| SUMMARY: TradeTech LLC Chief Executive
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| | reached a point where the cheap stuff has
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| Gene Clark talked with StockInterview
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| | been sold. Now, we have to actually spend
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| about the uranium bull market, where his
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| | some money, some capital, to build new
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| price models show uranium prices heading
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| | facilities, new mines and new mills. That
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| and when to expect the peak of the
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| | was, I think, the earliest signal of the
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| current upward cycle of the bull market.
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| | price needing to adjust.StockInterview:
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| When will "hard" times again hit the
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| | Isn't there a ton of hype across all
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| uranium market, and how long will the
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| | media channels about the "nuclear
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| trough last? And what does the future
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| | renaissance" and the demand for more
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| hold for the uranium price? An industry
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| | nuclear energy?Gene Clark:
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| insider gives us his
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| | First of all, all the hype about nuclear
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| insights.StockInterview: When the
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| | renaissance is really in the United
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| uranium bull market began, did you
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| | States. The Chinese have had plans to
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| foresee $40/pound uranium, now that the
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| | expand for a long time. The Japanese have
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| spot price has risen above this
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| | been steadily adding new capacity.
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| level?Gene Clark: I don't think any of us
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| | Koreans have been adding new capacity.
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| saw $40 per pound coming. We had price
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| | Indians have been adding new capacity all
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| projections at the time that indicated
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| | along, all the way through this, even
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| probably $25 per pound, which would be a
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| | before we started this discussion on
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| long term equilibrium price in constant
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| | nuclear renaissance. I think that phrase
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| dollar terms. But, I think it was a
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| | is really focused more in the United
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| surprise the price went up so high. I
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| | States, which really hasn't ordered a
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| think what's going, the biggest factor
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| | plant since 1976 or something like that.
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| right now, is the advent of the so called
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| | There is a boom. Maybe it's the uranium
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| hedge funds or speculator funds and other
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| | renaissance.StockInterview: Is all of
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| such groups. The price started to go up,
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| | what we've been reading just plain
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| and they came into the market with the
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| | hype?Gene Clark: There is some hype, but
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| express purpose of buying for holding and
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| | there is also some substance. A part of
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| then selling into the market later to
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| | it is certainly a change in public
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| realize the trading profit. In 2005, the
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| | attitude about nuclear power. If I was
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| hedge funds were responsible for
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| | riding on an airplane, ten years ago, and
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| purchasing about 10 million pounds of the
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| | someone asked me what I did for a living,
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| 29 million pounds purchased. I think the
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| | I was guaranteed to have a lousy trip,
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| market is now finally adjusting to the
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| | arguing about nuclear power. When I
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| realities of primary supply and demand.
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| | mention it now, I get a positive
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| It's been a depressed market for 20 or 30
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| | response. There's been a marked shift in
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| years, primarily from the draw down of
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| | public attitude about nuclear power. From
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| excess inventories, and what we call
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| | the standpoint of the utilities that
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| secondary supply.StockInterview: Will
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| | would be ordering nuclear plants. To the
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| the speculators remain active in driving
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| | extent that they need new capacity,
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| the spot uranium price higher?Gene Clark:
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| | looking at nuclear now is not off the
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| I think there is still some room for
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| | drawing boards, partly because of public
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| further speculation activity. Uranium
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| | attitude. The industry has been moving
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| Participation Corporation, for example,
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| | through this trough period, preparing
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| is rumored to be about to come to the
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| | itself for a new era. It remains to be
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| equities market again to raise funds for
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| | seen when the first order comes. But
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| another purchase. They're asking for
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| | when the first actual order of a nuclear
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| authority to buy UF6, as well as U308,
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| | power plant, along with the license
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| and different forms of uranium than they
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| | application does come, I think you'll see
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| were locked into before. Whether it be at
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| | several U.S. utilities following,
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| the 10 million pound level (size of
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| | probably five utilities very actively
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| purchase), I think it kind of depends on
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| | involved.StockInterview: When will that
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| where the market goes. If it tends to
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| | actually happen?Gene Clark: I think it
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| flatten out, then I think there's going
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| | will come within the next five years, the
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| to be obviously less interest on their
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| | ordering process. Of course it will be
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| part. When they were active in the
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| | probably another eight years before we
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| market, they, of course, wanted the price
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| | actually see the first power plant from
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| to go up. Therefore, they weren't too
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| | that process. We're talking probably
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| careful about what they paid for uranium.
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| | about 13 years. That's how long it takes.
