Posted 31 May 2007 - 06:32 PM
If there was "irrational exuberance" in the sector, a good bit of it has now been quashed, in my opinion. The very late buyers, if short-term oriented, in near the top, have likely been bucked off, and now the momentum of the declines is slowing or stopped, as I review the charts.
Some still have further downside to go, and some have turned back up. The strongest ones have really only gone sideways if they didn't continue to go up, albeit at a slower pace than in the frenetic October to February. One of the most bullish in my opinion is EMU, which is my biggest holding. There was talk of it being bought out by a biggie like Cameco or Areva but nothing for sure on that score yet. It's up 35 or 40% since February.
It's tempting to buy things that are down, like they're "better buys," and it's easy to be essentially counter-trend in our thinking that way. That's a bad emotion for an investor or trader. We want to buy things that are going up, not going down. That said, EMU may itself be ripe for a correction or consolidation now, as most stocks in the sector were in February.
No guarantees of course, but some I like on US exchanges are:
AU AnglogoldAshanti. A play on gold as well as uranium. Methinks the gold sector is looking decent right now, from a risk/reward perspective, so we'll see.
BHP - strong and momentum has taken a breather. Not just uranium, of course, but I like it all.
CCJ - been very strong but this is the Cadillac. Big-capitalization, so I doubt owners will get the percentage appreciation of some of the more risky ones, but I may be wrong there too.
CXZ - had it's high way back in December, on the Toronto exchange; it's only newly-listed on the AMEX. Looking good right here, IMO.
DNN - been relatively strong too, but this is Cadillac Jr. High was 15 and it's now 13.
EMU - it's doubled or a little more just this year alone, and it'd be nice to get it 10 - 30% lower. Yet when I've started figuring how low these things will go in "the next correction" I've usually not gotten my orders filled.
FRG - gone from 15 to 12. Great company, agile management. May go to 11 or 10...I don't know. Wouldn't count on it.
RTP - another big-cap with lots of recent strength. Like EMU I'm wary right here, thinking it may need to go down or sideways for a bit. Big worldwide producer.
URME - one of the riskier ones IMO but has gone from 9.30 in Feb. to 4.75 now, with a spike under 4.50 recently. Lots less risky here than at the highs.
URRE - turning back up nicely.
URZ - May need another visit to 5, closed today at 5.64. Momentum has not yet turned back up on this one, again IMO.
USEG - might be near a low.
USU - one of the strongest this year. I think right here it's going to go down more.
I continue to hold most of my net and gross worth in the sector. For some really scary speculative stuff I bought SAN.V back today. ASX.V too (Yikes). And PXP.V as well as TXM.V and WRI.V. I think they may be going back up. Added to my position in ALS.TO. Watching FSY.TO to add.
Do your own due diligence and I'm not advising anybody to do anything beyond that blah blah blah.
Posted 31 May 2007 - 10:47 PM
Peak Natural Resources, History and Future
By Jack Lifton
31 May 2007 at 04:48 PM GMT-04:00
DETROIT (ResourceInvestor.com) -- The unprecedented rate of increase in the utilization of metals, minerals and natural resources of energy in the 21st century has rendered all plans devised before now for producing these materials obsolete. The world’s industries have been caught completely off guard by the rate at which known reserves are being depleted. Businessmen can therefore no long calculate costs reliably and national planners cannot guarantee the future output of their domestic economies.
Seen in this light the strengthening of activist environmentalism by the global warming alarmists is economically suicidal for those nations which now, or in the near future, will have to depend on imported energy, metals and minerals for the maintenance, of their economies at current levels not to say for any hope of growth. The United States, which has enormous resources of energy and metals for which environmentally friendly extraction and utilization technologies already exist, nonetheless, mostly on account of extreme environmentalism and the canonization of some of the dire predictions of the global warmists, is one of the nations most at risk.
The company that owns and operates ResourceInvestor.com has invited me to speak at its next Hard Assets Investment Conference in Las Vegas, Nevada, on September 10-11 of this year. I was asked to propose a topic, and I have chosen “Peak Metals.” I want to use this article to explain what I mean by the term, ‘Peak Metals’, and why I think it is a subject that natural resource investors must be aware of and follow.
The idea of peak metals is a subcategory, as is the idea of peak oil, of the concept of peak resources. The idea of peak resources, simply stated, is that there is only so much of a resource and at some point during our extraction and use of it we will be at the peak of the supply. After that point, unless the demand subsides, we will simply one day run out of the resource.
