Uranium looking up here

Increased corporate action in the global uranium sector, and indications that spot prices may have troughed, could signal the end of a vicious bear market, according to some top investment ideas coming off specialised trading desks on both sides of the Atlantic.

There are rumours that specialist physical uranium trade entities Ux Consulting and TradeTech will likely report spot uranium prices rising to around USD 64/lb in latest weekly fixings, from multi-year lows of USD 58/lb reported last month, a level well less than half the peak USD 138/lb reported in June 2007.

On the corporate front, London-listed Nufcor Uranium is known to be involved in the marketing of a possible Toronto listing for its uranium investment vehicle. This follows last week's news that mining major Rio Tinto, itself a significant uranium producer, had reached agreement to sell its unlisted Kintyre uranium project in Western Australia to a joint venture consortium comprising subsidiaries of Cameco, the world's biggest producer, and Mitsubishi Development, for USD $495m.

This has left more than 100 listed explorer and developer uranium stocks in the cold for the meantime, but the Kintyre deal was the biggest in the global uranium sector since the August 2007 acquisition by Areva, the world's No 3 uranium miner, of Uramin, for USD 2.5bn.

Analysis of portfolio flows over the past month or so shows that investors have increasingly been switching selected funds into listed uranium stocks, suggesting that sentiment towards the beleaguered sector may have turned. Just a month ago, specialist analysts at RBC Capital Markets warned that the-then spot market price level for uranium "will likely have far reaching implications if it remains at such low levels for too long.

"Most importantly" RBCCM continued, "in our view, will be disinterested equity markets that might cease funding uranium exploration and development. We believe that the absence of equity market participation in the uranium industry would constrain the ability of uranium supply to meet the growing demand, which, in turn, could threaten the ability of global utilities' new reactor build programs".

According to a London-based sales-trader, speaking on Monday, uranium term (contract) prices have remained at USD 85 to 90/lb for most uranium volumes, for many months in a row. He added that "an oil price approaching USD 150 a barrel on the threat of an Israeli strike on Iran's nuclear facilities demands a re-rating of the entire energy complex and uranium has been unfashionable for a year now".

URANEX kinda looks promising..

A couple of weeks ago Deutsche Bank bobbed up with a Buy on Uranex – the same mob that Stokes is punting on.

MD was amused to see the research note titled "Getting in Early".

No latecomer tag for this broker – it is getting in on the ground floor!

Could someone please tell Deutsche that the uranium boom has been running for a couple of years now? And Perth-based Uranex, a spin-off from Goldstream Mining, listed in October 2005.

The company is exploring for uranium at the Bahi prospect in Tanzania and Thatcher Soak in Western Australia.

The latter prospect has the obvious hurdle of being located in WA, where Premier Alan Carpenter is still firmly opposed to uranium.

And it is remote, being further inland from BHP's Yeelirrie project, to the east of Meekatharra.

But it does have at least one thing going for it: a resource estimate.

BP discovered the deposit in 1972 and calculated 6000 tonnes of uranium oxide.

However, different assaying techniques gave a resource as big as 15,000t (15 million tonnes of ore grading 1000 parts per million yellowcake), Deutsche Bank notes.

"In our opinion, one of the most appealing features of the Thatcher Soak deposit is that around 80% of the carnotite deposit is located within 6m of the surface," the broker says.

This provides the opportunity for the company to achieve "very low" mining and development costs, compared with competing deposits, it reckons.

The broker has a 12-month price target of $3.05, compared with the recent share price of $1.63.

Critical to Uranex's fortunes is an 8000m drilling program that started May 8 at Thatcher Soak. It will investigate the quality of the deposit and explore for extensions.

The other determining factor, of course, is the uranium price.

No fears there, according to yet another investment bank – Australia's own Macquarie.

The latter reckons that uranium will peak at $US150 per pound in late 2007, up from a record $125/lb in mid-May.

The window of opportunity could shut relatively quickly, though.

