Market Outlook Journal
by James Finch - Please email your feedback to
jfinch@stockinterview.com
Editor’s Note: Please visit StockInterview’s disclaimer page for full disclosure, forward looking statements, important links and cautions.
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March 19, 2006 |
Quality of Management Attracts PR
Late Friday afternoon, while watching Bart Jaworsky, associate mining analyst for Raymond James, discuss his three top uranium stocks on Canada’s ROB TV, it again became evident that the very best publicity is reserved for those with quality management. StockInterview.com subscribers will recognize Jaworsky echoing the very same themes, which have run through this website’s commentary since June 2004, in every feature from ISR mining to U.S. uranium assets, and from the recent Wyoming series to the widely circulated “How to Choose a Uranium Stock.” Jaworsky picked Energy Metals (TSX: EMC), UR-Energy (TSX: URE) and Strathmore Minerals (TSX: STM; Other OTC: STHJF).
What attracts the big time publicity is the name behind the company. Often it is not the Chief Executive. If one were to speak to Gene Ramos, Reuter’s energy reporter based in New York, the first question he will fire back at you is: “Who is this person?” Translation: What has he accomplished? Bart Jaworsky astutely focused on “quality of management.” That is a lesson investors should learn.
For example, this past week, Strathmore Minerals was fortunate to have a triple play in publicity. On Tuesday, Lawrence Roulston, who writes Resource Opportunities, recommended Strathmore on ROB TV. On Wednesday, Bill Murphy’s Midas Report recommended Strathmore. On Friday, Jaworsky featured Strathmore on ROB TV. Who’s doing their public relations? In reality, the media attraction stems from the quality of management. When Spencer Jakab of Dow Jones (and Barron’s) wants a good quote about uranium, he turns to David Miller, president of Strathmore. Miller was chief geologist for Cogema’s ISR operations in the United States. Again, who are you and what have you done?
In the case of Energy Metals, when it comes to ISR mining, the engineer in charge of developing their U.S. assets is Dennis Stover. His claim to fame was designing the Smith Ranch ISR facility now owned by Cameco’s Power Resources. A review search of the ISR literature will inevitably turn up Dennis Stover’s name. Stover has proven himself, built a respectable reputation and inevitably will attract media attention at some point.
Finding a Wyoming geological textbook that omits the name of William Boberg, chief executive of UR-Energy, is easier said than done. His papers and presentations through the late 1970s and 1980s helped define the extent of Wyoming uranium geology. With previous experience at Conoco and Kennecott, as a uranium geologist, Boberg’s endeavors to bring his company’s Lost Soldier property into full production will, at some point, attract strong media attention.
What brings the media to a company’s door is not the tout by a self-serving, self-absorbed and megalomaniac newsletter writer, but all of the attributes we featured in “How to Choose a Uranium Stock.” Quality management, great (and proven) properties, hidden value in the company, and loads of cash help simplify an investor’s decision. Jaworsky warned about Kazakhstan, an area we’ve avoided coverage on because of the political climate (ditto for Mongolia). Focusing on North America reduces risk when it comes to uranium exploration and development.
In every uranium deal, there is a single individual who knows what is going on, as Bill Sheriff of Energy Metals advised us. If you want to know what is really happening at Smith Ranch, you talk to Patrick Drummond, the plant supervisor. He’s been in mining his entire life, having started off in the coal mines of Scotland. The Power Resources operation draws praise from Wyoming’s State Representative David Edwards and State Senator Robert Peck. The people who live in nearby Douglas, Wyoming speak highly of Power Resources.
