Copyright 2006 Equitrend, Inc.

Approximately 75% of fund managers do not beat the S&P 500 year in and year out. How can a basket of 500 hundred stocks beat the majority of actively managed mutual funds? The people who manage these funds are, for the most part, brilliant people. They are highly educated and have access to the most advanced information and decision support systems in the world. So why is it that they do not outperform the S&P 500?

A Quick Test:

Here’s a very crude test of management performance: Let’s compare the domestic-equity mutual fund performance supplied by Morningstar against the S&P 500 index for one, three, five and ten-year periods, looking back from April 30, 1995. The S&P 500 index is a fair comparison for large, domestic companies.

Our results:

Of the 1,097 funds Morningstar covered for the one-year period, 110 beat the S&P 500, while 987 fell short. Results ranged from 46.84% to -32.26%, while the S&P 500 attained a 17.44% return.

During the three-year period, the S&P 500 returned 10.54%, while results in the funds varied from 29.28% to -15.02% compounded annually. Of the total 609 funds, only 266 beat the S&P 500.

Shifting to the five-year period, of 470 funds, 204 beat the S&P 500. Results ranged from 27.35% to -8.51%, while the index racked up 12.62%.

At ten years, only 56 of 262 funds managed to beat the index, and results varied from 24.77% to -4.06% compounded annually against 14.78% for the S&P 500.

The fact that most funds do not beat the overall stock market should not be surprising. Since the majority of money invested in the stock market comes from mutual funds, it would be mathematically impossible for the majority all of these funds to out perform the market.

The implied promise held out to investors in actively managed mutual funds is that in exchange for higher fees (relative to index funds), the actively managed fund will deliver superior market performance. There are a host of barriers to fulfilling this implied promise.

Some of the problems are:

The larger a mutual fund gets, the more difficult it becomes to deliver exceptional performance.

Although fund size runs counter to performance, fund managers have a strong motivation to let the fund grow as big as possible because the bigger the fund gets, the more money the fund managers make.

Most skillful mutual fund managers are hired away by hedge funds, where their financial rewards are greater and there are few restrictions on investment techniques.

By law mutual funds are supposed to be conservative, which in theory limits their potential losses. This conservative stance generally limits their ability to use arbitrage, options, or shorting stocks.

Can You Do Better?

Because of the general inflexibility and restrictions of most mutual funds, your investment capital is not properly hedged against market fluctuations. In most cases, if you compared the beta of the equity exposure held in actively managed mutual funds to an equal equity exposure to the S&P 500 index, your reward/risk ratio would be less rewarding than purchasing an identical equity exposure to the S&P 500 index. So, the answer is, you can do better and beat the S & P 500 by using an effective stock market timing system.

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commodity trading book

When you are interested in investing in the stock market one of the first things you will need is a reliable and affordable stockbroker. At one point in time, a stockbroker was seen as a very high priced person that was extremely hard to understand. In todays world, stockbrokers have become much different, they have begun to make their services cheaper to obtain and in such a way that is easier to understand. This is an extremely wonderful change for the simple reason that you will not be able to trade in any way, shape, or form without a stockbroker.

One of the major rules within the stock market is that no person is allowed to trade within the stock market unless they are a certified stockbroker. A stockbroker, within the United Kingdom twelve million investors trade in the stock market, performs every trade that occurs and each one has enlisted the services of a stockbroker.

So you are probably now wondering, what exactly can a stockbroker do for me? There is a wide range of abilities and services that any stockbroker can offer you, at the same time there are also various ranges of fees that will be collected from them. Typically, a stockbroker will charge a commission, a set fee, or some combination of the two. In regards to the services a stockbroker can offer you, there are three basic levels that include only execution, portfolio management, and advice.

When a stockbroker only deals with the selling and buying of particular shares, per the instructions you give them, this is generally called execution only or in softer terms dealing only. With this type of service, they do not offer you any type of advice on any action you want perform. Typically, investors that are experienced or novice in investing will use this type of service. Execution only is cheaper and extremely efficient the fees the stockbroker charges can range anywhere between 20 to hundreds of pounds, this will depend on the specific stockbroker you choose.

Portfolio management is extremely detailed and the most expensive type of service performed and dealing with advice is typically a little more expensive than execution only, because the stockbroker will offer advice and views on what is happening within the stock market. The stockbroker at this level of service will also take the time to explain anything you may not understand very well.

Within the portfolio management service, you can separate these into two other categories these are advisory and discretionary. When under the advisory category, the stockbroker will create a proposal of a portfolio for you; however, he or she will not take any action without express permission from you. Within the discretionary category, your stockbroker will completely run all aspects of your portfolio and will give you reports as needs on how the portfolio is working.

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commodity trading platform

Energy Guru Bill Powers Forecasts Uranium Shortfall in Three Years. Bill Powers focuses on investment opportunities in the Canadian energy sector, mainly independent oil & gas companies and now uranium companies. We talked with him and he thinks uranium could reach $100/pound this decade.

Interviewer: A lot of newsletters cover oil and gas, but you picked uranium, which hardly anyone was covering until recently?

Bill Powers: I feel the uranium market right now is the worlds most unbalanced commodity market. In a sense, the world, through the nuclear power industry, consumes approximately 172 million pounds of uranium per year, and the world only produces about 92 million pounds of uranium per year. The supply deficit is made up through above-ground inventories, which are being worked down pretty quickly. Those numbers were supplied by Uranium Information Center. A lot of my information comes from the U.S. Department of Energy (DOE) or the Nuclear Regulatory Commission. For example, I discovered from them that the U.S. produced, through the 1980s, about 43.7 million pounds of uranium. And by 2002, the U.S. only produced about 2.34 million pounds of uranium.