By the end of the decade, Macquarie expects the market to have moved into surplus as new supplies from Kazakhstan, Africa and Canada come onstream.

Still, that gives another six months, at least, of rising uranium (and share) prices for the Johnny-come-lately brigade.

Uranium hopefuls must act to maximise prices : thewest.com.au

Uranium hopefuls must act to maximise prices : thewest.com.au: "“Overwhelmingly the conclusion is that the economics are real and companies should be pushing ahead full steam to develop their projects,” Mr Grigor said.

“The biggest winners on our table and in the stockmarket are those lowgrade companies that we had been dismissive of two years ago. Since then the uranium price has quadrupled, catapulting these companies into enviable positions.”

He estimates that if all 19 Australian potential uranium producers were to reach production it would increase uranium supply by 17,000 tonnes a year, or up to 30 per cent over the next five years. If combined with increasing global supply, this could drag the uranium price back below $US100/lb.

“This means that the highly leveraged, low-grade companies will need to be up and running as early as possible to maximise the peak of the uranium price cycle, sometime between today and three years time,” he said.

One of the hurdles will be the high capital costs of up to $300 million to develop many of the low-grade projects.

The report suggests that this could be a significant issue for Acclaim, Bannerman, Deep Yellow, Toro and Uranex, while better-placed companies include Contact, Energy Metals, Monaro and Uranium King.

Mr Grigor warned many of the floats now hitting the m"

Uranium sea change -- (News Ltd)

STAND by for a uranium sea change -- the end of the big tenement land rush and the start of serious exploration.

This means, according to Far East Capital's Warwick Grigor, that the race is now on among the 150 or so locally listed uranium companies to find a resource while the metal's price is still in its peak phase.

Mr Grigor, who charts hundreds of resource juniors on a daily basis, said that the potential uranium supplies to be brought on to the market by Canadians and others could eventually see the price go back below $US100 a pound. The metal was still holding strong at $US120/lb last week.

But if the land rush phase is just about over, it's ending with a bang as both established explorers and latecomers scramble for projects.

And Africa seems to be the latest favourite.

In recent days, Crossland Uranium Mines has expanded its search to West Africa by joining a Canadian explorer to pick up 5000sqkm in Burkina Faso; Murchison United has begun drilling in Guinea and is raising another $6.6 million; Western Uranium has hired consultants to find it uranium projects in Africa; recent entrants New Age Exploration and Palace Resources have jointly gone hunting uranium in countries ranging from Sierra Leone to Mali; and NGM Resources is acquiring three uranium leases in Niger, a country where Canadians and Chinese companies have also been pouncing on uranium leads.

Also joining the ranks of the uranium players is Marmota Energy, a float being spun out of Monax Mining. Xenolith Gold has plumped for "nearology" and acquired tenements close to advanced projects held by Nova Energy, while oil and gas junior Rawson Resources is going looking for yellowcake opportunities in Texas, Utah, New Mexico and Colorado.

Mr Grigor, in his client note on uranium, said the uranium boom was now fact, no longer fantasy.

"This is a bull market based on hard factual economics, not fantasies and what-ifs," he wrote. "At these uranium prices, there are enormous cash flows that can be made."

And he now likes many of the companies that, two years ago, he dismissed as marginal players. These were the players with low- grade resources but -- with the quadrupling of the uranium price in that time -- had now been placed in an enviable position.

"If the uranium price keeps rising, these companies will shine even more," he added.

Mr Grigor expects the new exploration phase to last about two years, after which investors would be much better educated.

The more serious companies would be moving toward production, but the majority of exploration stocks would probably have withered on the vine.

Far East Capital's rankings have now been expanded to include two more companies in the potential producer category, Alliance Resources and Bannerman Resources.

Alliance has a stake in a 15,000 tonne resource in South Australia while last week a European consortium bought a large stake in Bannerman as that company looked to develop uranium mining in Namibia.