At Uranerz Energy (OTC BB: URNZ), it is Glen Catchpole, who previously ran a Wyoming ISR operation, and helped develop Cameco’s ISR assets in Kazakhstan. Forum Development (TSX: FDC) has Dr. Boen Tan, who helped discover two of the Key Lake deposits in Canada’s Athabasca Basin. ESO Uranium (TSX: ESO) has precious metals geologist Tony Harvey advising the company. Perhaps it will be ESO’s Mikwam gold project in northern Ontario that puts this company on the map. With Forsys Metals (TSX: FSY), one turns to Graham Greenway, who previously compiled a resource estimate of FSY’s Valencia uranium property in Namibia for Rossing Uranium Ltd. Max Resources (TSX: MXR) has Clancy Wendt, who previously drilled the Utah property, and expects to again find uranium in the same place he found it more than 25 years ago. Mr. Anti-PR, Norman Burmeister of Kilgore Minerals (TSX: KAU), fails to boast about his stint as chief geologist for Silver Standard (NASDAQ NM: SSRI) or his former Bull Run gold mine. Yes, it is mentioned on his website. But, Norm is the kind of guy who quietly lines up a drill rig for his Idaho gold property, fairly certain he’s going to hit something big this summer. Then again, he doesn’t issue a wave of news releases to pump up his stock. These are the kinds of people the media just love to interview. They all have the “hidden” story that makes the reporter’s feature work for his readers, viewers or listeners.
These companies personify the qualities we investigate before writing about them in StockInterview.com. Mainly, it is the quality of management that sets apart the possible winners from the likely losers. Everything flows out from that key point. If management really does know in which direction the company should be going, they’ll find the right properties. Fund managers will be eager to finance them. Investors will be less fearful about speculating on the company’s prospects. Eventually, even the most reluctant newsletter writer will be compelled to feature the company, or at the very least acknowledge the company has a shot. As long as the commodity price continues running higher, it becomes a win-win situation for those participating. Most of all, at some point, the mainstream media will stumble across such companies, or someone will bring the company to their attention. And then, you get the kind of rallies we’ve seen in Strathmore Minerals and some others.
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March 16, 2006 |
Strathmore Minerals Technical Chart Picture
Curious about the strong momentum in Strathmore Minerals (TSX: STM; Other OTC: STHJF) the past few days? It appears a technical chartist, who is also a Strathmore shareholder, provided a ringing endorsement for Strathmore’s technical stock chart to Bill Murphy, proprietor of LeMetropole Café.com. Murphy also publishes the nightly “Midas” commentary, which goes out to his legion of subscribers. Below is the commentary that was emailed to those subscribers:
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Recently the Daily Reckoning ran a brief bit on how insiders at uranium mining companies are buying big chunks of their own stock. In doing a little research, I came across one uranium company in particular whose chart has just completed a textbook perfect "cup-with-handle" pattern. It's taken a year for the pattern to form, and the stock now looks ready to make its break. The company is Strathmore Minerals Corp. (symbol STM on the Canadian Exchange or STHJF on the American Pink Sheets) Have a look:
If you're a chart technician, the above is a thing of beauty! Notice that volume has picked up considerably in the last ten weeks or so. Admittedly, I don't know a whole lot about this company or its portfolio of uranium properties, but I have purchased a very modest number of shares based solely on what I see in this chart (every share I own, by the way, was bought at prices higher than Friday's closing).
The fundamentals in uranium are looking fantastic, that's true, but I'm only passing this along in case any of your readers want to get in on a uranium company play based purely on its promising technical picture. So caveat emptor.
You may recall that back on December 16th, in your nightly commentary, I highlighted three or four silver penny stocks that looked set to rock and roll based on their respective charts' technical patterns. Since that info was published, every one of those stocks has blasted dramatically upward, including ECU Silver (what a rocket ride, and things haven't even gotten started!), Excellon Resources (instead of five for a buck, now you can't even buy two for a buck!), Avino (huge leverage to the price of silver and already a double from December) and Canadian Zinc (also a double from December and one of the best stories I know of in the silver sector, and it's located in geo-politically safe Canada). In less than twelve weeks, these stocks have all doubled, tripled or (in the case of ECU) quadrupled!!
My gut feeling is that Strathmore Minerals has the same kind of potential not in the next 12 weeks, perhaps, but at least over the next year or so. But again, let each person conduct his own due diligence. I don't want either of us getting e-mails saying that we were "pumping" anything. I send this along strictly in the interest of presenting your readers with another possible investment opportunity. Other than my small share position, I have absolutely no relationship with Strathmore Minerals and I haven't received compensation of any kind from them or anyone else regarding this write-up.