The most written about and talked about of all (potentially at their) peak resources is oil. The ubiquitous presence of machines, mainly planes, trains, automobiles and ships, which for their motive power depend on products derived from petroleum (literally ancient Greek for “rock” oil to distinguish it from food oils derived from plants and animals) only really dates from the era after World War II. Prior to that time homes and buildings were heated with coal while steam and electricity were generated, even for most commercial cargo carrying ships and trains, with the heat from burning massive amounts of coal.
I remember well in the early 1950s the regular reports of deaths from London’s world famous “pea-soup” fogs, which today we would refer to as smogs. These were caused like those of Los Angeles after them and Beijing and Shanghai today by the unregulated burning of low quality (high sulfur) coal in myriads of home and commercial furnaces to produce heat, steam and electricity while at the same time rivers of leaded gasoline and diesel fuel were burned, frequently inefficiently, in cars, trucks, trains and planes. Today the air in London and Los Angeles have been mostly cleansed by modern technology of directly harmful smog causing particulate and acid forming emissions, which have now been replaced, however, by very large amounts of guilt rather than conservation.
Futurologists among you need to enlarge your perspective before you accept any dire consequences from peak oil. The exploration for and development of petroleum resources was not caused by commercial demand but by, you guessed it, the search for military advantage. The great naval arms race between Great Britain and Germany in the late 19th century resulted in the development of the steam turbine and the diesel-electric motor for propelling heavy (war) ships at high speeds. This created an impetus for the development of high strength metal alloys to resist steam pressure, high temperature corrosion and the impact of enemy projectiles, but more on this at another time.
The advances in propulsion technology only emphasized the problem with coal as a fuel. It was inefficient for warships, because it required too much of it to produce the heat to produce the steam to turn the turbine blade to turn the propeller or to generate electricity to turn the propeller. The mighty warships of Britain’s Royal navy were during the brief heyday of coal fuelled by sailors literally manhandling sacks of coal to below decks storage near boilers fed by men with shovels when the early coal feeding machinery failed. Sailors of the era were as likely to die of the same black lung diseases as coal miners!
While British, German and American scientists, engineers and inventors, were creating machines to generate electricity and forward motion from steam chemists and chemical engineers from the same countries were developing ways to produce highly energetic, easily pumped and sprayable, liquid fuels, such as kerosene and gasoline, from much more viscous and inefficient, as a direct fuel, petroleum. Two visionary investor/businessmen made the first great resource fortunes of the 20th century, Gulbenkian and Rockefeller.
Mr. Gulbenkian, an Armenian immigrant to Great Britain who spoke many Middle Eastern languages assembled oil fields in what are now Saudi Arabia and its surrounds, modern Iraq, Iran and the Arab Emirates, into the resource base for what would become British Petroleum. At the same time Rockefeller bought up all of his competitors and their resources to form the giant Standard Oil.
The U.S. navy’s contracts for fuel and guaranteed purchases of oil reserves ensured and promoted the massive expansion of the early 19th century oil industry while at the same time the Royal navy expanded its chain of former coaling stations around the world and converted all of them to oil fuelling stations. This guaranteed a steady supply of money to British petroleum and, just as importantly, it guaranteed that if the oil wells owned and operated by British Petroleum in remote places like southern Mesopotamia, modern Iraq, were threatened by local violence or menaced by other imperial adventurers there would quickly be Royal marines landed from oil fuelled warships of the Royal navy to, as the British say, sort things out.
Even without further historical details I think you can see why it was that a major factor causing both of the 20th century’s two great world wars was the need to secure natural resources, principally oil. World War I was fought in part to secure resource rich colonies, which in turn could be protected markets for goods from the home country or other colonies in an imperial preference trading commonwealth, for example. The oil fuelled both cargo ships that carried the trade and the warships that “protected” it.
Oil was the world’s most important natural resource from the beginning of World War I until the onset of World War II. Japan went to war against the European powers, other than Germany and Russia, in 1939 in order to further its openly stated plan to create a Greater East Co-Prosperity Sphere (i.e., Japanese Empire), which was intended to be self sufficient in oil, rubber and the metals necessary for civilization and making war.
Germany did not at first seek non-European expansion, but it targeted Norwegian iron ore mines, Romanian oil fields and Ukrainian wheat lands for immediate incorporation into the Greater German Reich to achieve self sufficiency in the natural resources necessary for expansion of its population and its war machine. Note the pattern.
Note also that Germany began making synthetic liquid fuels from coal using the Fischer-Tropf process early in the war. Without this technological advancement, Germany would have been out of the war perhaps a year and a half before it actually surrendered. I am flabbergasted when I read that some expert says that we could make liquid fuels from coal using a variation on the Fischer-Tropf process, and this is reported as news rather than as history.
