| China Demand for Uranium, World Growth in | | | | an easy process. Permitting requirements in |
| Electricity Demand to Drive Uranium Price | | | | countries where most uranium is mined are |
| Higher | | | | roughly comparable. If you havent done any |
| | | | work, after a discovery, it still will take |
| Industry expert says all new production | | | | about four to six years to mine in any of |
| already factored in uranium price We are | | | | those areas. |
| consuming far more uranium than we are | | | | |
| producing worldwide, explained David Miller, | | | | In early 2004, there were probably less than |
| Wyoming legislator and recently appointed | | | | twenty uranium producers and exploration |
| president of Strathmore Resources (TSX-V: | | | | companies. Since then, the number of uranium |
| STM; OTC: STHJF.PK). All the new production | | | | exploration companies has jumped to more than |
| is already factored into the future market | | | | 200. Miller warns investors that it could |
| for uranium. Were underwater right now | | | | take up to 12 years for a grass roots project |
| without building one more nuclear power | | | | to begin mining yellowcake. Miller explained, |
| plant. Nuclear reactor requirements have far | | | | Starting, finding, permitting and mining a |
| outstripped current mining production for the | | | | project is probably going to take a minimum |
| past two decades. Current worldwide | | | | of 12 to 20 years. From the start of the |
| production is more than 80 million pounds, | | | | exploration program to defining the ore body, |
| but the demand for uranium, which fuels | | | | after you make a discovery, to starting the |
| nuclear reactors, is running an annual | | | | background and permitting process, to |
| deficit of approximately 60 million pounds. | | | | development and then finally mining its |
| | | | going to take a long time. |
| Electricity: Uraniums Supply and Demand | | | | |
| Problem | | | | Through 2005, many uranium exploration |
| | | | companies announced new projects throughout |
| Were not going to run out of uranium, but | | | | Canada and the United States. Miller did not |
| where will the price go to encourage new | | | | see how their efforts would immediately |
| production? asked David Miller. We are around | | | | alleviate the uranium supply crunch, If you |
| over $33/pound now. Could it double again? It | | | | are talking about any of those, such as in |
| wouldnt surprise me at all. Kevin Bambrough, | | | | Labrador or the Yukon or in the basins |
| a research analyst for Sprott Asset | | | | outside the Athabasca Basin, or even within |
| Management, heartily agreed with Mr. Miller, | | | | the Basin, for those that are just now doing |
| saying, We have just started a long term | | | | their first exploration, you are talking the |
| uranium bull market that will end in a | | | | year 2020 before those could come online and |
| uranium mania as utilities and countries | | | | supply uranium to the world market. |
| drive uranium prices to unbelievable highs as | | | | |
| they compete to secure supplies." | | | | But, what about the worlds richest |
| | | | concentrations of uranium in Canadas |
| That driving force is demand for more | | | | Athabasca Basin? Will they help stem the |
| electricity. Over the past 25 years, total | | | | rising uranium price? In a nutshell, Miller |
| world energy use expanded by almost 50 | | | | says no. He explained, The next one to come |
| percent, with stronger growth in electricity | | | | online is Cigar Lake, but it was discovered |
| usage. Demand for electricity is increasing | | | | over 20 years ago. There is another one |
| far more rapidly than overall energy use. | | | | called Shea Creek, which was discovered by |
| Electricity demand has been projected to grow | | | | Cogema more than a dozen years ago. Could |
| 2.8 percent annually through 2010, and | | | | they start the permitting process on that one |
| substantially more between then and 2020. | | | | in the near future? Absolutely, Miller |
| About 2 billion people currently have no | | | | responded. But it might be close to 2015 |
| electricity access, and with United Nations | | | | before it could bring any uranium to the |
| forecasts of world population growth by 1.5 | | | | world market. |
| billion people in 2020, electricity demand | | | | |
| will continue to grow. | | | | The future largest producing uranium mine in |
| | | | the world is likely to be Olympic Dam in |
| As an interim solution to the greenhouse gas | | | | Australia. Its basically a copper mine with |