Interviewer: Where is uranium being produced in the United States?

Bill Powers: Wyoming. There is also a uranium facility in Nebraska. I think there are two in-situ leach plants in Wyoming and another one in Nebraska. There are a couple of phosphate farmers in Florida who produce uranium. I believe there is a facility in Texas that also produces uranium. For the most part, the uranium industry in New Mexico has just about been wiped out. The very low prices that weve seen, for about twenty years, have pretty much wiped out the entire U.S. uranium industry. To go from over 43 million pounds to less than 2.5 million pounds, it has really only allowed the most productive, highest margin and most efficient mines in the country to continue operating in that environment.

Interviewer: So that makes the U.S. a net importer of uranium?

Bill Powers: Absolutely. According to the DOE, US imports have gone from 3.6 million pounds per year in 1980 to 52.7 million pounds per year in 2002. A lot of it comes from Canada, but a significant amount is coming from the Russians, through a program called HEU (highly enriched uranium): the megatons to megawatts program. Its where the United States Enrichment Corporation, as well as its partner in Russia, took highly enriched uranium and broke it down into lower grade uranium that could be marketed to nuclear power companies throughout North America and around the world. This has been one of the reasons weve had lower prices. All of this uranium has cluttered the market the past few years. And the US Enrichment Corporation has a lot to do with why weve seen low uranium prices here in the States.

I had a conversation with them about the fact that since 1998, when they became a public company (after being a company that was owned by the U.S. government), their long-term inventories of uranium had declined. When they became a private corporation, the U.S. government gave them 7,000 tons of enriched uranium and 50 tons of highly enriched uranium. They have been selling about 6 million pounds of uranium into the marketplace every year since 1998. According to my conversation with them, they have about three to four more years of selling. Its because the US Enrichment Corporation wants to get out of the uranium storage business, and they want to be in the processing business.

Interviewer: How long will it be, do you think, before USEC is going to stop being a factor on the selling price pressure of uranium?

Bill Powers: I would probably say in about three years. For the uranium they are now selling, the cost of the uranium to them was zero. This has really made that company look very profitable. They are selling about $100 million worth of uranium every year, and they intend to do this at no matter what price. This is an extremely bullish scenario right now because uranium prices have touched twenty-year highs, despite the fact that USEC is dumping more than three percent of the worlds uranium consumption onto the market place. When this dries up, we should see markedly higher uranium prices.

Interviewer: How high is high when you say that?

Bill Powers: I would say up to $100 per pound. Before the end of this decade, uranium will probably be $100/pound. The Russians are going to be holding back some of their output from the megatons to megawatts project. Their (the Russian) uranium is going to be needed for internal consumption. Russia has a growing nuclear power industry. They need to have uranium supplies available. Theyre not going to be selling as much as they had in previous years. It appears it is going to be very important to factor in reduced Russian supplies as well as when USEC gets out of the business.

Interviewer: How can a sophisticated investor benefit from uraniums rising price?

Bill Powers: The most leveraged investments are the Canadian juniors. I believe Cameco (NYSE: CCJ) has other businesses out of uranium exploration and production, and it is a very safe way to play uranium. But I think there are far better opportunities out there. One of my favorite companies is Strathmore Minerals (TSX-V: STM). I really like their business model of acquiring a great deal of very prospective uranium properties at bargain basement prices. Theyre able to do this because, right now, uranium has gone through a twenty-year depression. The prices for some of these pretty far advanced projects are very cheap.

I think they are well leveraged for that. Another safe way to play uranium is Denison Mines (TSX: DEN). They produce about 1.3 million pounds per year. They have properties are in McLean Lake, Saskatchewan, which is part of the Athabasca Basin. What I like about them is they are able to use their cash flow from their existing production to further expand some of their properties. With UEX Corporation (TSX: UEX), Cameco was the shareholder. UEX was founded several years ago with Pioneer Minerals. Both of the companies put in properties. Its look like they are rapidly advancing some of their properties in Athabasca. I believe they have about eleven properties they have an interest in.

Interviewer: What about other energy factors, such as crude oil, and what do you see happening there?

Bill Powers: I would say crude oil is heading much higher. We have reached the worldwide production peak of crude oil, or we are very close to it. This is not very well recognized. As demand continues to rise, and world production starts a downward slope, were heading for much higher crude oil prices. I see much higher prices later this decade, if nothing goes wrong. What I mean by that is the natural market equilibrium price of crude oil should be $50 within the next eighteen months. And probably over $100 by the end of this decade if nothing goes dramatically wrong. That would come from the natural decline of existing reservoirs, limited new discoveries, and increasing demand. However, if a country, such as Saudi Arabia, were to have a regime change

Interviewer: Are you looking for a regime change in Saudi Arabia?

Bill Powers: Yes, there is a body of evidence that supports this. Terrorist incidents are becoming more violent and closer together in Saudi Arabia. Right now, were seeing those attacks targeted to the oil workers. I believe it will not be too long before those attacks are focused more on the royal family. I believe that will be the next stage in Saudi Arabia. Theres a very good chance, which history supports, is when there are sudden regime changes in oil-exporting countries, oil exports from those countries drop significantly.