Here's a link to the Strathmore's website for those who may be interested in further investigation.
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March 6, 2006 |
An Inside Look into Red Hot Pace Asia China Energy
On January 20th, we alerted our subscribers to Pacific Asia China Energy (TSX: PCE). PCE shares traded under C$1.50/share, as low as C$1.25. About one month later on February 24th, PCE hit a record high of C$3.06/share. Shares are now trading at C$2.55/share – a respectable appreciation over a brief period. Why the excitement and the rally?
We failed to reach Michael Schaefer, a newsletter writer whose mid February recommendation suggested PCE shares might be valued, under certain conditions, well north of C$20/share. Mr. Schaefer’s eye has previously discovered other coal bed methane deals, which have had long and strong price share appreciations. In a Doug Casey newsletter, we found this strong endorsement of Schaefer’s grasp of coal bed methane deals, “… his last coal-bed methane stock recommendation – Canadian Spirit – gained 939% in 24 months.” In a subscription promotion for his “Secret Stock Files” newsletter, Schaefer wrote, “Coal bed methane (CBM) has become one of the fastest-growing sources of natural gas. In my home state of Wyoming, for instance, coal bed methane drilling started in the late 1980s… and the CBM has been heating our homes ever since. Asia has some of the largest coal bed methane fields in the world, and they’re turning to North American energy companies to help extract the natural gas.”
This may explain Schaefer’s excitement in enthusiastically recommending the shares of PCE. We investigated into the company’s recent filing (February 27th), and interviewed Dr. David Marchioni about Pacific Asia China Energy. Dr. Marchione is one of Canada’s leading experts on coal bed methane. At the same time, he is a director of PCE. We talked about the Sproule Report, a technical investigation into the Guizhou coal bed methane property, named for that province in China. PCE holds an option to acquire 100 percent of Asia Canada Energy Corp (ACE), for which the Sproule Report was prepared. Marchione told Market Outlook, “It was very fair, there were no surprises, no negatives, and reasonable.”
This report addresses the geology and discovered coal bed methane resources of the Baotian-Qinghshan property located in China’s southwestern Guizhou province. During the exploration phase, the potential PCE subsidiary, ACE, is committed to fully funding and drilling and coring four exploration wells. Should the project move into commercial production, China’s coal bed methane government corporation, China United Coalbed Methane Corporation Ltd (CUCBM), the Chinese will have the right to participate in up to 40 percent of the working interest in the coal bed methane project.
The Sproule Report published three possible scenarios, for which confirmation drilling to support the Chinese geological work data. The high case volume of “discovered coal bed methane resources in place” for the seven coal seams in the Longtan Formation of the property is 11.2 trillion cubic feet of gas. The low case volume is 504 billion cubic feet. The most likely case volume, according to the Sproule investigation, is 5.2 trillion cubic feet. What does all of this mean to the typical investor, and how valuable is it as a resource?
In a comparative analysis, with a possibly similar coal bed methane in Asia – in this case, it is in India, we looked at Great Eastern Energy. In December 2005, Great Eastern Energy began trading on the London Stock Exchange’s AIM exchange, London’s global market for emerging companies. PCE and Great Eastern have at least one common denominator – both have contracted with Mitchell Drilling of Brisbane, Australia. Mitchell Drilling is Australia’s largest privately owned drilling company. Highly respected in international circles, Mitchell Drilling aspires to become a world leader in coal bed methane drilling. Both Great Eastern Energy and PCE have licensed the Mitchell’s proprietary drilling Dymaxion System. Pacific Asia China Energy has the exclusive right to use Mitchell's Dymaxion System in China. This is a unique surface to in-seam drilling technique, developed by Mitchell for the past six years. Reportedly it is highly effective, and more than 200 Dymaxion wells have been drilled on coal bed methane projects.