| problem and climate changes, a growing number | | | | uranium grades. On October 27th Hong |
| of countries are investigating nuclear energy | | | | Kong-based institutional advisor Marc Faber, |
| to solve their burden of a soaring electrical | | | | and author The Gloom, Boom and Doom Report, |
| demand. Presently, there is as much | | | | told Dow Jones newswire that he thought |
| electricity generated by nuclear power as was | | | | copper prices would fall by as much as 40 |
| provided by all sources worldwide in 1960. | | | | percent. (Note: Marc Faber also said, Id be a |
| | | | physical buyer of uranium.) What happens when |
| Nuclear power generates more than 16 percent | | | | copper is $0.50/pound? What will be their |
| of the worlds electricity, nearly 24 percent | | | | cost of producing that uranium? asked Dave |
| of the OECD and 34 percent of the European | | | | Miller. Olympic Dam is low grade uranium, |
| Unions electricity needs. In an April 2005 | | | | less than 0.05 percent U308. Their cost to |
| speech to the National Small Business | | | | operate the uranium portion of that will go |
| Conference in Washington, President Bush | | | | up, if copper prices go down. |
| announced, Nuclear power is now providing | | | | |
| about 20 percent of America's electricity, | | | | Where else do utilities turn for their |
| with no air pollution or greenhouse gas | | | | growing uranium needs? |
| emissions. Nuclear power is one of the | | | | |
| safest, cleanest sources of power in the | | | | David Miller argues that some of that uranium |
| world, and we need more of it here in | | | | production is likely to come from the |
| America. | | | | smaller, but well-capitalized, companies, |
| | | | such as Strathmore Minerals. Our strategy |
| Demand for electricity is projected to impact | | | | from day one, and we havent veered from this |
| other commodities as well, not just the price | | | | at all, has been to acquire as many known |
| of uranium. In the Energy Information Agencys | | | | uranium deposits as we possibly could, |
| Annual Energy Outlook 2005, U.S. electricity | | | | explained Miller. We started early in this |
| demand will bring about increases in natural | | | | uranium cycle in 2003. We were out there |
| gas consumption. By 2025, the electric power | | | | before 95 percent of these other uranium |
| sector will account for 31 percent of total | | | | companies even thought of starting uranium |
| demand for natural gas, as consumption | | | | companies. We were able to pick up some very |
| increases from 5.0 trillion cubic feet in | | | | good deposits in New Mexico and Wyoming. |
| 2003 to 9.4 trillion cubic feet in 2025. | | | | These are known, drilled-out uranium deposits |
| | | | in the country thats produced as much as |
| Chinas Demand May Be Greater Than Anticipated | | | | uranium anywhere else on earth. Weve taken |
| | | | all that exploration information, where they |
| Today, 441 nuclear power reactors in 31 | | | | discovered these old deposits, and have |
| countries provide more than 16 percent of the | | | | acquired a number of those old deposits. Now, |
| worlds electricity. In 2003, that was 2525 | | | | we have opened a permitting office in New |
| billion kilowatt hours. Eleven countries are | | | | Mexico and starting the permitting process to |
| constructing thirty more reactors, mainly in | | | | put those into production, somewhere down the |
| China, but also in Russia, Japan and Korea. | | | | road. Its a long process and all kinds of |
| The International Atomic Energy Agency has | | | | studies must be done to get these fully |
| projected at least 60 new power plants will | | | | permitted and into production. |
| be constructed over the next 15 years. By | | | | |
| 2020, nuclear powers electricity production | | | | But there is a second part to the Strathmore |
| share will increase to 17 percent. | | | | Minerals strategy. Miller announced, Dont |
| | | | ignore the richest uranium province on earth, |
| China is the future wild card, said Miller. | | | | which is the Athabasca Basin in Canada. |
| Their current uranium demand is miniscule. | | | | Strathmore is the Number One landholder in |
| They have a small nuclear industry. They may | | | | the Athabasca Basin, controlling |
| have three or four thousand megawatts of | | | | approximately 3 million acres in Canada. We |
| capacity. Their uranium demand is only about | | | | have dozen different individual projects |
| 4 or 5 million pounds per year. They meet | | | | there. We are starting the exploration |
| that internally from their own uranium | | | | process on all of those." |
