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Russian Nuclear Crisis
to Hit the U.S. in 2013
31 Million U.S. Citizens
Will Be Affected
As the country scrambles to react, a group of stocks could shoot up.
Few people realize it, but at the end of 2013 an event will take place in Russia that could devastate U.S. energy supplies.
On that day, a 20-year nuclear warhead agreement between the United States and Russia will expire.
Unless preventive steps are taken, 10% of America's electric energy supply will dry up.
Here's what's going on...
In 1993, the United States and Russia launched a program known as "Megatons to Megawatts."
The purpose of this program was to convert 500 tons of Soviet-era warheads into uranium for U.S. nuclear power plants.
The program has worked well. Maybe too well.
Believe it or not, this Russian program accounts for 10% of our total electricity -- more than solar, wind and hydro combined.
This fuel powers one out of every 10 homes, businesses, schools and hospitals in America. 31 million people rely on electricity generated by defunct Russian missiles.
But this nuclear lifeline is about to be cut.
When Russia refuses to renew the deal (as nuclear experts and government officials predict), the U.S. will face an entirely new kind of energy crisis.
What does this mean for investors? Once this uranium supply is disrupted, the price of uranium mining stocks could go through the roof. I'm talking about potential gains in the hundreds of percent.
It might come as a surprise after all the negative headlines... but nuclear power is still a growth industry, despite the Fukushima disaster in Japan.
Only 10 of the world's 445 reactors have stopped operating since the accident. Meanwhile 60 new ones are under construction... and 370 more are in the planning stage. If nuclear power is slumping, I bet most industries would be happy to be in that kind of "slump."
True, there has been a backlash in Europe, where anti-nuclear sentiment runs highest. But the uranium story isn't about the developed world. 90% of the growth in nuclear reactors is coming from China, India, and Russia... which have all reaffirmed their need for nuclear power.
The simple fact remains that uranium is the only fuel that can possibly give 3.5 billion new consumers in oil-poor nations the power they need. It's unquestionably the safest, cheapest and cleanest form of mass power generation.
Doug Casey, Chairman of Casey Research and a long-time metals analyst, puts it best: "Despite the Western world's skittishness, it's full steam ahead in China, India and other developing nations -- and the Western world is tiny in comparison."
China has already begun building 26 new reactors that will triple the size of its nuclear reactor fleet over the next decade. And they have 50 more in the advanced-planning stage. India is building 19 new nuclear reactors between now and 2016.
These countries want power fast, cheap and clean. Regardless of how you feel about nuclear power, there's no denying that it delivers on all three counts.
But all those new reactors can't deliver a single kilowatt without uranium. Casey is a huge uranium bull: "If you want mass power, you need nuclear power. And today that means uranium. I'd say uranium is a great place to be for at least the next generation."
Like so many compelling investment opportunities, investing in uranium is basically a scarcity play.
The world's 445 reactors burned through 180 million pounds of uranium last year. But miners could produce only 140 million -- leaving a 40-million pound shortfall.
The U.S. is the poster child for uranium deficiency. We need about 60 million pounds of uranium annually, but our mines spit out just 4 million.
But that hasn't stopped Duke Energy, Florida Power & Light and a dozen other utilities from planning new nuclear projects. All told, the U.S. Nuclear Regulatory Commission is reviewing applications for 26 new reactors.
That's why the U.S. needs recycling programs like "Megatons to Megawatts" to keep our reactors running. Once that program ends in 2013, and Russia is no longer obliged to send us uranium, we are going to be scrambling to find replacement uranium.
This is why the industry's few uranium producers are in such a strong position. When you produce something that is guaranteed to sell -- because the world needs so much more than it's digging up -- isn't that the sort of business you want to own?
It's a Seller's Market
The hundreds of new reactors being planned are driving a frantic scramble for uranium inventories. You need 1.5 million pounds of uranium at startup to get a reactor going. And you need 500,000 more pounds to burn every year. Utilities like to hold three to four years of inventories. This adds up to big numbers when you consider that the world digs up only 140 million pounds a year.
If we look out over the next 8-10 years, which is how long it takes a nuclear power plant to become operational, the market is about 400 million pounds short of demand.
In other words, the uranium we're now digging out of the earth covers just 65% of what these reactors will need.
The new supply will have to come from somewhere, or the price of the existing supply will skyrocket.
Indian power generators are hoarding huge quantities... and buying stakes in African mines.
China is buying out foreign uranium miners lock, stock and barrel. Reuters recently reported that China Guangdong Nuclear Power is trying to take over London-based Kalahari Minerals. Kalahari is the biggest shareholder in one of the world's largest uranium projects. This will give the Chinese company access to a world-class uranium project.
China mines just two million pounds of uranium a year -- even less than we do. So it has no choice but to buy it where it can.
China says it will boost uranium imports fourfold to 50-60 million pounds a year by 2020. At that point, China will be gobbling up 25% to 30% of total global production. There's no way to do this without sparking a price war.
We could see uranium prices soar to $100, $200, even $1,000 a pound. That's a long way up from today's $55.
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