Uranium overview - mid 2007

What more do we know about the junior uranium companies? Firstly, it is clear that nearly all of them are involved at die early stage of exploration. It is believed that world expenditure on uranium exploration quadrupled between 2001 and 2005 and now stands at over 9200 million per year. The juniors are responsible for over half of this, the remainder being carried out by the current major producing companies. Altogether, this can be called the beginning of a second major exploration cycle for uranium, following the first in the 1970s and 1980s, when many of the current operating mines were discovered. Maybe a third of the companies are also buying up previously known deposits indeed there has been a rush to acquire the data from previous exploration activities, while share swaps and other similar corporate activity is very much part of life for such companies. Very few of the companies, no more than 20, have yet reached the next stage, which can be termed active mine development, in other words going through the regulatory process, preparing environmental impact assessments and bankable feasibility studies and beginning to invest in the mine infrastructure. What is clear is that it will still take many years for new discoveries to result in active mine production - this is true for all metals and minerals, but in uranium it tends to be prolonged. In some cases, this may be 20 years or so - it has taken that long to get current mines into operation. Of the junior companies, only a small number are now producing, such as URI and Mestena in the USA, Paladin Resources in Namibia and UrAsia in Kazakhstan.

As time goes on, however, more and more junior companies will reach the production stage. It's interesting to consider the countries where this is likely to take place. About half the junior companies have their headquarters and stock exchange listing in Canada, with about one third in Australia. Yet the geographical spread of their activities is much greater. Although Canada and Australia are both prominent at the exploration and known deposit acquisition stages, many of the companies are active in both the USA and Africa, with smaller numbers working in Asia, Latin America and Europe. So new production could come from any of these locations - indeed there are good grounds to believe that Africa and the USA may well outpace Canada and Australia, at least over the next 5-10 years.

With the exception of the Honeymoon in situ leaching mine in South Australia (which SXR Uranium One should commission by 2008), there is nothing immediately coming up from the juniors in the two big producing countries, which currently account for half of world output. One reason for this may be that the regulatory process seems to be rather more lengthy in these countries (and Australia is only now escaping from anti-uranium public policy and sentiment}. It is notable that Paladin has got the Langer Heinrich mine in Namibia up and running in a relatively short period of time, encouraged by supportive public authorities. Other African mines, in South Africa and other countries, are likely to get into production well before all the projects in Canada and Australia, currently only being talked about. The position in the USA is less clear, as the regulatory process there can also be lengthy, but there is every prospect of some of the juniors getting production moving strongly upwards in the 5-10 year timeframe, American utilities, who have been most exposed to the uranium price spike, will no doubt support this. Yet the big increase in world production before 2010 is likely to come from Kazakhstan, where operations are largely controlled by Kazatomprom, clearly a major established player in the market.

Another feature to watch with the junior uranium companies is that they are often very dependent on the uranium price staying high. The average grades of many of their deposits are quite low, suggesting they may be quite high up the cost curve. While buyers are keen to diversify their sources of supply, particularly at present when they feel weak against the established producers, price is vitally important and they won't generally support those with high cost profiles.

It is clear that there will inevitably be a huge amount of consolidation in the junior uranium sector. The better companies will inevitably become acquisition targets for the major producers, particularly if these find themselves short of material to satisfy contracts. Indeed, cynics about the sector would claim that this is all most of the juniors really want to do - they have no intention of ever producing a pound of uranium themselves and are just seeking to sell out at a good profit to whoever comes along. This may be true of many, but there are clearly those who are dedicated to getting mines up and running. But of course, everything has its price. What is likely is that over the longer term, there will likely be only 10-20 survivors out of the current pool of 400 who are still involved in uranium, independently and at the mine production stage. Possibly even fewer. So a wave of takeovers, mergers and even corporate failures is now likely to ensue.