Regardless of what were to happen, as far as the political situation, a lot of their fields, especially Ghawar, which is the biggest oilfield in the world it produces between 4 and 4.5 million barrels per day there is evidence that this field could decline relatively soon. Saudi-Aramco has been injecting substantial amounts of water into injection wells to push the keep production flat What this has done is it keeps production flat, but its sort of an illusionary fountain of youth. If you keep injecting water, the amount of water you produce, along with the oil, continues to rise. As the water cut continues to increase, the amount of oil produced can fall dramatically. If that were to happen, if Ghawar were to go into a permanent and irreversible decline well, it could happen relatively quickly.

There are other fields in the Middle East, such as Yibal in Oman, where they had a lot of water flooding and horizontal well drilling. Yibal has gone from 250,000 barrels per day in the late 1990s to about 80,000 barrels per day now. If we were to get that type of decline in Ghawar, the world is going to be seeing higher prices just on that. Right now, there is not any excess oil production supply anywhere in the world. A relatively small reduction in availability of supply will lead to an exponentially higher oil price.

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commodity trading account

Investors who bought during the top of the frothy commodities rally are now panicking or kicking themselves. Neither activity helps an investor or trader think straight. Below are a few tips in dealing with the current market shakeout.

1. If you believe you invested in the right stock(s), then turn off your computer and do something enjoyable. Exercise is a great stress reliever. The market has already begun its shakeout. If you didnt get stopped out, or failed to place earlier stops, your best opportunity lays ahead in picking up additional shares at a much lower price. Most of the experts weve interviewed tell us the next rally should start sometime between late July and Labor Day. In an attempt to interview the uranium guru James Dines in late May, we were told, Call back in a couple of months. That was a helpful clue that the markets were less than exciting. Mr. Dines is often eager to be interviewed, but recently he was not.

2. Do you believe the fundamentals which engendered the commodities boom have changed? If they havent, then the bullishness is only taking a breather. We dont see any fundamental change in the markets. Russia still wants nuclear power, and its oil production may be peaking. China hasnt announced the end of its nuclear expansion program. India wants to spend $40 billion on new nuclear reactors. If you are invested in uranium stocks, spot uranium jumped another dollar to $45/pound this past week. Hardly the end of the bull market.

3. If you worry about your investment in one stock or another, then stop watching the ticker and focus on the company fundamentals. Is the story still true or has it changed? See #7 A, B and C below.

4. Theres an old clich that the time to buy is when you feel like dumping everything you own in the category. At the exact moment you want to sell your entire portfolio of uranium stocks, it may be wiser to add to your holdings. This applies mainly to the retail investor. Most of the professionals did dump at the top and are now slowly accumulating the shares of the nave who waited until the washout to start selling off.

5. Has a major, earth-shattering event occurred? The last bull cycle in uranium ended with Three Mile Island (TMI). The last decent rally in the precious metals markets fell off a cliff after it was discovered Bre-X Minerals had perpetrated a fraud about its gold discovery in Indonesia. Something significant and newsworthy always transpires, and it is also far-reaching. That is the trigger. As with TMI and Bre-X, those were the first shots which launched a later chain reaction to end those bull markets.

6. Before pulling the sell trigger, ask yourself: Do I really want to give up these shares to a bargain basement hunter, who will make a killing on my losses?

7. Since most of you will still panic; please review the following basics for any of the uranium companies youve read about:

A) How much cash does the company have in the bank? During shakeouts, cash is king. Prescient companies, which completed their financings during the recent and robust rally, are sitting pretty. They can weather the short-term storm and are well-oiled to move forward when this correction bottoms and reverses. Those companies are the strongest ones to check out when this correction looks gloomiest.

B) Has the management remained the same? Unless the top financial and/or technical people blew out the door, in recent weeks, the story probably hasnt changed much. Companies which built a strong technical team are resilient and powerful. They will move forward.

C) Have the properties come up dry? One of the reasons you invested in a uranium company was because it announced it had pounds in the ground. Some companies have more than others. Some went to the expense and trouble of completing a National Instrument 43-101, which independently confirmed the quantity and quality of the uranium resource. If that changed and the company announced, Sorry, nothing there after all, or announced, Hey, we were kidding, thats one thing. If you havent heard that, or read a news release announcing that, then the uranium didnt walk away or move onto a competitors property. Its still there.

Next time, when the markets are racing higher, and you feel like you won the lottery, consider this bit of biblical advice. The old joke goes, When did Noah build his ark? The answer of course is: Before it began to rain.

Reviews

commodity trading brokers

Greed and fear are the major players in the stock market. These two emotions are the
driving force behind almost all market participants – Institutional mangers, stockbrokers,
Investors, traders and yourself.

You might be saying to yourself that greed and fear will never get in the way of my trading,
but believe it or not they will be. It is not something to be ashamed of. It is something you
have to admit to, come face to face with, If you are to become a successful stock trader or
investor.

What do greed and fear look like in the stock market trading arena?

You have been watching a particular stock for some time now. It has set up perfectly, so you pull the trigger. You bought it at the perfect price and now it is moving higher just as you thought it would.

Now greed steps up to the plate and says to you, this is going to be a rocket ship. So you buy some more shares. Or your stock moves a few points and goes passed the price that you decided to get out. Greed tells you this baby is going higher tomorrow so you hang on.

When stocks make strong moves to the upside greed from all the cumulative market participants joins the move.