How does PCE stack up against Great Eastern Energy? In February, Great Eastern Energy had over 544 million shares outstanding, with a market value of more than C$308 million shares. As a result of its recent ACE approval by the TSX Venture exchange, PCE has about 70 million shares outstanding (about 25 million of which are held in escrow) with a market value, based on Friday’s close, of about C$178.5 million.
In a geological comparison, Great Eastern Energy reported proven reserves of 55 billion cubic feet and 87.4 billion cubic feet of probable. Combined with another 673.5 billion cubic feet of possible reserves, Great Eastern’s West Bengali concession has the potential for a bit more than 1.38 trillion cubic feet of gas. This company plans 100 well development programs over the next four years and hopes to achieve commercial production by 2007. Simple mathematics suggests that PCE, when compared to Great Eastern Energy, may be well positioned to achieve Michael Schaefer’s ambitious price target. Schaefer may have the laugh last, after all, as well as delighting his subscribers with yet another spectacular stock recommendation.
To more carefully review PCE, we talked further with Dr. Marchione about the Sproule Report and to obtain further details about the property and PCE’s plans. Marchione is fairly confident the company’s confirmation drilling will duplicate similar numbers to the Chinese exploration data. He revealed, “We have a good idea what the gas content will be. Drilling the property won’t yield any surprises.” PCE does not plan deep wells and their initial drilling will only be on one part of the property. “We will be drilling where there is the highest intensity of data provided by the Chinese geologists,” Marchione explained. “Theoretically, we expect this to be the highest area of permeability.”
PCE plans to drill only about 10 percent of the Guizhou property. “We want to elevate the Chinese data, correlating their data with ours, in order to confirm that their geological data is correct.” The questions Marchione believes the confirmation drilling will answer are about permeability and productability. “Can we get it out at a reasonable price?” Marchione asked. That is what this drilling plans to answer.
Drilling the property will reveal the magnitude and orientation of the stress in the basin. “We expect it to be mild,” said Marchione. “The lower the stress, the better the permeability.” Shallow drilling of 300 to 850 or 900 meters, with a total of six drill holes, will answer his questions. While the basin goes down to 2000 meters, and the amount of gas increases with depth, PCE will start at the shallow depth to discover if they can get good gas content. “We will be trying to find out an optimal depth,” Marchione explained. “There is abundant evidence of gas content, and that was confirmed by Sproule.” Well, that is good news. Drilling could start before the end of March. |
February 15, 2006 |
“The Only Real Alternative to Oil is Nuclear Power”
Nuclear power got another editorial boost by Steve Forbes, editor-in-chief of Forbes magazine in its February 27th edition. “Political rhetoric aside, the only real alternative to oil is nuclear power,” wrote Forbes in his “Fact and Comment” section. A photograph of indigents punches up his column, tagged along with the emphatic photo caption: “Without oil the U.S. would have a Third World-like standard of living.”
Forbes complained about President Bush’s now-famous phrase, “addicted to oil,” and editorialized that Bush might have just as well have said, “We are addicted to prosperity, to progress.” Without oil, Forbes believes the U.S. might be as poor as Bangladesh. Forbes also slammed Bush’s mention of renewable programs, such as solar, wind, and hydrogen. Forbes called those programs, “the kind of mostly wasteful and useless programs we’ve been engaging in since the late 1970s.”
The Forbes editor sees no pollution problem with oil, but from where we get it, writing, “Most of the world’s oil is found in troublesome neighborhoods: the Middle East, Venezuela (nor run by a crazed Castroesque dictator) and other unstable, largely undemocratic parts of the world.” Downside for Forbes embracing nuclear energy with regards to that point is one of the more ambitious uranium-producing countries is Kazakhstan. Another place where uranium exploration may pay off is Mongolia. Hardly are those countries blessed with benevolent despotism.
Perhaps Forbes should get behind the exploration and development of U.S. uranium assets. Once the world’s largest uranium-producing country (in 1957 the Atomic Energy Commission had to rein in uranium exploration), the U.S. uranium industry has been held hostage by various environmental groups for the past twenty-odd years. Even in the light of new uranium mining techniques, such as solution mining, also known as In Situ Recovery mining, environmentalists still “don’t get it.”