The cold war, which began right after the end of hostilities in World War II, was between two great military powers, which were both then mostly self-sufficient in the natural resources required to make war. The U.S. was so rich at the end of the war that it could buy outright whatever natural resources it decided not to bother to develop or to continue producing internally. The cold war foe, Soviet Union, simply denied its people a higher standard of living and focused its economy on producing, at any cost, those natural resources which would make it self-sufficient in war materiel.
The Soviet Union had oil in great abundance, but just producing enough for its own needs required slave labour and enormous resources to make up for its lack of a diversified economy and its lack of production and refining technology. I well remember my own surprise in the 1970s when a friend of mine working at Wright Patterson Air Force Base in Dayton, Ohio told me that upon analysis the lubricant used in a MIG fighter plane brought to Japan by a North Korean defector pilot was automotive grade lubricating oil and, as such, must have severely reduced the life of the high speed engines using it.
Peak oil, as a relative term, first appeared in the U.S. during the Vietnam War. Because of the decline production from the relatively easily extractable fields of Texas and Oklahoma and the startup costs of off shore rigs it became cheaper during that period to import oil from places like Saudi Arabia, the oil of which was then under the firm control of an international group of companies, all American or European owned and operated. West Africa, Central and South America also were growing as suppliers.
As the cry of “We are running out of oil, and we have reached peak production in the USA” began to be heard, the simple reply was “Oh well, we’ll just buy more cheap oil from overseas” where the backward (they were not yet “emerging”) nations produce it but cannot use it.
By 1972, London fog was just a raincoat and American homes were heated by oil as were the boilers at many electric utilities. Now came Arab nationalism and there went cheap oil.
Today, in 2007, the oil peakists are back; only now it’s the world that’s running out of oil, and it may well be running out of easy to recover pumpable liquid petroleum, because of the unpredictable volume ramp up of demand growth. The world today uses 85 million barrels of oil per day. The U.S. uses 25 million of that and the U.S. produces domestically less than half of what it uses.
Russia is today the largest producer of liquid petroleum. It produces more than 10 million barrels per day. Its domestic economy has never recovered from the Soviet emphasis on military production, so that Russia is able to export and sell 70% of its (actually) growing oil production. The Russians under their latest version of a Czar are rapidly nationalizing their natural resources, first and foremost among them oil.
China, the world’s fastest growing economy, is scouring the world for oil resources, not just the oil being produced, but also the reserves and the refineries, which it is buying as fast as it can with its hoard of dollars earned from selling its labour to the U.S., while that labour is cheap.
China, for example, is moving rapidly into the oil business, replacing western oil companies as financiers, with the autocrats of the Middle East, Africa and South America without regard for local politics, unlike the U.S. The purpose is not primarily to make money but rather to ensure that China always has sufficient oil for its domestic needs.
Neither China with its vast resources of (formerly American) money or Russia with its vast reserves of oil cares in the least for the welfare of America. Neither of these nations is a democracy nor does either of them practice free market capitalism as the basis of their economic life. The governments of these two nations decide when any domestic resource will be bought or sold, not the market.
American oil companies have the best and most efficient extraction and refining technology in the world. So, even if we have reached a peak of production in this country of liquid petroleum we can and do inject wells with steam and perhaps soon with carbon dioxide from coal fired power plants, seeking to lock up their carbon dioxide, to get the last liquids out of the existing wells.
In addition, companies like Shell and Chevron have developed processes for extracting oil values from the vast shale deposits in the American west. A lead story on CNBC today, May 31, 2007, was titled “Is there a gold mine in the shale deposits?” The economic value of these processes depends on the price of a barrel of crude remaining above $40. The very fact that the shale oil projects have not been turned on at full blast should give peakists some food for thought about the thinking of the oil companies about the imminence of the end of liquid petroleum supplies.
By the way, the total volume, in barrels of oil, estimated to be locked up in known American shale deposits is 1.5 trillion barrels at $40 per barrel. This amount of oil would supply all of America’s current needs for 150 years. Canada, with 1/10 of our population is currently exporting to the U.S. nearly 2 million barrels a day of oil produced from treating the tar sands of Alberta and the surrounding region. This tar sand deposit is estimated to contain 1 trillion barrels equivalent of liquid petroleum and has been profitable since oil passed $40 per barrel.
Imagine if Americans actually reduced their oil usage by simple conservation for example by buying cars that are one-half of the size and weight of the average ones made and purchased today. In other words, imagine if Americans all gave up cars as status symbols and used them for transportation. On the day that this transformation was finished the U.S. could slow production of domestic oil or export some. We would be self sufficient! Smaller cars made from better materials with engines made from better materials would last longer also, so the number of replacement cars necessary would be reduced. This is the future for the rest of the world as seen, for example, by Renault Nissan and the Indian manufacturer, Tata.