Stock prices usually fall faster then they go up, and when this happens, fear now steps up to the plate.

Lets look at the example above, where your stock went through your get out price and you held on because greed was by your side. The next morning the stock price gaps down. Their is heavy selling all morning long. Greed is telling you to hang in there the price will come back. The price keeps going down, now you get a knot in your gut, and your knuckles are turning white. Fear is now by your side, but by now it is too late, your nice profit has turned into a loss.

Everyone goes through this until they have mastered the ugly faces of greed and fear. Master this and you are well on your way to becoming a successful stock trader.

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commodity trading company

Summary: Sprott Asset Management uranium expert Kevin Bambrough talked with us about the second leg of the current uranium bull market. He sees a massive nuclear build up heading our way with the environmentalists leading the charge. He said many price projections may be inaccurate because people are underestimating future demand.

StockInterview: Price forecasts on spot uranium are widening. Some insiders have predicted uranium prices may drop back into the $30/pound range; others, such as yourself, continue to suggest $50/pound or higher. Any comments on the forecasts others are making?

Kevin Bambrough:
There are many people forecasting uranium prices now. Its important to consider their track record of forecasting prices. Look at the contracts that have been written by many companies in the industry, over the last number of years. Anyone who had ceilings, or had signed fixed-priced contracts, has been punished. Very few people in the industry predicted what has happened. Looking forward, I think that in our view, the cost of production of current producers isnt going to be as relevant as it has been in the past. It will be the more marginal, much higher cost producers who will be setting the price.

StockInterview: Isnt there a sense of false optimism that projects in the pipeline will ensure an ongoing stream of uranium oxide for the nuclear fuel cycle?

Kevin Bambrough:
There are a lot of people looking at the supply situation going forward while underestimating future demand. They are very optimistic that mining projects are going to go as planned. We had recent news that Cigar Lake had a problem. There was a flood the. Theres a couple million pounds shortfall to most peoples models for at least two years. All because of one mines six month delay.

StockInterview: Would that have the kind of impact the McArthur flooding (Athabasca Basin, Cameco) had on the spot uranium price a few years ago?

Kevin Bambrough:
I think it could. It was forecast to go up to 18 million pounds of production. That would have been ten percent of the worlds current consumption. Cigar Lake would need to ramp up over a three year period, once it gets started. Now, there is a six month delay. What if its delayed a year? That really changes the production profile for the next decade. There are many projects that could see delays. The mining business is always full of delays. Remember that when we bring on new nuclear plants, they take on average about 1.6 million lbs when commissioning. What will happen, if in a decade, we bring on just 10 or 20 reactors each year? Thats another 16 to 30 million pounds per year of demand just because of the start up.
StockInterview: Does this mean the current uranium bull market still has strong legs?

Kevin Bambrough:
I think were entering the second leg of the bull market here. It is going to move away from a supply shortage story, where we focus on the fact that we only get about 60 percent of the current consumption from mines, while the inventories are being worked off. Now, were moving into a situation where were seeing an explosion in demand growth. Just a couple of years ago when we first started investing in uranium, we could see probably about a dozen nuclear facilities being planned for construction throughout the world. Now weve got well over 100 being planned. It seems there are new additions and talk of more additions every day.

StockInterview: How you envision this nuclear buildup rolling out?

Kevin Bambrough:
I dont think its unreasonable to think, looking ten to twenty years out, there are going to be a lot of countries that will be trying to get in the position that France is in, with a much higher percentage of their power coming from nuclear generation. We could see a move to where maybe 50 percent of global energy production or more could eventually be supplied by nuclear. There is nothing else that can really step up and fill the void and take care of this problem that were having. France produces 78 percent of their electricity from nuclear. Why isnt that reasonable for others? Look out a decade or two, and it doesnt appear like were going to have the oil and the gas in order to handle our needs. Obviously we can do more with coal, but if were going to keep using coal weve got to put in place technology to take care of the carbon dioxide sequestration. If you want to have a stable, secure supply of electricity, it seems that youre going to have to go with more nuclear or eventually with these new coal technologies. I think there is going to have to be a balance of both, because the oil and gas just isnt going to be there.

StockInterview: What do you think is the catalyst for this anticipated growth in nuclear energy demand?

Kevin Bambrough:
The most interesting thing is the fact that some environmentalists are leading the charge to go more nuclear. Its because they realize nuclear energy is the only practical alternative and because of the situation with the carbon dioxide (CO2) levels. There have been some recent reports about CO2 levels reaching 381 parts per billion, just spiking out of the range that has kept the world in a relatively stabile environment for the last 400,000 years. If you look at the work of people like James Hanson, the correlation between CO2 levels and temperature is undeniable. Basically, mankind has increased the CO2 levels beyond a level that hasnt been seen in over a million years. We are just starting to see the weather impacts. There are problems with droughts across the world as well as elevated hurricane activity. Going nuclear on a mass scale is starting to become recognized as one of the only ways to have a real impact. I think what were going to see is an unprecedented build out in nuclear capacity throughout the world in the coming years and decades. Id equate this to what happened when we went from using oil for just lamps and home heating to using it as a transportation fuel. Whats going to happen with the people who have the higher quality uranium reserves and lower cost production? They are going to be able to reap massive profits over the coming decades.

StockInterview: Looking ahead, do you think well see more deals between a small uranium producer, such as Uranium Resources (OTC BB: URRE) and the Japanese multi-national conglomerate, Itochu Corporation?