Part of learning about something involves getting your hands dirty in the subject, spending time in the field. That’s the sin many policy makers and environmental fanatics commit. If U.S. policymakers don’t strongly face up to the dangerous buffoonery of the domestic environmental movement, U.S. utilities may be buying an increasing percentage of non-North American uranium, and from the same kind of unstable and undemocratic foreign locales which Steve Forbes detests. |
February 13, 2006 |
Is This Uranium Bull Market For Real?
In light of Toshiba’s recent proposed acquisition of Westinghouse Electric from the government-owned British Nuclear Fuels (BNFL), historians may be reminded of former Westinghouse Chairman Robert Kirby’s litigious international outcry and prolonged battle over secretive and illegal price manipulation by a global uranium cartel. In the 1970s, Westinghouse, determined to capture the world market of building nuclear reactors, offered dirt-cheap nuclear fuel as part of its incentive to get sales from utility companies. The company’s 27 utility customers had locked in agreements with Westinghouse to provide them with 65 million pounds of U3O8 over the next twenty years, well into the 1990s. Those contracts set off one of the most curious legal battles of the 1970’s, ultimately reducing Westinghouse to a shell of the powerhouse it once was.
In recent weeks, Toshiba (London Stock Exchange: TOS; Tokyo Stock Exchange Ticker Code: 6502) has been strongly criticized for the Westinghouse acquisition, and may sell as much as 49 percent of the deal to two other Japanese firms and a smaller stake to an American firm. Toshiba’s CFO, Sadazumi Ryu said the company would pay for some of its acquisition costs within three years out of current cash flow plus float debt to about 115 percent of equity. Will Toshiba repeat the mistakes made by Westinghouse in the mid 1970s during the last uranium bull market?
Today, Toshiba aims its sights on the lucrative Chinese nuclear energy market, which on the surface appears more ambitious than the U.S. civilian nuclear program of the 1970’s. Toshiba wants to be a major beneficiary of China’s aggressive plans to expand the country’s nuclear energy program. And why not? Uranium prices have soared the past few years. Spot uranium rocketed in 2005 at an even faster degree than in 1975. That was the year when Westinghouse’s Robert Kirby was told by his doctor to not even bother giving up his chain-smoking habit. Things at Westinghouse had gotten that bad.
The head of the Pittsburgh-based conglomerate failed to grasp what was behind the escalating uranium price during the 1970s. His Westinghouse incentive plan sounded great when spot uranium sold for $6/pound. However, at $40/pound, Westinghouse got stuck with potential liabilities of more than $2 billion (1970s dollars) because of his offer to provide the utilities with cheap fuel. By July 1975, Kirby began blaming the world’s uranium cartel, which he believed manipulated the spot price higher to piggyback his company’s development plans. Across from Kirby’s offices in Pittsburgh’s Golden Triangle were the offices of Gulf Oil, a uranium supplier, whom he believed to be a member of the uranium cartel. By September 1975, Westinghouse announced a shortfall of 25,000 metric tons of uranium, and claimed “commercial impracticability” in honoring its nuclear fuel commitments to the 27 utilities. And the lawsuits began.
According to a special report in the Pittsburgh Post-Gazette, Kirby’s “suspicions heightened when, in late 1976, he received copies of documents suggesting Gulf and 28 other suppliers had conspired to form a cartel to keep Westinghouse out of the uranium business.” The documents were the minutes of a private meeting of uranium suppliers held in Australia. In a bizarre twist of fate, the whistleblower came in the form of Friends of the Earth, which offered Westinghouse additional documents if the nuclear power plant manufacturer would help the environmental group release jailed members in the Philippines. Kirby ran with what he had, ignoring their request, and began a course of intense litigation. The lawsuits were eventually consolidated and heard in a federal district court in Virginia. During the course of the litigation, Westinghouse took its grievances to London’s House of Lords, setting international case law about the discovery process in litigations. (View the U.S. Department of State Advisory notice for “Obtaining Evidence Abroad”)
What really happened in the 1970’s?
