I think we're entering the second leg of the bull | | | | a long time: the HEU agreement (to deliver highly |
| market here. It is going to move away from a supply | | | | enriched uranium and have it blended down) is |
| shortage story, where we focus on the fact that we | | | | probably not going to be renewed. The Russians are |
| only get about 60 percent of the current | | | | planning to make nuclear technology a key export |
| consumption from mines, while the inventories are | | | | for them, really as a value added product to go with |
| being worked off. Now, we're moving into a situation | | | | uranium production. They desire to be able to offer a |
| where we're seeing an explosion in demand growth. | | | | complete solution, not just uranium, but the actual |
| Just a couple of years ago when we first started | | | | building and technology around the nuclear facilities |
| investing in uranium, we could see probably about a | | | | themselves. They will also have growing uranium |
| dozen nuclear facilities being planned for construction | | | | demands domestically and have voiced concern about |
| throughout the world. Now we've got well over 100 | | | | being able to meet their own needs beyond 2015. |
| being planned. It seems there are new additions and | | | | StockInterview: But nuclear energy critics claim all of |
| talk of more additions every day. | | | | these power plants won't secure financing and most |
| StockInterview: How you envision this nuclear buildup | | | | plans are just pipe dreams never to be built. |
| rolling out? | | | | Kevin Bambrough: |
| Kevin Bambrough: | | | | Two years ago, the critics said there would never be |
| I don't think it's unreasonable to think, looking ten to | | | | any more nuclear plants built in the U.S. People used |
| twenty years out, there are going to be a lot of | | | | to say nuclear was over for Germany, and that |
| countries that will be trying to get in the position that | | | | many countries would exit nuclear power. Now we're |
| France is in, with a much higher percentage of their | | | | seeing the exact opposite. We're seeing proposals |
| power coming from nuclear generation. We could see | | | | being done, incentives put in place, and a multitude of |
| a move to where maybe 50 percent of global | | | | projects moving ahead. If what the leading scientists |
| energy production or more could eventually be | | | | from NASA, the NOAA and from many organizations |
| supplied by nuclear. There is nothing else that can | | | | around the world are saying about global warming, |
| really step up and fill the void and take care of this | | | | and the acceleration we've recently seen continues, |
| problem that we're having. France produces 78 | | | | people are going to be begging to have more nuclear |
| percent of their electricity from nuclear. Why isn't | | | | facilities and cut CO2 emissions. The environmentalists |
| that reasonable for others? Look out a decade or | | | | will be leading the charge. |
| two, and it doesn't appear like we're going to have | | | | StockInterview: How long will it take before the |
| the oil and the gas in order to handle our needs. | | | | proposed nuclear build up impacts the uranium mining |
| Obviously we can do more with coal, but if we're | | | | companies? |
| going to keep using coal we've got to put in place | | | | Kevin Bambrough: |
| technology to take care of the carbon dioxide | | | | The actual build of all this takes time. I think the |
| sequestration. If you want to have a stable, secure | | | | increase in the positive perception, of the nuclear |
| supply of electricity, it seems that you're going to | | | | industry is going to continue to accelerate. All demand |
| have to go with more nuclear or eventually with | | | | for uranium can come from just the planning stage |
| these new coal technologies. I think there is going to | | | | for nuclear power plants, as companies look forward |
| have to be a balance of both, because the oil and | | | | and try to contract future supply. Ultimately, that's |
| gas just isn't going to be there. | | | | what will keep driving the uranium price higher. |
| StockInterview: What do you think is the catalyst for | | | | StockInterview: How seriously is the nuclear industry |
| this anticipated growth in nuclear energy demand? | | | | taking the global build up? |
| Kevin Bambrough: | | | | Kevin Bambrough: |
| The most interesting thing is the fact that some | | | | I think the industry is starting to take it very |
| environmentalists are leading the charge to go more | | | | seriously. That's why the uranium price keeps pushing |
| nuclear. It's because they realize nuclear energy is the | | | | higher. People are going around trying to contract for |
| only practical alternative and because of the situation | | | | uranium, and they are finding it more difficult. People |
| with the carbon dioxide (CO2) levels. There have | | | | are also starting to realize that as you have |
| been some recent reports about CO2 levels reaching | | | | problems, such as the McArthur River flooding, which |
| 381 parts per billion, just spiking out of the range that | | | | got the uranium bull market jump started, and now a |
| has kept the world in a relatively stabile environment | | | | problem at Cigar Lake, you really should have a good |
| for the last 400,000 years. If you look at the work | | | | build up of inventory in order to protect yourself in |
| of people like James Hanson, the correlation between | | | | this environment. Especially when the relative cost of |
| CO2 levels and temperature is undeniable. Basically, | | | | having to switch off a nuclear facility to go to |
| mankind has increased the CO2 levels beyond a level | | | | something else in a pinch is multiples higher. |
| that hasn't been seen in over a million years. We are | | | | |