Kevin Bambrough:
I have no doubt that its going to continue to happen. More importantly, Ive heard that some of the major builders of nuclear facilities around the world, companies such as Areva are quite concerned about the availability of supply going forward. When these companies are talking to countries and utilities that potentially could contract to build nuclear facilities, theyre basically being told that buyers want uranium supply assurances, or they arent going to give an order to buy a nuclear facility. Ive heard they are looking to do joint ventures or at least contract with emerging producers to try to get future supply. Then, they will be able sell their nuclear technology to countries and ensure supply.

StockInterview: Will the Chinese be satisfied with the uranium they plan to buy from Australia, or will they have to tap into uranium production from another or other countries?

Kevin Bambrough:
I think that the Chinese will probably look elsewhere as well. Countries have strategic oil reserves. Why shouldnt they have strategic uranium reserves to supply their nuclear reactors? It makes sense to have a good stockpile of uranium considering the relative cost of nuclear power versus anything else. I dont think that the nuclear power industry should operate on a just in time basis, considering the costs and the risks of making sure you can secure supply. Dont get me wrong. There is plenty of uranium in the world, but were just going to have to pay up for it. I believe were going to consume lot more than what were consuming nowadays a decade or two out. The world is waking up to the reality of peak oil production, and how it is going to affect all aspects of energy production.

StockInterview: How much of a factor will Russia play in the nuclear build up?

Kevin Bambrough:
Looking at some of the recent statements made by Russian officials, its completely clear to me that weve been correct in what weve been thinking for a long time: the HEU agreement (to deliver highly enriched uranium and have it blended down) is probably not going to be renewed. The Russians are planning to make nuclear technology a key export for them, really as a value added product to go with uranium production. They desire to be able to offer a complete solution, not just uranium, but the actual building and technology around the nuclear facilities themselves. They will also have growing uranium demands domestically and have voiced concern about being able to meet their own needs beyond 2015.

StockInterview: But nuclear energy critics claim all of these power plants wont secure financing and most plans are just pipe dreams never to be built.

Kevin Bambrough:
Two years ago, the critics said there would never be any more nuclear plants built in the U.S. People used to say nuclear was over for Germany, and that many countries would exit nuclear power. Now were seeing the exact opposite. Were seeing proposals being done, incentives put in place, and a multitude of projects moving ahead. If what the leading scientists from NASA, the NOAA and from many organizations around the world are saying about global warming, and the acceleration weve recently seen continues, people are going to be begging to have more nuclear facilities and cut CO2 emissions. The environmentalists will be leading the charge.

StockInterview: How long will it take before the proposed nuclear build up impacts the uranium mining companies?

Kevin Bambrough:
The actual build of all this takes time. I think the increase in the positive perception, of the nuclear industry is going to continue to accelerate. All demand for uranium can come from just the planning stage for nuclear power plants, as companies look forward and try to contract future supply. Ultimately, thats what will keep driving the uranium price higher.

StockInterview: How seriously is the nuclear industry taking the global build up?

Kevin Bambrough:
I think the industry is starting to take it very seriously. Thats why the uranium price keeps pushing higher. People are going around trying to contract for uranium, and they are finding it more difficult. People are also starting to realize that as you have problems, such as the McArthur River flooding, which got the uranium bull market jump started, and now a problem at Cigar Lake, you really should have a good build up of inventory in order to protect yourself in this environment. Especially when the relative cost of having to switch off a nuclear facility to go to something else in a pinch is multiples higher.

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direct access trading

Perhaps the White House flap as to whether or not Saddam Husseins government tried to buy uranium ore from the country of Niger was the best publicity Niger has had about its uranium production for more than two decades. How many geologists know that the Republic of Niger ranks fourth, behind Canada, Australia and Kazakhstan, in terms of the quantity of uranium annually produced worldwide?

Named after the river which runs through it, Niger produces nearly four times the uranium currently mined in the United States. More uranium is mined in Niger than in Russia, South Africa, India, China, Brazil, Ukraine Namibia or Uzbekistan. In fact, if you added up the total amount of uranium mined in South Africa, China, India, Brazil, Czech Republic and the Ukraine for 2004, Niger would trump the combined production of those six countries. Until Dr. Jon North came along, uranium mining was pretty much monopolized by Cogema and a consortium that includes Spanish and Japanese interests.

This is the fourth largest uranium producer in the world, raved an excited Dr. North into his cell phone during our taped interview. Niger has never had an entrepreneurial and nimble junior mining company ever explore for uranium. And this is the first one. North was talking about Northwestern Mineral Ventures (TSX: NWT; OTC BB: NWTMF). Imagine if Australia, Canada and Kazakhstan having never had a junior company looking for uranium. Its absolutely absurd to even consider the concept.

The Republic of Niger supplies about 9 percent of the worlds annual production to meet the growing need for uranium to fuel the worlds nuclear reactors. According to the IAEA-NEA Red Book of 2003, the sub-Saharan Niger ranked #4 behind Australia, Kazakhstan and Canada for total uranium reserves. In the 2005 update, it fell to seventh place. It may be that this country is under-explored. In 1981, Niger produced a peak of 4366 tonnes of uranium. As with others, mining production plummeted with the spot price of uranium during the 1980s and 1990s. The slump hit the country hard because Niger depends upon uranium for more than 30 percent of its exports, more than $100 million. Five percent of the countrys tax revenues come from uranium mining.

