Looking for the next big energy investment? With the US’ Highly Enriched Uranium (HEU) contract with Russia expiring, Uranium Energy Corporation (NYSE: UEC) is leading the charge to be the next big uranium producer and provider for the US. Currently, the US uses approximately 55 million pounds of uranium annually to power their 104 nuclear reactors. Uranium is a heavy metal which can be used to generate an abundant source of concentrated energy.
UEC currently controls one of the largest databases of historic uranium exploration and development in the country. With access to this immense database, UEC has been able to target properties for acquisition that have been the subject of significant exploration and development by energy companies in the past. UEC has acquired properties that they have deemed beneficial and are located throughout the southwestern US.
UEC has focused its property acquisition program primarily in the south-western states of Texas, Wyoming, New Mexico, Arizona, Colorado and Utah. Historically, these regions have been the most concentrated areas for uranium mining in the US. Uranium Energy Corporation has situated itself in a prime position to capitalize on the world’s overwhelming demand for uranium, for more energy, for cheaper energy and for a cleaner environment.
UEC engages in two different methods of uranium mining, the conventional method and the in-situ recovery (ISR) method.
Conventional uranium recovery involves open pits or tunnels where the surface of the land is disturbed significantly. The uranium ore is extracted through the tunnels and pit mines. The ore is then pulverized and a mixture of acid and other strong chemicals are added to extract the uranium from the ore.
The ISR method for uranium recovery is different and requires much less disturbance in the land than the conventional method. ISR utilizes a series of injection sites where a water solution known as lixiviate is used to absorb uranium as it is pumped through the ore in the ground. A pump, located elsewhere, is used to collect the uranium-rich water and pumps it to the initial processing plant. The initial extraction process involves converting the uranium from a solution into a form that can be transferrable. The removed uranium is then bonded to a resin and the uranium is then stripped away from the resin using a salt solution, eventually converting the uranium into the yellowcake uranium that countries use. A typical ISR mining plant can be seen below:
UEC currently has 26 active projects that are located throughout some of the aforementioned southwestern states of the US and in Paraguay. With UEC’s Palangana, plant in Texas already in its production phase and its Goliad plant ready to reach the production phase in 2014, UEC is in a position to become a significant domestic producer of uranium
H.C. Wainwright & Co., an investment bank concentrated on providing corporate finance, strategic advisory and related services to public and private growth companies, just initiated coverage of UEC and has given it a Buy rating.
H.C. Wainwright believes that UEC provides growth and value for a long term uranium investor and that the company has a great track record of developing uranium ISR projects and navigating the regulatory environment in a timely fashion. They state that UEC is filling a critical need in the United States with their domestic uranium production, something that will be crucial by the end of 2013 when the US’ HEU treaty with Russia expires.
Until the Fukushima disaster in March 2010, nuclear power construction was gaining traction and expanding into the United States. The impact of the crisis in Japan has led to global policy changes and is delaying the development of new reactors. At the moment, nuclear power construction is dominated by China and India. China projected, that by 2020, the country would increase its atomic energy capacity by 8 times while India is projected to increase by 13 times by the year 2030.
Currently, the US consumes approximately 57 million pounds of uranium oxide annually while they only domestically produce 4 to 5 million pounds per year. The difference between the US uranium consumption and domestic production was previously filled by the HEU Treaty with Russia. The HEU Treaty is a program that converts highly enriched uranium from decommissioned and dismantled atomic warheads from Russia into low enriched uranium that was fit for nuclear fuel rods.
The HEU Treaty officially expires at the end of 2013 and the Russian government has made it clear that they will not renew the program. Due to the standpoint of the Russian government, UEC is poised to be the next big producer and provider of uranium for the US.
UEC’s CEO, Amir Adnani, explains that 1.5 billion people in the world are still without electricity and government and policy makers are very focused on finding an energy source that is sustainable, secure and clean. Interview can be viewed here: http://video.cnbc.com/gallery/?video=3000066249