Finally, it must be said that the junior companies have brought a fresh air to a sector that, with a few exceptions, appeared to be on its last legs only a few years ago. Some would say that a lot of the fresh air is also hot air, but this U inevitable in a business such as mining, with its sharp up and down swings. Industry meetings have certainly been enlivened by the appearance of many 'characters' from the past and by the arrival of financial types, only really out to make money (and not apologetic about this). And as said earlier, the rising interest in uranium has presaged the increased focus on nuclear power as a whole, which must be a good thing.

News Limited May 21, 2007 - Uranium sea change

Robin Bromby

Commodities

STAND by for a uranium sea change -- the end of the big tenement land rush and the start of serious exploration.

This means, according to Far East Capital's Warwick Grigor, that the race is now on among the 150 or so locally listed uranium companies to find a resource while the metal's price is still in its peak phase.

Mr Grigor, who charts hundreds of resource juniors on a daily basis, said that the potential uranium supplies to be brought on to the market by Canadians and others could eventually see the price go back below $US100 a pound. The metal was still holding strong at $US120/lb last week.

But if the land rush phase is just about over, it's ending with a bang as both established explorers and latecomers scramble for projects.

And Africa seems to be the latest favourite.

In recent days, Crossland Uranium Mines has expanded its search to West Africa by joining a Canadian explorer to pick up 5000sqkm in Burkina Faso; Murchison United has begun drilling in Guinea and is raising another $6.6 million; Western Uranium has hired consultants to find it uranium projects in Africa; recent entrants New Age Exploration and Palace Resources have jointly gone hunting uranium in countries ranging from Sierra Leone to Mali; and NGM Resources is acquiring three uranium leases in Niger, a country where Canadians and Chinese companies have also been pouncing on uranium leads.

Also joining the ranks of the uranium players is Marmota Energy, a float being spun out of Monax Mining. Xenolith Gold has plumped for "nearology" and acquired tenements close to advanced projects held by Nova Energy, while oil and gas junior Rawson Resources is going looking for yellowcake opportunities in Texas, Utah, New Mexico and Colorado.

Mr Grigor, in his client note on uranium, said the uranium boom was now fact, no longer fantasy.

"This is a bull market based on hard factual economics, not fantasies and what-ifs," he wrote. "At these uranium prices, there are enormous cash flows that can be made."

And he now likes many of the companies that, two years ago, he dismissed as marginal players. These were the players with low- grade resources but -- with the quadrupling of the uranium price in that time -- had now been placed in an enviable position.

"If the uranium price keeps rising, these companies will shine even more," he added.

Mr Grigor expects the new exploration phase to last about two years, after which investors would be much better educated.

The more serious companies would be moving toward production, but the majority of exploration stocks would probably have withered on the vine.

Far East Capital's rankings have now been expanded to include two more companies in the potential producer category, Alliance Resources and Bannerman Resources.

Alliance has a stake in a 15,000 tonne resource in South Australia while last week a European consortium bought a large stake in Bannerman as that company looked to develop uranium mining in Namibia.

SXR Uranium looking for Australian assets

June 11, 2007 12:00am

ACQUISITIVE Canadian uranium player SXR Uranium One is sniffing for Australian assets as it moves to bulk up its production of the nuclear fuel.

Speaking to reporters after a seminar in Toronto, the company's chief executive Neal Froneman said he would like to achieve a "critical mass" in Australia, where uranium production is dominated by global miners BHP Billiton and Rio Tinto.

Uranium One is developing the Honeymoon project in South Australia, which is expected to begin production in 2008.

The company also has assets in the US, Kazakhstan and South Africa, and last week offered to buy Toronto-listed Energy Metals Corporation in an scrip deal worth about $C1.4 billion ($A1.55 billion).

Mr Froneman said the company was not currently in talks with any companies in Australia, however the Canadian miner is believed to be watching closely the efforts of local explorers, particularly in uranium-friendly South Australia.

China, which is planning to build almost 70 new nuclear power plants, is also taking a keen interest in Australia's uranium juniors.