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| I think that's a part of it. In the long
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| | You can actually construct one in 48
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| run, it was due for a readjustment to
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| | months, but you have to have been through
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| reflect prices of the cost of new
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| | the licensing. If you don't believe the
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| production facilities. But, the hedge
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| | anti-nuclear people are going to be
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| funds came in and overdrove the market.
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| | psyched up to fight the first plant
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| Eventually, what it's going to wind up
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| | coming through, then you'd be very
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| doing is, if they sell off, it could have
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| | naïve. The first one is going to be more
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| the impact of driving prices back down
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| | difficult and take more time, I
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| below where they would otherwise have
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| | think.StockInterview: One anti-nuclear
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| gone.StockInterview: Did the speculators
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| | group told us they do not believe we'll
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| interfere with the trading efficiency of
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| | have more nuclear power plants in the
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| the uranium market?Gene Clark: In theory,
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| | United States.Gene Clark: That's
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| speculators come in, tend to take the
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| | possible, but given the current
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| risk and smooth out market prices. But,
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| | circumstances, my guess is we will have
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| it never really works out that way. They
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| | more nuclear plants. We need the
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| always come in and only take the risk, if
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| | capacity, whether we're going to build
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| there's an opportunity to make money. So
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| | coal plants (or other types of power
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| some people make a lot of money. It does
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| | generating plants). I just came from
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| tend to upset the market. If you get away
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| | California, moved here (to North
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| from the primary users of uranium and
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| | Carolina) six months ago. They were
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| primary producers of uranium as your
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| | talking in California about building
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| market participants, then you tend to
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| | gas-fired plants for base load
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| introduce more noise than you would
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| | generation, which is the most ridiculous
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| like.StockInterview: With that in mind,
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| | thing you can imagine. The plants are
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| in which direction are your price
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| | cheap to build, but the fuel cost is
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| projections going?Gene Clark: We're
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| | exorbitant. I did a speech a couple of
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| actually updating our uranium price
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| | years ago, having looked at the Energy
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| forecast right now. We haven't decided on
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| | Information Administration's projections
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| a reference case yet. The reference cases
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| | of gas demand. All the growth in natural
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| we're looking at will peak at about $50
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| | gas demand is going to be in the electric
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| to $55 per pound in about three years,
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| | utility sector. We are going to be
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| and will then drop off pretty
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| | importing 60 percent of our gas supplies
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| drastically. It has to do with a selling
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| | by 2020. Does that make any sense? No. We
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| of the speculator reserves, the uranium
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| | have a lot of coal, but there are lots of
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| that's being held (for speculative
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| | complaints about coal burning. In our
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| purposes). I can see it coming back down
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| | state of North Carolina, the attorney
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| to $30, maybe below $30 per pound. Then,
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| | general is actually suing the Tennessee
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| in the long run - out through 2020 -
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| | Valley Authority (TVA) for the damage
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| getting easily back up over $40 per
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| | from coal burning of the TVA's power
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| pound.StockInterview: Are you predicting
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| | plants in the adjacent state, in
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| a down cycle during the course of the
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| | Tennessee. There's going to be continued
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| uranium bull market?Gene Clark: Yes. It's
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| | pressure on coal burning. I think nuclear
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| pretty consistent with everything we're
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| | has as good a shot as any in terms of new
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| doing with the changes in requirements,
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| | capacity.StockInterview: Some critics
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| in different cases of high, low, and
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| | have argued China and India will not be
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| medium demand. Our modeling system is
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| | able to afford the massive nuclear power
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| projecting this. It has to do with the
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| | plant build up they've envisioned.Gene
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| supply and demand balance and the cost on
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| | Clark: If you think the Chinese are going
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| the margin. The way to describe it is
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| | to have any problem financing things,
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| that prices have come to a point now of
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| | you'd better think twice. Let's focus on
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| higher than we would have projected them
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| | India. India is a clear case where, and
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| to be, such that over-supply is going to
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| | it is a good rule of thumb, one percent
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| evolve. The large low cost projects will
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| | growth in gross domestic product requires
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| reach a point where supply then
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| | one percent growth in electricity
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| overshoots demand for a few years, which
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| | requirement. For India to grow
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| causes the price to come back down. Then
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| | economically, it needs electric power.