I will not write about peak oil again, because it is not clear to me that there is any limitation on the production of fuel from liquid petroleum extraction or shale or tar sands production in the next two generations. The only possible limitation on use of oil by Americans will come from the price they will have to pay to maintain a lifestyle. Larry Kudlow, the television economist on CNBC, says that even $5/gallon gasoline, long common in Europe and Asia, will not stop Americans from driving, because they are doing so well economically. Is he right?
Now for the grimmer news. We live on the cooled and solid surface of an eight thousand mile in diameter sphere of mostly molten material. The solid skin on which we live is at most 25 miles thick. The deepest mineshafts in the world, which are in South Africa, may go down between one and two miles where unprotected men would rapidly die from the earth’s internal heat welling up from the interior. The few men and machines working at that depth are looking for metals such as gold and the platinum group.
All of the prospecting for and extraction of all known metals is carried on in a narrow zone from the surface itself to within a few thousand feet of the surface of the earth. Almost 100% of mining is done on dry land, so that 70% of the earth’s surface, the ocean floor, has hardly been explored, much less mined. Nonetheless geologists have studied the earth’s crust extensively and have determined the elemental composition of it primarily from the analyses of cores from mining. Simplistic analysis of this data results in determination such as that which appeared in the Wall Street Journal last week under the lead “Earth Audit.” The WSJ article was a brief abstract of an article from last week’s issue of the British popular science magazine, The New Scientist, which had “Earth Audit” as a cover story.
According to the authors if they estimate the total known recoverable amounts in the earths crust of a list of key metals by the current and estimated near future usage they get a lifetime of the production of new metal. The authors realize that this is oversimplified but the results are very interesting. You may remember that I recently published here an article called “Peak Platinum, Perhaps?” in which I pointed out that if new technologies come into use for the production and use of electricity to power vehicles in place of liquid petroleum based fuels for internal combustion engines then the need for platinum group metals could decline and would actually vanish if a cheaper, more available, substitute for platinum were found to use as a catalyst in fuel cells.
Last week in my article on rhodium, I also noted that if platinum production were to decline so would rhodium production since it is only recovered as a byproduct of platinum mining.
The authors of the article in The New Scientist now tell us that if nothing changes the world may have exhausted its supply of new platinum in just 15 years, so either way we are now at peak platinum.
I plan, ResourceInvestor.com willing, to devote one column a month to the subject of peak metals with one metal or one group of metals featured each month.
Posted 07 June 2007 - 05:51 AM
Posted 30 July 2007 - 01:46 PM
Posted 30 July 2007 - 05:25 PM
Posted 31 July 2007 - 03:36 AM
I meant to say 50% correction off the 2005 - 2007 leg. I have no idea if the uranium bull is over for a while. But if money reenters the sector, you'd think they would start with Cameco. Also note that the last big low was the 4.5 year low back in 2002-2003. The stock appears to be heading for another 4.5 year low IMO with extreme right translation. There has been some big selling so far. This could take a while to turn around, we'll see. If it manages to climb back up above $45 quickly, that would give me hope for a faster recovery. Earnings release this week.
BTW, I saw in a recent analyst report a NAV for the stock of ~ 40 CDN. If the $CDN and things improve for its operations, valuation should improve from here.
Edited by SilentOne, 31 July 2007 - 03:45 AM.
Posted 31 July 2007 - 02:56 PM
Posted 09 August 2007 - 03:19 PM
Edited by SilentOne, 09 August 2007 - 03:27 PM.
Posted 12 August 2007 - 10:04 AM
Posted 12 August 2007 - 07:17 PM
I did see that TVA Watts Bar in Tennessee now has plans to finish reactor #2 by 2013. This is amazing to me. I worked on some transformers there in 1995 or 1996, and unit #1 was just about finished. They were to start loading fuel rods right away.
But #2 was not supposed to be finished, even though it was 90% complete. Not enough demand for electricity, it was said. It's just one small anecdote, but times for power and energy in general have changed, and IMO the world picture is still bullish for uranium in the long run. Weapons-grade stocks are being drawn down and there are a lot of nuke plants to be built.
That one is just above me a few miles. T V A is also restarting Browns Ferry a few miles south and west of me in North Alabama.
I have some freinds who are in the power management section and a lot is going on that is not making the media. Watch coal and railroads close. T V A uses a lot of coal still
You two guys take care,
A DOG ALWAYS OFFERS UNCONDITIONAL LOVE. CATS HAVE TO THINK ABOUT IT!!