Kirby and Westinghouse were caught up in an international trade dispute, during a world revival of the uranium market. Uranium prices had collapsed in December 1959 when the U.S. government placed an embargo on the purchase of foreign uranium for domestic purposes. The embargo came after the nuclear weapons build-up of the 1950s had peaked. In 1959 alone, the U.S. bought 20,000 metric tonnes of uranium for the country’s weapon procurement program, about 61 percent from Canada. Within a week after the embargo, global uranium prices fell by 75 percent. Twenty-four out of the 28 Canadian uranium producers and processors left the business.
Two Canadian crown corporations remained with viable uranium assets to mine and sell. Eldorado Mining and Refining Ltd had stakes in mines at Port Radium, Key Lake and Rabbit Lake. The provincially owned Saskatchewan Mining Development Corporation owned had stakes in Key Lake, Cluff Lake and Down Lake. Before 1942, Eldorado Mining (later re-named El Dorado Nuclear Ltd) had been a privately owned radium company, which in that year was taken over by the Canadian government and made into a crown corporation. During World War II and for the next decade, the company’s raison d’être was to produce uranium for the U.S. and U.K. nuclear weapons programs.
By 1956, both countries looked elsewhere for their uranium. By 1965, Canada’s production plummeted to 3,000 tonnes from a peak of 12,000 tonnes annum in 1959. Canada’s uranium exploration came to a standstill, and only three mines remained operational. Boom town Elliot Lake became a ghost town. Lacking buyers, a self-serving Canadian Prime Minister Lester Pearson announced in 1965 that Canada’s exported uranium would “be used for peaceful purposes only.” Nearly a year earlier, the U.S. government had banned the enrichment of foreign uranium for domestic use, pre-empting any newsworthy value to Pearson’s announcement.
Between 1964 and 1967, more than sixty nuclear reactors were ordered for the U.S. civilian nuclear energy program. Westinghouse’s newly designed light-water reactor created excitement within the industry. During that time, Canadian uranium exploration was taken out of mothballs and production resumed. Hardball shenanigans in Washington kept the uranium ban intact, and global uranium prices reached an all-time nadir of $4/pound. Canada was shut out of the U.S. nuclear fuel cycle market, and Ottawa was forced to stockpile a reported $100 million of uranium during the Nixon presidential administration. By late 1971, Prime Minister Trudeau’s cabinet had reached the end of their rope failing at every step to remove the ban by diplomatic means.
News reports suggest a number of uranium-heavy countries held an initial meeting in Paris in February 1972 to establish a uranium-producer’s alliance, in essence a de facto uranium cartel. Others suggest it was formed in April 1972, after the Canadian government reportedly gave its blessing. Canadian author Gordon Edwards (Canada’s Nuclear History) bluntly wrote, “The purpose of the cartel was to secretly manipulate world uranium prices using a phony bidding system. Hidden quotas were established by representatives from Canada, France, Australia, South Africa and Rio Tinto Zinc (London Stock Exchange: RIO).” Namibia and Niger were also included in the alliance, as was Gulf Oil, at least according to Robert Kirby of Westinghouse.
When the U.S. government re-affirmed its trade embargo in March of that year, a subsequent uranium cartel meeting took place in Johannesburg, South Africa in May 1972. At an Ottawa conference on May 28, 1972, it was reported that Jack Austin, then deputy minister of energy, voiced his concern the cartel could be considered illegal under Canadian law. Nonetheless, the politicians gave the uranium cartel a green light.
The alleged price manipulation was paying off. In 1973, the spot uranium price doubled. By 1976, it doubled again and stayed above $40/pound for nearly four years. It was around that time the alleged cartel disbanded to avoid international anti-trust laws, which Westinghouse was arguing after unleashing a tsunami of litigation. Westinghouse was desperate to escape its liability over the promise of cheap uranium to utilities. In March 1976, the U.S. Department of Justice began investigating possible infringements of U.S. anti-trust laws by the alliance of uranium producers. By mid 1977, a federal grand jury had been formed to pursue the investigations and possibly initiate criminal proceedings.