Dr. North discussed how he came to obtain concessions for both his company, North Atlantic Resources (TSX: NAC) and Northwestern Mineral Ventures, in which he serves as a director and helps guide geological colleague and president Marek Kreczmer. I traveled around the Sahara Desert twice on field trips with a local Niger geologist before I decided to apply for permits. When I did this in 2004 with the minister of mines, he said to me, You know, youre the first person to ever do this, and the only people who have done this are energy companies or governments. So, I told him I would like to apply for two permits. North obtained two for Northwestern Mineral Ventures and another for North Atlantic Resources.

Salt Tectonics the Key to Uranium in Niger

North explained, We selected the projects based on the geologic ingredients that we felt were important in the control and distribution in the uranium, such as, but not limited to, northwest trending fault corridors, northeast trending fault corridors, and inliers of stratigraphy that are popping up through younger parts of the stratigraphy. According to North, the salt structures are the key to finding uranium in the Republic of Niger. The northeast and northwest faults, and the inliers there, are all salt-related structures, North remarked. An inliers is an area or formation of older rocks completely surrounded by younger layers. For decades, the oilfield people have understood, emphasized and completed research on salt, the deposition and then the movement of salt through stratigraphic sequences, North pointed out.

Salt is very common but it doesnt last very long in stratigraphy and it escapes, North explained. When it escapes, it forms walls and diapirs (an anticlinal fold where the salt has pierced through the more brittle overlying rock). Oil exploration geologists pay attention to these because they tend to form permeability barriers to oil and gas deposits. North is interested in them for a different reason, We noticed that the salt diapirs, where they escaped through the sequence in Niger, coincided with the distribution of uranium deposits.

Uranium in the Republic of Niger is mined by open pit because of the sandstones. These are redox deposits, North noted. They tend to be associated with reduced layers and structures, such as the former salt diapirs and faults in the stratigraphy. At the time, we didnt really understand why we were doing that. We just knew there was an association with uranium deposits and these structures in Niger.

That appears to have made Dr. Norths job a walk in the park, or in this case, a walk in the desert. How do you inexpensively explore concessions of 2,000 square kilometers each? Thats about 24 miles and 30 miles each, both in the desert. If you do the target selection carefully, and you stick to the salt diapirs, those really narrow down the search, North revealed. When we do our first multi sensor mag and radiometric survey, which will happen in the next couple of months, we will map out those structures and features, and look for radiometric anomalies associated with them. When we have that data, well have at least 50 drill targets on those projects. There appear to be no scarcity of drill targets on the concessions.

Without that data, North believed he could have picked out ten high quality drill targets, just from the geology map. They show up as circular bulls eyes on geology maps, North noted excitedly. In the desert they show up as low hills. Theyre topographic anomalies where you have about maybe 50 meters of relief. Its just a low rise because the desert is flat as on a plate. North explained that you can drive anywhere by pointing your vehicle and stepping on the gas. The only things in your way are these very low hills, and those hills are related to either faults or inliers (exposed older rocks surrounded by younger rocks). Initial targeting comes straight from a topography map.

A Vote of Confidence on Current Progress

But what about the availability of drill rigs for this project? North conceded there is a global shortage. But he shot back, Theres a drilling company in West Africa called West African Drilling services and surprise! surprise! Ive been working with them for the past four years. North has already discussed moving a rig in with them. Quite honestly, its not a big issue, he said. Neither is labor or the cost of drilling. We pay an all-inclusive cost of approximately US$150/meter, North told us. Labor costs are very low, about one-third the cost of North America. We use all local people because thats what we do in Mali. There are lots of highly trained, skilled geologists in Niger.

Clearly, Northwest Mineral Ventures is excited. We are very pleased to be one of the first North American companies to acquire exploration permits in Niger a country that has not been explored using modern techniques and has, until now, been one of the world’s best-kept uranium secrets, Northwestern’s Chairman and CEO Kabir Ahmed told Reuters in wire service story published in March.

Northwestern Mineral President Marek Krezcmer, who has been a geologist for more than thirty years, seventeen of which were spent exploring in Africa, was also enthused about the companys prospects in Niger, We know there is uranium mineralization on the surface, based on the work which was done by Jon North. I think we can succeed. Were going to find uranium. Kreczmer is familiar with geology in Africa and doing business on this continent. Ive worked in Tanzania, Zambia, Swaziland, Ethiopia and Eritrea, said Kreczmer. He was optimistic about developing Northwestern Mineral Ventures uranium concessions, Our business plan there is to discover mineralization, and (have) probably someone like Cogema become a partner of choice.

At Cogemas seven open pit uranium mines which feed the Arlitt mill, the grades have run 0.3 percent with 2003 production at 1126 tonnes. At the two open pit uranium mines which feed the Akouta mill, grades have run at between 0.4 and 0.5 percent with 2003 production at 2017 tonnes. Krezcmer explained that Northwesterns exploration licenses are valid for a period of nine years, three-year licenses which are renewable three times. The countrys mining act, according to Krezcmer allows Northwestern to apply for a mining license, which can be granted for between 25 and 70 years.

We were concerned with any political situations, but both North and Kreczmer assured us the country is stable. When I first went to Niger in November 2004, and that was during the last election, it honestly looked like a lot of fun. Everybody had a little piece of rag tied around their wrist or tied to the antenna of their car to represent their political affiliation. Kreczmer added, My experience working in Africa is that because this country relies so heavily on foreign aid, the World Bank has great influence.