Liu Xuehong, vice president of China Nuclear International Uranium Co, an arm of the state-owned China National Nuclear Corporation (CNNC), told World Nuclear News the company was contacting Australian explorers with the aim of forming partnerships.

CNNC will present next month at a conference in Perth, which is expected to be attended by a high-level Chinese delegation.

Six Chinese organisations are among more than 40 companies vying for a potentially lucrative uranium deposit in the Northern Territory.

The Chinese might also be buyers of uranium from Honeymoon, with just 40 per cent of the mine's production currently pre-sold.

Uranium prices have soared over the past two years, with renewed interest in nuclear energy driving demand well above supply, following years of sluggish exploration.

Spot prices hit $US138 a pound last week, up from $US7 in 2000, although producers caution that the spot market is driven largely by speculators and doesn't reflect long-term contracts agreed to by producers and utilities.

Mr Froneman said he expected demand to continue to outstrip supply, due to the long time lag between exploration and production.

"Up to about 2015, we don't see the market coming into balance," he said.

He predicted spot prices would hit $US150 a pound before the end of the year, but said prices actually paid by utilities over the long term would likely be about $US60 a pound.

Australia is home to about 30 per cent of the world's low-cost uranium reserves and moves to relax laws on developing new uranium mines have international players watching.

The Australian Labor Party recently scrapped its opposition to new mine developments, but has left the ultimate decision in the hands of the states.

Western Australia and Queensland -- home to some of the richest deposits -- are still opposed to uranium mining.

with Reuters

Ngapa clan want low level dump

Land in Australia's Northern Territory will be assessed for suitability for radioactive waste management facilities after nomination by its indigenous owners.

The Ngapa clan has put forward 1.5 sq km of its 200 sq km holding near Muckaty Station as a potential site for a low-level waste (LLW) disposal site and an intermediate-level waste (ILW) store.

LLW typically takes the form of laboratory materials like gloves, glasswear and clothing as well as contaminated soil and objects like luminous dials. The material is typically placed in steel barrels which are then compacted to save space. ILW would include disused radiotherapy and industrial radiation sources as well as waste resulting from the recycling of used nuclear fuel from Australia's research reactors, which has taken place in France and the UK.

The country's first research reactor, Hifar, has recently been shut down, having been replaced by Opal, which is currently in the commissioning phase.

The Australian Nuclear Science and Technology Organisation (Ansto) would now be permitted to study the land, alongside a number of other possible locations. If Muckaty Station were to be chosen, the Ngapa clan would receive A$1 million ($819,000) to invest in enhancing their education and training opportunities, while payments amounting to A$11 million ($9 million) would be made to a charitable trust for their benefit. The clan numbers around 60 people. The Ngapa land would be leased to the Australian government for 200 years, before being returned to them.

Meanwhile, Ansto has submitted an application for a licence to enter the second phase of decommissioning Hifar. The first stage was the removal of highly radioactive used nuclear fuel and the reactor's heavy water. The second phase would see the dismantling of non-radioactive parts of the facility and detailed work begin to fully plan the remainder of decommissioning work. Further permissions would be required before the third and final stage could commence, leaving the site free for alternative use around 2016.

Much material from Hifar's decommissioning would eventually be stored in the LLW and ILW facility.

Short Term Outlook points to Higher Uranium Prices

Shares of Paladin Resources (PDN) rose from a low $0.04 in January 2004 to beyond $1.00 for the first time in February 2005, a gain of 2500% in a little over a year. By January 2006 they had crossed the $3.00 mark, a gain of another 200% in less than a year. By December of last year they were trading above $9, representing another gain of 200%.

Paladin shares peaked at $10.75 in February this year and then again at $10.80 in April, only to fall back below $8.50, from which point they've risen again to above $9.

For the first time in more than three years shareholders have not made any gains on their shares over a five month period.

A similar story applies to shareholders of Energy Resources of Australia (ERA), which is currently trading some 14.5% below its April peak, and to most of the 160 other ASX-listed uranium stocks. In Toronto and New York as well most share prices of uranium producers and developers have retreated in the past weeks.