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| demand growth, in the long run, picks up
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| | Where are they going to get it? They have
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| and puts a lot of pressure on the supply
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| | coal plants there, as well. Once you use
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| market to be able to meet the demand. So
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| | up all your hydro capacity, you really
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| you wind up with pressure toward the end
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| | don't have much to choose from, except
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| of the period.StockInterview: But the
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| | coal, natural gas, and nuclear. To the
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| markets are finicky, filled with
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| | extent that they can have economic growth
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| variables, and can frequently trick price
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| | and export income, coming into their
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| models.Gene Clark: Here's what it would
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| | country, they would be able to finance
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| take to shoot that down: We have a
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| | nuclear power plants. My guess is they're
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| problem with small numbers, and there are
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| | going to get the vendors of the nuclear
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| some very large projects - Cigar Lake,
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| | plant to help finance
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| for example. The expansion of Olympic Dam
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| | them.StockInterview: Are you talking
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| in Australia would be going from about 12
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| | about the French?Gene Clark: Framatome -
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| million pounds of production to over 30
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| | the company that constructs the nuclear
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| million pounds, if they finish. If you
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| | plants. Financing is generally part of
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| shift that out by four or five years, or
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| | the package. The first plants in China
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| if the owner decides, "No, we're not
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| | were basically financed by the French
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| going to expand at all," you have a
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| | government. If the French go into India,
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| drastic effect. Then you would wind up
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| | you'll see the same thing. The Russians
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| with $100 per pound uranium, I
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| | have financed plants for developing
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| think.StockInterview: What are your
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| | countries. That's not unusual for them to
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| estimates on the peak price years and the
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| | do. The United States may, or may not,
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| bottom years?Gene Clark: A lot of things
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| | get involved. I think there have been
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| could change, but here is what we're
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| | some types of guarantees in the past, but
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| looking at. In one case scenario, the
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| | not at the same level as the Russians and
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| speculators are really going to stay out
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| | French do it. I think those are the big
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| of the market and holding onto their
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| | choices. I wouldn't be surprised to see
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| stuff for a long time. If so, then we're
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| | the South Koreans involved in the reactor
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| going to be at the peak by the end of
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| | export market. They've pretty much
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| this year. If they stay active in the
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| | developed their own technology now. They
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| market and buying, then that stretches it
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| | have the capability of building 100
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| out further. Depending on the scenario,
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| | percent of a nuclear power plant in South
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| we see the peak possibly at 2008 or so. I
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| | Korea: the pressure vessels, all the
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| would say we're looking at a trough
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| | steel requirements. They can do it all.
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| around the timeframe of 2011 to 2013.
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| | We really haven't seen them export yet,
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| Then back up after that.StockInterview:
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| | because they've used up all their
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| How do you arrive at your weekly numbers
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| | manufacturing capacity for their own
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| for the spot uranium price?Gene Clark: We
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| | program. At some stage, I wouldn't be
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| get our data from all of the key sources:
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| | surprised to see that happen. And I think
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| the utility fuel managers, sales staff
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| | they would be able to finance reactor
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| and management of uranium producers and
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| | export sales.StockInterview: How are the
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| processors, and uranium traders, brokers
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| | U.S. utilities going to fare in getting
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| and asset managers. Some are, of course,
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| | their "share" of uranium to fuel our
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| more cooperative than others, and whom we
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| | domestic nuclear power plants in the
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| call depends on the type of information
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| | context of the apparent overwhelming
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| we are seeking. Since our price
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| | Asian demand?Gene Clark: In reality, the
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| indicators are a judgment call, we often
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| | U.S. utilities, which tend to wait longer
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| focus on the losers in particular recent
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| | to contract, may be the ones on the
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| transactions, as those will be the next
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| | losing end because the Chinese and the
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| to make offers in the
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| | Indians will contract early. The
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| market.StockInterview: Let's back up a
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| | implication of current group-think is
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| bit. Why has uranium gone up past the
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| | that the Chinese and Indians are not
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| levels of the "cost of production," which
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| | going to be able to find enough uranium
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| would place the spot price between $25
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| | for their new plants. But, they are
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| and $35/pound?Gene Clark: The biggest
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| | committing for supplies way out into the
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| factor, in signaling the market, was when
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| | future. When the U.S. utilities come to
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| utilities went out for long term bid
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| | the market, they're going to look around
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| requests. They found they reached a
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| | say, "Oh blankety- blank, what happened?
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| period in which producers would have to
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| | Where's the uranium?" They'll be the ones
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| build new facilities. Producers building
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| | that sat around. I think that is what's
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| those facilities felt, "I have to make at
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| | going to happen unless things really
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| least enough profit to cover a return on
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| | change in the way contracting is done in
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| the construction costs for these
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| | the United States.James Finch contributes
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| facilities." That was much higher than
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| | to and other publications.
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| the market at the time. Basically, you
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