The Republic of Niger has Norths vote on confidence. He has worked for the past few years as Chief Executive of North Atlantic Resources, which hopes to develop its Kantela gold property in Mali. Niger and Mali and demographically and geographical identical, he told us. North feels Niger is going to become more aggressive in developing its uranium properties. He talked about how the President of Niger told his minister of mines, Get out there and advertise Niger as being open for business. We want people to come in here and invest. We want to give them mineral rights, and we want them to do what Mali is doing. From the looks of it, the first to jump on the Niger bandwagon were Northwestern Minerals and North Atlantic Resources, but they wont be the last.

My experience with Niger is that its a peaceful, democratic country with no civil unrest. Lets put it this way. They have less civil unrest than France. Ironically, French is one of the countrys official languages. You got to be fair, right? asked North. The French recently stormed the Bastille in France, and they didnt do anything like that in Niger.

Just how exhilarated is Dr. Jon North? The excitement in the market is we do the airborne survey, he enthused. We find some radiometric anomalies that correlated within inliers. We show the model. If that doesnt excite people, then I dont think their hearts are beating.

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Its time to rewrite the history books. In Situ Leach Mining (ISL), or Solution Mining, was not first commercially started in Bruni, Texas in 1973 by Westinghouse, a consortium of oil companies and others. The birthplace of ISL was never South Texas, as some have claimed. It was begun in Wyoming, about 16 years before an ISL operation was started in Texas. Why there has been a whitewash over the true history of ISL is not our concern. This series is an in-depth investigation into how and why ISL mining came about, how it has been tested over a period of nearly 50 years, and why this type of uranium mining will play an important role in providing U.S. utilities with the raw fuel to power nuclear reactors for the next few decades.

In this modern era of uranium mining, extremely skilled engineers, hydrologists and geologists establish ISL mining operations. Most insiders compare an ISL operation to a water treatment plant. Its really that simple to understand. However, as with every modern industrial operation, the roots of ISL mining came about in a less genteel or sophisticated manner. In 1958, Charles Don Snow, a uranium mining and exploration geologist employed by the Utah Construction Company, was investigating a Wyoming property for possible acquisition for his company. During the course of that visit, he discovered a new method of uranium mining and helped pioneer its development into the modern form of ISL.

Since 1957, R.T. Plum, president of Uranyl Research Company, had been experimenting with a leach solution on his property at the Lucky June uranium mine. They mixed up the sulfuric acid solution and just dumped it on the ground, and soaked it through the material and collected it in a little trench at the end, Charles Snow told StockInterview. It wasnt very scientific. Snow added, They were just learning how, and I observed it and thought that the application could be made through some of the ore that we had in the Lucky Mc mine. The company was mining uranium this way because it was below the grades miners were used to, when mining. As Snow noted, It was not worth mining. But it was practically at the surface. He explained what they were doing at the Lucky June, There was an area where uranium leached out to the surface in a small area, and it had a clay under-bed. These people put solutions onto the surface, collected the solution, and ran it by resin beads to absorb the uranium.

While they only recovered about $3600 worth of uranium, roughly 600 pounds, Snow was impressed. He later wrote an inter-office memorandum in July 1959, with the subject header: Recovery of Uranium from Low Grade Mineralization using a leach in place process. In his conclusion, Snow recommended, From the preliminary information available, it appears that it will be possible to treat very low grade mineralization for recovery of uranium at a large net profit. He explained the process to his bosses, encouraging them to consider this as an option:

In brief, the process introduces a leach solution onto the surface of the ground and allows the solution to percolate down through the area to be leached. The solution is then recovered from wells and circulated through an ion exchange circuit with the barren solution being returned to the leach area. Recovery of the uranium is made by stripping from the ion exchange medium.

He wanted the Utah Construction Company to try this method of mining where there was low grade mineralization. Snow succeeded in convincing his bosses. That began yet another innovation for Utah Construction Company, the same company which helped construct the Hoover Dam, decades earlier, before it got into the uranium mining business.

Utah Construction Becomes the
First Commercial ISL Miner
Newspaper reports, through the 1960s, illustrate that ISL mining was in full bloom more than a decade before anyone in Texas began a commercial ISL operation. On June 18, 1964, the Riverton Ranger newspaper reported, The Shirley Basin mine is on a standby basis. The timbers are being maintained and the water pumped out. Total production comes from solution mining. Between 1962 and 1969, ISL was the only method producing uranium at Utahs Shirley Basin Wyoming. Later in that same article, under the section entitled, Gas Hills Solution Mining, it was reported, The Four Corners area is mined by solution mining techniques similar to those employed at Shirley Basin. Credit for this new mining method is also reported in that same article, Lucky Mc introduced the heap leach process of recovering values from low grade ores in 1960.

Charles Snow explained how his company made the transition from underground mining to solution mining, The underground mining at Shirley Basin was very expensive, and we were having a lot of heavy ground problems. The sandstone aquifers containing the uranium were uncemented and brittle, supported with timbers. In some places, it was too heavy to hold with timbers, said Snow. We had to use steel sets underground, and it was even mashing the steel sets. So the expenses were getting very high.

Water was flowing into the open drifts at prodigious rates. Snow recalled, Barney Greenly said, Lets try solution mining over here. They did a test, and it did operate quite well. They got some pretty good results. So the underground mine was shut down, and they went to a solution-mining program to produce the allocated pounds in the Shirley Basin area. The procedure was tested for a few years before a full-scale commercial production began. This fulfilled 100 percent of Utahs Shirley Basin uranium production allotment from the AEC.