What is happening with uranium stocks? Has anything fundamentally changed for the sector?

Not really. If anything more and more market insiders and close followers of the industry have come to realise the market is likely to remain much tighter for a much longer time. Taken from that perspective uranium is no different from the likes of iron ore, crude oil and nickel for which average price estimates in the market have been continuously on the rise this year.

Uranium's spot price certainly has had the experts baffled since late last year. After entering calendar 2007 on an already higher than expected US$75/lb, spot uranium has made a few giant leaps to a preliminary peak of US$122/lb this week, up 62.6% in five months after doubling in price in each of the two previous calendar years.

If current market indications are any guide spot uranium will reach US$150/lb between now and December. If achieved, this would mean the weekly spot price has once again doubled within twelve months.

According to sources inside the industry, this scenario is likely to unfold sooner rather than later as spot uranium seems poised to record another leap forward in the next few weeks. This could possibly take the weekly spot price as high as US$140/lb in June.

Within this context, last week's price increase by US$2 to US$122/lb would have come as a minor disappointment to participants in the industry. Apparently several offers in the US market at around US$125/lb failed to find a buyer while one small transaction was concluded at US$122/lb during the week.

Two public auctions in two weeks have the potential to push spot uranium to new record highs. Firstly there is the monthly auction of 100,000 lb U3O8 (yellow cake or uranium concentrate) by Corpus Christi, Texas based and privately held Mestena. It is believed this month all bids are due by May 30. The Mestena auctions have been responsible for solving several deadlock situations between buyers and sellers in the first months of 2007.

This month the Mestena auction is competing with an unnamed hedge fund which is believed to have approached a number of potential buyers and invited them to submit offers by June 1. The fund is auctioning 200,000 lb U3O8 and 100 metric tons UF6 (uranium hexafluoride).

The positive prospects for uranium producers were also highlighted at a Rio Tinto presentation to securities analysts in London this week. Both the slides and a webcast of the presentation are available on the RioTinto.com website.

The company reiterated its intention to potentially double its global production in the next five years while still expecting the market to remain in deficit until at least 2012.

A recent presentation by industry service provider Nukem goes even further. The industry experts believe market fundamentals have shifted even more in favour of uranium producers recently, a situation that may not change for another ten years.

Nukem sees increasing demand for uranium as the world's focus on global warming and more efficient energy usage intensifies, while producers need time to ramp up new mines and extend their current programs. Delays and production shortfalls are more norm than exception, the experts at Nukem argue, pointing out the flooded Cigar Lake project could easily be delayed for three to five years (instead of the two years as stated by operator Cameco). This would have clear negative ramifications for buyers of uranium in the years ahead.

Cigar Lake is the single most important known new source of uranium in the world. The potential loss of production from the project in 2009 exceeds all current scheduled additional supply for the year, and not just in Canada but globally.

Nukem believes demand for uranium is likely to exceed the so-called high case projections by the World Nuclear Association whose estimates are used by securities analysts worldwide.

The presentation suggests supply and demand are unlikely to reach a balance for many years to come.

Whether all this means that share prices of every company with a vague connection to uranium will continue to soar is doubtful. Some market commentators believe part of the hot money has left the sector this year as momentum slowed and further appreciation of share prices had become less obvious.

Others believe investors have become more knowledgeable and they have started to differentiate between likely winners and losers in the sector. The fact that Cameco shares are trading near their all time high on the Toronto Stock Exchange could be interpreted as a sign of this.

Probably of equal importance has been the fact that mainstream stock brokers have sort of rediscovered the sector over the past nine months. Apart from revealing a wide variety in opinions and views, with corresponding large differences in price projections, reports issued by these experts have also shown investors further upside for share prices does come with limits.

As an example of this, Deutsche Bank analysts upgraded Paladin Resources to Buy this week with a price target of $9.73 arguing paying around 1.7 times Net Present Value seemed appropriate for a company such as Paladin.