| deposits. But what they are planning for | | | | |
| nuclear is probably the most aggressive | | | | The case with Cameco (NYSE: CCJ), the blue |
| program in the world. I visited China in 2003 | | | | chip publicly traded uranium producer, may |
| to teach ISL (in situ leaching) uranium | | | | also help fuel uranium prices rally to higher |
| geology and ISL mining techniques to a couple | | | | levels. They have forward sold their |
| of institutes. At that time, they were | | | | production. Added Miller, I would bet their |
| talking about building two new nuclear power | | | | average sales price, under contract right |
| plants per year for the next 20 years. | | | | now, of the 20+ million pounds they deliver |
| | | | every year is somewhere in the low teens |
| But as Miller observed, they may have more | | | | maybe $13/pound plus/minus $1-2. As these |
| ambitious plans. He added, Since then, I have | | | | contracts mature, and bring on new contracts, |
| heard of more aggressive programs. One | | | | that price is going to keep going up. They |
| article I read recently was entitled, Let | | | | should keep going up for the next five years. |
| 1000 Reactors Bloom. That is more than 200 | | | | |
| percent of the nuclear reactors we now have | | | | The Case for Nuclear Energy |
| on earth. I believe that is what the Chinese | | | | |
| will be doing in the next 40 50 years, | | | | As electricity demand grows by leaps and |
| converting nearly 100 percent of their | | | | bounds during the 21st century, many of the |
| electrical generation from nuclear power. | | | | worlds governments are seriously considering |
| Currently, China is generating less than | | | | nuclear energy as a safer alternative to |
| three percent of their electricity from | | | | coal-fired plants. As many study the safety |
| nuclear energy. | | | | issues of nuclear-powered electricity, they |
| | | | tend to conclude that nuclear energy may very |
| Miller speculates of how this might impact | | | | well provide a healthier, as well as a less |
| the price of uranium, If they are building | | | | expensive, alternative to present power |
| nearly three times the world fleet in just | | | | generation methods. |
| China, then that would be about 500 million | | | | |
| pounds of uranium demand from China in fifty | | | | Miller pointed out, In the 1970s, when the |
| years. Other companies are announcing new | | | | anti-nuclear movement was very strong, the |
| nuclear power plants. What does that mean for | | | | U.S. was then mining and burning 600 million |
| the price of uranium? Miller concluded, So, | | | | tons of coal each year. And now, thirty years |
| the demand for uranium is going up. I think | | | | later, because the anti-nuclear industry was |
| the growth in demand will be more rapid than | | | | successful, we are burning 1 billion tons of |
| we realize. | | | | coal per year. |
| | | | |
| Uranium Mining: A Slow Process | | | | According to the Environmental Protection |
| | | | Agency, U.S. air pollution in 1999, as a |
| David Miller, who was previously interviewed | | | | result of energy from coal, emitted more than |
| by in June 2004, reflected on last years | | | | 13 million tons of sulfur oxides and nearly |
| forecast, I thought $30/pound was | | | | 5.5 million tons of nitrous oxides. In a |
| sufficiently high to encourage enough new | | | | Harvard School of Public Health study, as |
| production around the world. But there are | | | | many as 70,000 Americans are dying each year |
| major issues with supplying the increasing | | | | as a result of air pollution. From sulfur |
| appetite of the burgeoning nuclear power | | | | dioxide alone, Harvard estimated that 2400 |
| industry. Miller warned, The problem with | | | | Americans die for every million tons of |
| encouraging new production is you dont turn | | | | sulfur dioxide emitted, or more than 30,000 |
| these things on and off. The only uranium, | | | | American deaths annually. |
| coming onto the market in addition to whats | | | | |
| already planned right now, will come from the | | | | But, air pollution is far worse elsewhere. |
| already-discovered deposits. | | | | The pollution levels in China from Shanghai |
| | | | to Beijing are shocking, said Miller. |
| Two years from now, Miller thinks the spot | | | | Emphysema kills 5,000 people per year in the |
| price of uranium could double again. There | | | | coal mines. They need nuclear power, probably |
| are going to be a lot of people trying to put | | | | more than any area on earth, to clean up |
| uranium mines into production, but it is not | | | | their air. |