Uranium - America: The Next Uranium Giant?


NEW YORK (ResourceInvestor.com) -- When it comes to uranium mining, it’s expected that the United States would play second fiddle to world heavy weights like Canada and Australia.
But thanks to years of depressed pricing and an unpalatable political climate, the U.S. actually lags behind many developing nations (many of whom have significantly lower reserves) in uranium production.
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In fact, even though the United States accounts for about 7% of the world’s uranium reserves, according to the World Nuclear Association, it is currently responsible for only 2.5% of worldwide production from mines.
Worldwide annual uranium demand currently far outstrips supply from mines - with the shortfall currently being met by recycled uranium for nuclear warheads. But, with uranium power requirements on the rise, it’s almost certain that increased mine openings are in our future.
In the next decade, the American uranium industry is in for a massive change.
Thanks to re-emerging domestic support for nuclear power, and a pricing environment that allows for profitable extraction, the American uranium mining industry is finally finding support after nearly twenty years in decline.
Domestic Uranium Mining - It’s all About Pricing
The biggest issue facing domestic uranium mining in recent years was the depressed demand – and pricing – in the heavy metal’s market. Unlike countries with high-grade uranium deposits like Kazhakstan and Australia, much of the United States’ uranium is based in low-grade sandstone deposits.
Located primarily in the western states of Wyoming, Colorado, Utah, New Mexico and Arizona, much of America’s uranium can only be extracted with a comfortable profit margin with spot prices over $35 to $40 per pound. With pricing currently topping $46/lb., we’re finally entering the “sweet spot” for U.S. production.
With high oil prices and a desire for increased energy independence, the political environment for uranium mining is also seeing a boost.
Finally, although American deposits may not be as profitable as those located in various former Soviet republics and throughout parts of Africa, the political stability of the U.S. is an attractive bonus.
After declining from the mid-1990’s onward, domestic uranium product is finally starting to turn around. If pricing remains elevated, it’s likely that this is just the beginning of a change in the U.S. uranium industry.
Reflecting this change, action among the small number of publicly traded uranium companies involved in the U.S. uranium game has begun to heat up.
In a major announcement last month, International Uranium [TSX:IUC] announced it would restart its mothballed U.S. uranium mines after a whopping seven years of down time. The company plans on producing a whopping 3.4 million pounds of U308 in its initial year of production, before leveling off at between 1.5 million pounds of 2 million pounds of yellowcake later on. In all, the company plans to operate nine mines located in Colorado, Utah and Arizona by 2008.
Ur-Energy [TSX:URE] moved the market last month when it announced increased resources estimates at two of its Wyoming properties. With the help of an estimated uranium price of $40/lb., Ur was able to nearly double its resource estimate at its Lost Creek property. According to the latest results, the property contains an indicated resource of 9.8 million pounds of U308, plus an inferred resource of 1.1 million pounds of U308. The company’s also upped the resource estimates at its Lost Soldier property by about 40% - to a measured and indicated resource of 12.2 million pounds and an inferred resource of 1.8 million pounds. Just last week, Ur-Energy also announced it would increase its presence in Wyoming with the acquisition of 2,600 acres of claims.
Energy Metals is also turning itself into a growing force in U.S. uranium exploration. On July 11, the company completed the acquisition of Quincy Energy Corp. [TSXv:QUI] to create a combined company with a large number of advanced stage projects and solid development prospects. The deal follows Energy Metals’ earlier acquisition of Standard Uranium and that company’s exploration projects in Arizona, Wyoming and Colorado.
Of course, SXR Uranium One [TSX:SXR] made major waves in the sector when it announced July 10 that it would acquire the Sweetwater Uranium Mill and 19,000-acres of claims in southern Wyoming from metals titan Rio Tinto [NYSE:RTP] for $110 million. Just one day later, the company announced it would also acquire U.S. Energy’s [Nasdaq:USEG] Shootaring Canyon Mill in Utah and 164 square kilometres of land in Wyoming, Arizona, Utah and Colorado for $77.5 million. In that deal, U.S. Energy will retain a 5% royalty on the mill’s sales, up to a maximum of $12.5 million. With the acquisition of two of only four licensed uranium mills in the country, it’s obvious that SXR is making a push to become a major player the American uranium industry.
Assuming the uranium price remains elevated, it’s likely that the pace of deal making and exploration will only increase through year-end, to the benefit of shareholders in those companies.
There aren’t a terribly large number of companies currently involved in U.S. uranium exploration and production. Industry heavyweight Cameco [NYSE:CCJ; TSX:CCO] current operates two small uranium mines in the United States, while Laramide Resources [TSXv:LAM] made news late last year when it acquired Homestake’s U.S. uranium portfolio. With its recent deal with SXR, U.S. Energy has few remaining uranium assets – with the notable exception being its promising JV with Uranium Power Corp. [TSXv:UPC] on Sheep Mountain, Wyoming. Strathmore Minerals Corp. [TSXv:STM] is working on a number of advanced-stage exploration projects, while Mesa Uranium [TSXv:MZU] is exploring on past producing project Lisbon Valley in Utah.
Other companies like Glen Hawk Minerals [TSXv:GHM], Golden Patriot [OTCBB:GPTC], Mill Bay Ventures [TSXv:MBV], Quaterra Resources[TSXv:QTA], Mangum Uranium [TSXv:MM], Rodinia Minerals [TSXv:RM], Powertech Uranium [TSXv:PWE], Max Resource Corp. [TSXv:MXR] and Universal Uranium [TSXv:UUL] are all exploring throughout the United States to different degrees.
Conclusion
It’s quite certain that not every company discussed is sure to become a major presence in the U.S. uranium market. But with U.S. uranium production likely to see significant growth over the next several years, it’s likely that exploration activity and deal-making will both continue to expand. Investors looking to take part in the overall surging uranium market would do well to own stakes in a number of companies with U.S. operations.
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