Wednesday, May 10, 2006

China + Uranium Supplies: An Analysis

Along with other base and precious metals, China picked uranium to stockpile as part of its five-year plan to make sure the country has adequate natural resources to supply its amazing growth. Indeed, the country is building two new nuclear reactors a year for the next twenty years so uranium oxide should definitely be on China's wish list.

The question for uranium investors, then, is to tease out what China's strategy for uranium might be. Yes, they did sign an accord with Australia, but in order to secure supplies within a relatively short window of five years, they had better hope that Australian legislation changes in a hurry to permit more uranium mines.

In fact, it is unlikely that Australian uranium could totally satisfy China's uranium thirst within the next five years, even with BHP Billiton's (NYSE:BHP) Olympic Dam expansion. China will likely adopt a multi-tiered strategy for uranium as they did with oil, with a mixture of buying companies outright and, for others, JVs.

Thus, for uranium oxide producers like Urasia (CVE:UUU), Denison Mines (TSE:DEN), UEX Corporation (TSE:UEX) and near-producers like Paladin Resources (TSE:PDN), sxr Uranium One (TSE:SXR), this announcement by China can only be interpreted as being positive for their respective companies and their investors.
 

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