Investors Take Note: It's Going to Get Worse Before It Gets Better
By Andrew Mickey
We’re still reeling from the effects of last October deep in the hills of Saskatoon, Saskatchewan. This is where the Cigar Lake mine flood occurred. It was an utter disaster. However, Cameco Corporation (TSX:CCJ) kept putting a positive spin on the situation each time it was asked how bad it really was.
You see, Cigar Lake was expected to account for as much as 17% of the world’s uranium supply. And in an already tight uranium market, hopes were very high the mine would deliver as promised. But it just keeps getting worse and worse.
At the time of the disaster, Cameco was the world’s largest producer of uranium. It has a 50% stake in the Cigar Lake project, and with the news that the mine had been flooded uranium prices soared.
Granted this is not really anything new though. But you should take note of what I’m about to tell you. The Cigar Lake disaster is worse than Cameco ever let on. Now, reports from the disaster area have the first pound of uranium coming out of the mine in 2011.
If you take a look at the chart above, that’s going to be way too late. As it stands right now, the uranium supply/demand gap won’t be closed off until 2020. And it wouldn’t surprise me if the 2011 expectation for the Cigar Lake mine to come back on line is revised back yet again to 2013… if the mine is still viable at all.
The problem is that the process to clear the mine is extremely difficult. The flooding is caused by water flow from an underground source. Tons of special concrete designed to harden underwater is poured down the shaft in successive layers, then other tunnels need to be reinforced, and then the workers can begin pumping out the water.
At every phase of the cleanup, a regulatory agency must approve and supervise each physical effort of the mining company. The news came out yesterday that the repair operation could delay the re-opening of the mine until 2011.
This knowledge means you will now see the price of uranium skyrocket again. This development is a boon to many smaller producers, and a unique opportunity for anyone wanting to make a smart play on this metal market.
When the original incident occurred, uranium prices jumped from $55 per pound to $69 in three months. And they haven’t stopped. A pound of uranium is still pulling in record prices at the current long-term price of $95 and a spot price of $133.
As you can see, there’s still plenty of opportunity in uranium. But the era when everything uranium goes up, up, and up is long over. Now you have to pick and choose your uranium exposure very wisely.
Now, it’s still not too late to get in on my top uranium play. It’s a bit different, but as you’ll soon learn, it’s different because of my in-depth knowledge of the uranium industry. Check out the full story here.
That’s all for now,
Andrew Mickey
Editor in Chief, BreakAway Investor
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