How To Profit From The Re-Emergence Of Nuclear Energy

| September 16, 2010 | 0 Comments

The age of fossil fuels is rapidly coming to a close.  The world is slowly but surely shifting its dependence on oil, gas, and coal to more sustainable types of energy.  Eventually we will power our planet with renewable sources such as wind, sun, and water.

The problem is, it could take awhile for renewable energy to become affordable on a commercial scale.  Technology improvements still need to be made.  And in some cases, the energy infrastructure will need to be redesigned or rebuilt.

We need a potent energy source to bridge the gap between fossil fuels and renewables.

That’s where nuclear power comes in.

Every day, countries across the globe are turning to nuclear for their energy needs.  Over 100 new reactors will be completed by 2020.  That’s a nearly 25% increase in the number of reactors on the planet.  You can’t question growth.

But here’s the thing… in order to power nuclear reactors, you need lots of uranium.

Uranium is mined like most metals… with some important differences. Since it’s a radioactive, special safety steps must be taken.  Also, because of the radioactivity, uranium mining is a heavily regulated industry.

Despite safety issues, regulations, and mining difficulties, uranium is actually pretty cheap right now.  You can purchase a pound for around $45.  But it won’t stay this low for long… all the new reactors will push prices higher.

Here’s the bottom line…

The key to nuclear power is uranium.  By investing in uranium, you’re investing in nuclear energy.

And one of the best uranium mining companies out there is Cameco (NYSE: CCJ).

Cameco is a mining and nuclear energy company based in Canada.  It’s one of the largest producers in the world.  CCJ owns mines in Canada, the U.S., and Kazakhstan – including the only high grade uranium mines in the world in Canada.

What really makes this company attractive is their huge stockpile of uranium.

They hold about $5 billion in uranium reserves.  They’re also one of the few companies in the world which focus on mining this highly sought after metal.  In fact, CCJ produces 16% of uranium across the globe.

You can bet any energy producer needing uranium will call up CCJ.  And because it’s a highly regulated commodity, purchase contracts tend to be for long periods of time.

Let me give you an example…

China just agreed to a 10-year supply contract with CCJ.

China is going to need tons of uranium over the next decade.  They’re already planning to build 60 new reactors.  Plus, they have proposals for 120 more!

Cameco’s hitting the jackpot with this deal.

The company’s other existing contracts are also long-term.  So they can expect steady revenue from these contacts for years to come.

Let’s face it… if they mine it, someone will buy it.

And CCJ already has more than $2 billion a year in revenue.  Even better, the company has a rock solid balance sheet.

CCJ is sitting on a pile of cash… more than $1 billion.  They also have $5 billion in uranium reserves.  And current assets are a solid 4.5x current liabilities.

But here’s the best part…

CCJ shares are positioned for a huge increase.

You see, demand for uranium is ready to go through the roof.  And there isn’t enough uranium to meet rising demand.

Over the next decade, there’s expected to be a 250 million pound shortfall in uranium.  The last time uranium supplies were tight, the price skyrocketed to over $140 a pound.

Guess who stands to gain?

Uranium mining companies of course… and CCJ is in a great position to profit.

The last time uranium prices jumped, shares in CCJ soared.  In 2007, share price was more than double what it is today.

As the price of uranium increases, I expect to see CCJ shares climb once again.  There’s definitely some serious upside potential here!

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Category: Commodities

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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