Some commentators believe investors largely dismiss these NPV based calculations these days as the usage of long term product prices of around US$45/lb has become questionable with experts such as Nukem anticipating another ten years of global supply deficits.

But even looked upon from a pure price/earnings ratio point of view it is difficult to argue that Paladin shares are cheap these days. At Monday's $8.76, Deutsche Bank believes the shares traded on an estimated FY08 P/E multiple of 31 (forecast EPS $0.36) and a FY09 multiple of 18 (forecast EPS $0.56).

All of a sudden, a share price of $15, or even $12, as widely speculated only a few months ago, seems a long way off. Many an explorer is trading at higher resource valuations than both Paladin and ERA.

It should come as no surprise to anyone if share prices of most uranium stocks will fail to keep pace with further rises in the spot price from here on. The real challenge will come when the weekly spot price stops rising, though that may not happen for a while still.

Lack of fuel may limit US nuclear power expansion

Lack of fuel may limit US nuclear power expansion Discussion at PhysOrgForum
Limited supplies of fuel for nuclear power plants may thwart the renewed and growing interest in nuclear energy in the United States and other nations, says an MIT expert on the industry.

Over the past 20 years, safety concerns dampened all aspects of development of nuclear energy: No new reactors were ordered and there was investment neither in new uranium mines nor in building facilities to produce fuel for existing reactors. Instead, the industry lived off commercial and government inventories, which are now nearly gone. Worldwide, uranium production meets only about 65 percent of current reactor requirements.

That shortage of uranium and of processing facilities worldwide leaves a gap between the potential increase in demand for nuclear energy and the ability to supply fuel for it, said Dr. Thomas Neff, a research affiliate at MIT's Center for International Studies.

"Just as large numbers of new reactors are being planned, we are only starting to emerge from 20 years of underinvestment in the production capacity for the nuclear fuel to operate them. There has been a nuclear industry myopia; they didn't take a long-term view," Neff said. For example, only a few years ago uranium inventories were being sold at $10 per pound; the current price is $85 per pound.

Neff has been giving a series of talks at industry meetings and investment conferences around the world about the nature of the fuel supply problem and its implications for the so-called "nuclear renaissance," pointing out both the sharply rising cost of nuclear fuel and the lack of capacity to produce it.

Currently, much of the uranium used by the United States is coming from mines in such countries as Australia, Canada, Namibia, and, most recently, Kazakhstan. Small amounts are mined in the western United States, but the United States is largely reliant on overseas supplies. The United States also relies for half its fuel on Russia under a "swords to ploughshares" deal that Neff originated in 1991. This deal is converting about 20,000 Russian nuclear weapons to fuel for U.S. nuclear power plants, but it ends in 2013, leaving a substantial supply gap for the United States.

Further, China, India, and even Russia have plans for massive deployments of nuclear power and are trying to lock up supplies from countries on which the United States has traditionally relied. As a result, the United States could be the "last one to buy, and it could pay the highest prices, if it can get uranium at all," Neff said. "The take-home message is that if we're going to increase use of nuclear power, we need massive new investments in capacity to mine uranium and facilities to process it."

Mined uranium comes in several forms, or isotopes. For starting a nuclear chain reaction in a reactor, the only important isotope is uranium-235, which accounts for JUST 7 out of 1000 atoms in the mined product. To fuel a nuclear reactor, the concentration of uranium-235 has to be increased to 40 to 50 out of 1000 atoms. This is done by separating isotopes in an enrichment plant to achieve the higher concentration.

As Neff points out, reactor operators could increase the amount of fuel made from a given amount of natural uranium by buying more enrichment services to recover more uranium-235 atoms. Current enrichment capacity is enough to recover only about 4 out of 7 uranium-235 atoms. Limited uranium supplies could be stretched if industry could recover 5 or 6 of these atoms, but there is not enough processing capacity worldwide to do so.