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2013/08/20

The Single Best Investment Opportunity Today

The Sovereign Investor

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The Single Best Investment Opportunity Today

By Jeff D. Opdyke, Editor of Profit Seeker

Dear Sovereign Investor,

I love it when Wall Street doesn't pay attention.

For investors, it's the best time to strike.

Today, there exists a commodity with an impending supply crunch that will catapult it into a years-long price upswing … yet investors are paying little attention because of preconceived notions that are seriously out of date.

But if you understand the underlying fundamentals, you will understand why this commodity is my favorite commodity today, and the closest to a sure thing I've seen in years. In fact, it has already entered the most-dramatic growth phase in its history, the market just hasn't responded yet … meaning huge opportunity awaits us.


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I've written quite a bit about the profit opportunities in uranium, and those opportunities – the greatest the industry has ever seen – are the reason I've put my Sovereign Individual and Profit Seeker readers into uranium stocks in recent months. I fully expect we will see share prices double, triple, maybe even rise fivefold.

The public still suffers from a media-fueled perception that the 2011 tsunami-induced Fukushima nuclear-reactor disaster sounded a death knell for the nuclear-power industry. As I wrote in the weeks following that disaster, the death of nuclear was wildly overhyped and that the industry would emerge bigger and stronger than before.

And that's precisely what has happened, where environmentalists and concerned citizens forced the country to shutter its entire nuclear-power fleet, Japan has begun quietly restarting just about every nuclear plant in the country. Moreover, at least 71 new nuclear plants are under construction somewhere in the world today, and another 484 are in some stage of planning. That exceeds the number of nuclear facilities under construction or consideration before Fukushima ever happened. It is an unparalleled level of nuclear-plant construction.

But here's the opportunity: The existing 437 nuclear reactors that exist consume on an annual basis about 175 million pounds of uranium. Yet, the world's existing uranium mines only produce about 145 million pounds a year. The world has papered over that 30-million-pound gap with a U.S./Russia agreement to turn weapons-grade uranium into industrial uranium – and that agreement ends this year. Russia will stockpile that uranium for all the nuclear plants it's now building.

So, we have a supply crunch that already exists, and which will dramatically worsen with the christening of each new reactor.

A Way to Play Uranium

Given the supply-demand fundamentals that are now taking shape, and given that it takes seven to 10 years to permit, license and build a new uranium mine, I am quite certain that uranium has already entered an explosive-growth phase. Demand will begin to ratchet higher from here, and prices must follow suit.

It's a quintessential Sigma event, in which a company, a country or a commodity that was in a slow-growth phase begins to experience rapidly ramping demand that can last years or decades. Tap into an investment in this high-growth phase, and watch your portfolio explode higher.

With uranium, the industry has quietly moved into this fast-growth stage two.

The early part of this up-cycle has been highly overlooked because, in the wake of Fukushima, nuclear energy is non-grata in many eyes. But the people in the know – the utilities and the governments that didn't overreact – realize that in a world that wants to be more green in dealing with carbon footprints and whatnot, nuclear is the only salvation for "base-load" power. And, so, nuclear is in a quiet renaissance, which means that uranium is about to cross the Sigma-event horizon and break out into a multi-year upswing … which leads me to Energy Fuels.

U.S.-based and Canadian-traded Energy Fuels (Toronto: EFR) is the largest conventional uranium producer in the U.S. The company supplies 25% of the uranium produced in the U.S. and it operates the only uranium mill in America. The mill, ideally located in the heart of the Four Corners region (parts of Arizona, New Mexico, Colorado and Utah) where uranium is mined, is where the uranium ore is processed into what is called "yellowcake" before it is converted into fuel.

The company will sell nearly one million pounds of uranium in 2013, and it's locked in under contracts at an average realized price of $58.75 per pound – the spot price of uranium today sits around $35.

The company reported its first revenues last year from its mill and its two producing mines. Energy Fuels currently has a number of mines on standby that can ratchet up production as the price of uranium improves. And it has a bundle of development projects underway – including one of the largest and highest grade uranium-development projects in New Mexico.

That makes Energy Fuels – a producing miner with the added sweetener of high-grade prospects – an ideal play on rising uranium prices. And though I never buy a stock based on the possibility that it might get taken over, I think there's high likelihood that Energy Fuels is target for a larger uranium producer like Cameco.

But even if a takeover never develops, Energy Fuels has a strong positive correlation with the spot price of uranium – 86.3% to be exact. That means that as uranium surges higher, this stock will move right along with it.

At just C$0.20 a share, Energy Fuels is priced like a risky, penny-stock junior miner. But unlike junior miners, Energy Fuels has real production to support itself. It also has more than 755 million shares outstanding – a very large number – which helps explain the share price.

The shares are a buy up to C$0.30. This is a stock that, once uranium prices race to $70 or $80 a pound – which they will – could see its price rise to between C$5 and C$7 a share, a price level the company has seen before.

Until next time, stay Sovereign …

Jeff D. Opdyke

P.S. Uranium is just one of the sectors ready to surge in the coming months. To learn more about stocks and sectors that are on the cusp of breaking out, click here.

TODAY'S EDITOR

Jeff D. Opdyke

today's editorFor his Profit Seeker subscribers, Jeff is always looking for companies in position to benefit from the rise of a growing global middle class.
Click here to learn more
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