Investing in Uranium: Megaton Profits

End of Nuclear Agreement Could Send Uranium Soaring

Written by Jimmy Mengel
Posted November 25, 2013

Last week, a mysterious cargo shipment arrived at the port of Baltimore.

Just blocks from our downtown office, the lumbering barge pulled into the harbor carrying 10 massive shipping containers packed with 160 metric tons of the most powerful substance on earth: uranium.

This shipment marks the final delivery of the joint Russian-U.S. Megatons to Megawatts program.

And while this may be the end of the agreement to transform nuclear weapons into civilian-grade energy, it also signals the very beginning of a uranium bull market...

In a fit of irony, nuclear power itself did more to de-weaponize the world than a million anti-nuke protests. 

The program was conceived by MIT physicist Thomas Neff, who laid out the concept in a New York Times editorial:

The Soviets have been selling increasing amounts of natural and enriched uranium in Western commercial markets, feeding a downward price spiral that has driven some uranium producers out of business and threatened the uranium enrichment business of America's Energy Department, the world's largest supplier of commercial fuel.

A typical warhead might yield fuel worth $200,000. Ten thousand warheads containing 200 tons of highly enriched uranium would be worth about $2 billion. This would be a good deal for the Soviets, for if they tried to sell such a volume commercially, prices would crash.

Funny, because prices have crashed in part because of the program (more on that later).

 

In any case, since the inception of the program, we've imported 16,000 nuclear warheads directly from our old Cold War nemesis, dismantled them, and converted the highly-enriched weapons grade uranium to low-enriched uranium for commercial energy — including a whopping 10% of the electricity produced in the United States that was generated by low-enriched uranium from these Russian warheads.

According to the USEC, one in every 40 American homes, businesses, schools, and hospitals is generated by Megatons to Megawatts fuel.

To put that into perspective, that's enough generated electricity to power the city of Boston for 730 years.

So while the program was great at de-weaponizing the world and supplying the United States with cheap nuclear power, it flooded the market with below-value uranium prices, tugging the global price down with it.

Russia has grumbled for years that Megatons to Megawatts forced the nation to unload their uranium stock at a steep discount.

Now that they can sell their supply unfettered, we can expect those prices to jump — along with the uranium supply at large...

And even outside of the Megatons to Megawatts issue, demand is continuing to increase.

The international community is even more reliant on nuclear power, whether or not they care to admit it.

The Chinese need nuclear power to address their horrific pollution problems. That's why China currently has 17 nuclear reactors online and another 28 in the works. All told, the World Nuclear Association expects China to quadruple its nuclear reliance by 2020.

Check out this mind-blowing chart:

*Courtesy of Business Insider.

15 to 160 gigawatts is a 967% increase!

That's some astounding growth.

And a black swan event like Fukushima is not going to put a dent in a transition that massive.

India and South Korea are on a similar trajectory.

As commodities titan Rick Rule put it: “Either uranium prices go up, or the lights go off.”

We're betting the lights will stay on.

Have a look at the forecasts from energy analysts from around the world:

I'd say that's a pretty unified front. 

Prices will go up; it's not a matter of if, but when.

Nick Hodge has been beating the uranium drum for a while now. In fact, he just returned from a trip to the famed Athabasca Basin -- the Saudi Arabia of uranium -- where output is expected to double by 2020.

He was so impressed by the two companies he visited that he compiled a detailed report within days of his return.

And now he's ready to share it with you.

Don't wait to read about his findings and take a position... Once that Russian supply hits the market at post-Megatons to Megawatt prices, things are going to get interesting very, very fast.

It's also going to make early investors very wealthy. Make sure you're one of them by keeping up with Nick Hodge's Early Advantage.

Godspeed,
jimmy-mengel-signature-fixed

Jimmy Mengel

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Jimmy is a managing editor for Outsider Club and the investment director of several personal finance advisories, The Crow's Nest, and The Adventure Capitalist For more on Jimmy, check out his editor's page.

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