re: another uranium star!!!!! Feature StoryDate: February 22,...

re: another uranium star!!!!! Feature Story
Date: February 22, 2005

Investors Looking To Invest In Uranium Hopefuls Should Ignore Australia.

By Our Man In Oz.

It’s awfully hard to pretend that the world is not changing when it comes to serious matters like global warming, the Kyoto Protocol on greenhouse gas, and the fact that uranium company shares are going through the roof. But pretend is just what’s happening in Australia today where everyone can see the bleeding obvious but the political leaders are choosing to ignore it - which is an astonishingly clever trick because it’s like sharing your morning shower with an 800 pound gorilla.

In a normal world, Australians would be shouting in the streets about the second coming of uranium as a wonder fuel, if only because just about everyone else is, including the darkest of dark green environmentalists. Like St Paul on the road to Damascus they have had an enlightening experience and seen, golly gosh, that burning coal and oil causes atmospheric pollution, blots out the sun, and raises the temperature.

At the same time, and who would ever have forecast the coming together of the Greens and the markets, investors can sniff a boom commodity. Uranium prices have doubled, and the price of uranium shares performed even more strongly. Out at the speculative end of the market you only have to whisper the magic word and your share price doubles or better. Australian-based Murchison United said it had appointed consultants to have a look for uranium claims in Africa (a sort of we’re thinking about it announcement) and has doubled from A5 cents to A10 cents. Deep Yellow has acquired a brace of pre-loved uranium tenements from Paladin Resources and watched its shares soar from A1.9 cents to a recent high of A7.5 cents, a 294 per cent gain over 28 trading days. Nice!

Then there’s Paladin itself, an Australian company developing a small uranium mine in Namibia with a share price that has gone critical, an appropriate description for a stock which was A8 cents less than a year ago and is now A$1.18 (a 1,375 per cent gain for anyone without a calculator). And, of course there’s the big one itself. Xstrata’s raid on WMC Resources, a move which started out last year as an attempt by Xstrata to add a nickel division and expand its copper operations but which has become a highly-contentious uranium-focused takeover in the eyes of the market, and some critics.

At this point a reasonable man might be encouraged to call out something like “game on”, which would be understandable, but wrong. Australia, despite sitting on an estimated one-third of the world’s uranium resource, and having its outback scattered with more potential uranium mines than beer bottles in the backyard of the Crossing Inn at Fitzroy Crossing (and believe your man in Oz that’s an awful lot) is showing no appetite for a revival of the great uranium debate that was argued, and lost, in the 1970s.

Back then, when the first of the Arab-induced oil shocks sent the price of crude through the ceiling, Australia adopted what it called the Three Mines policy. The socialist left, and the embryonic Green Movement, successfully argued that uranium was bad because it could be made into bombs, and there was a waste disposal problem etc etc - we all remember those argument. In any event, new-mine uranium development in Oz came to an abrupt halt. Ranger, Olympic Dam and Nabarlek were the chosen “three mines”. Yeelirrie, Kintyre, Koongarra, Westmoreland, Ben Lomond, and countless other prospects were hung out to dry.

Roll forward 30 years and the Greens are now awfully close to admitting a truly horrible mistake and admitting that they played a role in the greenhouse gas dilemma. Most of Europe is looking enviously at the French and their nuclear industry which accounts for 78 per cent of electricity production, and the miners of the world are rushing about looking for the next generation of mines, an urgency aided by an imminent end to re-processing of weapons grade material.

Meanwhile, back in Australia, the home of some red hot share movements, there is nothing happening at the political level, a point being missed by many over-keen investors. There is no debate about rolling back the Three Mines policy (despite Nabarlek closing in 1988); no change in policy from the left; and no effort to raise it as an issue from the right. Because of its federal system, under which the Commonwealth holds most of the levers of power, but the States have a big say in the use of land, kick-starting a uranium debate after a 30-year break will be all but impossible for many years. Federal Opposition Leader, Kim Beazley, says “our policy stands”. The State Labor Leader in Western Australia, Geoff Gallop, says there will be no uranium mining in WA while he is in power. On the right, the Federal Environment Minister, Ian Campbell, and the Industry Minister, Ian Macfarlane, says nuclear power is not even on the government’s radar screen.

Given the state of the world, and its hysteria about greenhouse, how can Australia be so out of step? Easy really. Australia is also littered with coal, and loaded with natural gas. It already has clogged ports trying to ship this stuff to China, the economy is booming, and unemployment is down to 4.4 per cent, and painful labour shortages have already emerged in the resources sector. In other words, this is about as good as it gets. The two big mines still operating (Ranger and Olympic Dam) plus a small in-situ leaching operating at Beverley in South Australia, are filling export orders. There are no local nuclear reactors, and if the uranium industry was developed to its potential the issues of waste storage and transport come up again.

That’s why Australia is playing a game of let’s pretend there’s no uranium boom, and why anyone buying shares in an explorer with uranium-rich tenements in Australia will be waiting an awful long time to see his company generate a shekel in sales revenue - if ever. You will do far better to find a company exploring for uranium elsewhere.