In a letter dated July 12, 1977, the U.S. Attorney-General wrote to the U.S. District Attorney for the Eastern District of Virginia, explaining the quandary this international episode had caused and discussed invoking immunity to obtain witnesses who would talk about the alleged conspiracy:
“These persons are not likely to come within the personal jurisdiction of the United States courts so long as the Department of Justice continues a sitting grand jury investigation of the international uranium industry; (3) These persons are British subjects and we have determined that it is highly unlikely that their testimony could be obtained through existing arrangements for law enforcement co-operation between the United States and the United Kingdom; (4) The Department of Justice has been largely unable to obtain information from these foreign persons about the subject matter of this investigation…”
By mid 1978, Westinghouse Electric’s complaint against Rio Tinto Zinc in the United Kingdom floundered in that country’s court system. Obtaining evidence in England was markedly different from the U.S. style of depositions.
Conclusion
During this litigious period, Westinghouse settled with several utilities, but continued to pursue the lawsuits. By 1979, Judge Merhige in the U.S. District Court for the Eastern District of Virginia, Richmond Division, ordered Westinghouse and the utilities to equitably resolve their differences. Westinghouse agreed to concessions that ultimately cost the company nearly $1 billion, but locked up the utilities as long-term customers by providing parts and engineering services for up to 25 years. In quiet out-of-court settlements, the uranium suppliers paid Westinghouse nearly $100 million and supplied the company with uranium.
Besides, there was another cartel in the 1970’s, which posed a far greater risk to the developed nations. From the oil embargo, which began 1973 and throughout the decade, the OPEC oil cartel overshadowed the tiny uranium cartel. Saudi King Faisal’s “oil sword” had a far greater impact on the energy climate, Gross Domestic Product, inflation and quality of lifestyles, than an anxious alliance of uranium producers trying to meet production costs and peddle stockpiled inventory at higher prices. Not only was the oil crisis a more serious affair, but another un-related episode tanked the price of uranium.
Just as the decade was coming to a close, on March 28, 1979, a water pump broke down at the Three Mile Island nuclear plant, about ten miles southeast of the Pennsylvania state capital. It was an unexpected event, heightened Hollywood-style, as the accident coincided with the opening of a new movie called The China Syndrome, starring Jane Fonda, Michael Douglas and Jack Lemmon. In short order, many Americans were persuaded that events within the movie were somehow related to the Three Mile Island event. This was a Hollywood PR man’s dream. Fanning the media flames to capture a larger box office gross, a basically nothing episode (in terms of loss of human life, since no one died from the reactor accident) was transformed into an earth-shattering campaign against the entire nuclear energy industry. Ironically, more died in the movie (one, Jack Lemmon’s character) than as a direct result of the Three Mile Island accident (0 reportedly died).
Hysterical commentary from that era bespoke of a nuclear accident, which would melt down to the earth’s core, as one character in the movie suggested. Unable to distinguish what was movie fiction from scientific reality, the movie’s message left a horrifying memory in the collective minds of the general populace. A general panic followed, and nuclear energy was badly tainted by the accident. As the momentum for building U.S. nuclear power plants came to a grinding halt, overflowing inventories for the raw material to fuel those power plants had once again nullified the uranium exploration and mining sector. It took more than two decades to draw down those built-up uranium inventories, about as long as it has taken for the public to once again accept nuclear energy as a safer, cleaner alternative to fossil-fuel powered electricity.
Why is today’s uranium bull market different? Is the current and spectacular rise in spot uranium prices different today than it was in the early to mid 1970’s, when an alleged uranium cartel reportedly bid up prices to an artificial level? Is that same factor occurring during the current steep rise in the spot price of uranium? Will Toshiba sink into the same quicksand, during the balance of this decade, as Westinghouse Electric once did?
(To Be Continued) |
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