There were problems at first. We started out initially using sulfuric acid, and we had some reaction with carbonates in the formation. Sulfuric acid plus calcium carbonate produces calcium sulfate, and this plugged up the formation. Calcium sulfate is gypsum, which was insoluble in the leach solution. It tended to plug up the formation and reduce the transmissivity of the fluid from the input hole to the output recovery hole.

To prevent interference with the porosity of the formation, Snow switched to nitric acid, but admitted, We were reluctant to use nitric acid because it was much more expensive than sulfuric. But they did, because the nitric acid solution did not form gypsum. Unlike present-day ISL methods used in Texas, Nebraska and Wyoming, Utah Construction did not use a carbonated leaching solution in their solution mining. Nitric solution was used during the 1960s and continued until the Lucky Mc switched over to open pit mining.

It all started as a heap leach experiment. We had quite a bit of low grade in Lucky Mc, Snow told us, so we thought we would try a heap leach experiment. Results were good on the test, and Utah pioneered ISL mining. Snow wrote in an August 2, 1960 memo, The favorable results of the heap leach project and other research indicate that the process can be successfully applied in many of the low-grade areas to recover much of the mineralization. Later in his report, Snow calculated reserves from random samples obtained from previous drilling at Lucky Mc, The estimated reserve for the block is 147,000 tons @ 0.0361 percent U3O8, or 106,616 pounds of U3O8. He estimated the program would cost $111,471. Using a value of $6/pound for U3O8, the anticipated returns were calculated as follows:

50 percent recovery: 53,318 pounds: $208,377
25 percent recovery: 26,654 pounds: $ 48,453

That was just the start. By the end of the decade, Shirley Basins solution mining operation was producing U3O8 at comparable levels to present day production at any of the major U.S. ISL facilities. In a paper presented by Ian Ritchie and John S. Anderson, entitled Solution Mining in the Shirley Basin, on September 11, 1967, at the American Mining Congress in Denver, Colorado, these Utah International executives explained the success of the Shirley Basin solution mining operation. In a summary explaining the companys activities, we discovered the Shirley Basin operation not only filled the Atomic Energy Commission (AEC) allocation requirements from 1962 through 1969 but we learned of the sizeable commitments into the future Shirley Basin was to fill:

In 1968 sales of uranium concentrate were made to purchases other than the AEC. One of the first sales was to Sacramento Municipal Utility District with a minimum of 950,000 pounds to a maximum of 1,100,000 pounds of uranium concentrate in 1971. Additional contracts were signed with General Electric Company and with Nordostschwerzerische Kraftwerke A.G. (Baden, Switzerland). The contracts called for delivery of 8,000,000 pounds of concentrate to GE between 1968 and 1975, and 500,000 pounds of concentrate to NOK commencing in July 1969.

Conclusion

The single reason solution mining stopped, well before the first commercial ISL operation began in Bruni, Texas in 1973, was because of the improved market forecast for uranium in the 1970s. Utah Construction switched to open pit mining because they needed to produce a lot more uranium. The nuclear renaissance of the 1970s demanded massive quantities of uranium to fuel the rapidly growing nuclear power industry.

Don Snows initial field tests, begun in the late 1950s, resulted in continuous production achieved by late 1962. Subsequently, production in the underground uranium mine was shut down by May 1962. The underground mine was maintained in a standby condition until 1965, when all underground operations were written off. Millions of pounds were mined by Utah Construction through its ISL operations in Shirley Basin. It wasnt heap leaching.

Sufficient evidence confirms that Wyoming, not Texas, first pioneered commercial ISL mining. Not only were well fields designed as early as 1960, but the entire concept of an ISL water treatment plant can trace its roots to Utah Constructions pioneer work. Everything from injection wells to production wells were pioneered in the early 1960s. We challenged Charles Don Snow that some have claimed it was heap leaching, not ISL mining. Snow shot back, No, we drilled holes in the ground and the material had never been mined. We got our ideas, certainly, from heap leaching, which came from the copper industry. Snow explained that after the solution mining experiment was successful, A recovery plant was designed and put into the hoist house, where they had had the underground mine. That was designed by Robert Carr Porter and Ian Ritchie. Snow added, In fact, Ian Ritchie and J.S. Anderson have a U.S. Patent on the well completion procedures that we used at Shirley Basin.

Snow pondered if his friend Jack Bailey may have exported the ISL technology to Texas. Jack Bailey was the Shirley Basin project manager for the underground mine when we switched over to solution mining, Snow said. He later went to work for Chevron, and Chevron had operations in Texas. I believe they even experimented with solution mining. Now, whether or not Jack was directly involved, I dont know. As it is with history, many of the old-timers are gone. We were told Jack Bailey had had a stroke a number of years back, and did not trace this further. There may have been others. Some of the people from that area (Shirley Basin) had gone to Texas, Snow recalled. There is documentation, it was published information, and a lot of people who went to Texas, came from the Wyoming area. So, Im sure there wasnt a paucity of information being transferred. Ironically, the Westinghouse-led consortium, which included U.S. Steel and Union Carbide, among others, was called Wyoming Minerals. Now we know exactly why they chose that name.

While there have been a number of ISL operations built and operated in Texas, there may be little future for uranium mining in that state, unless there are new discoveries. By a few, Texas has been inaccurately called the home of ISL mining. Perhaps that came about because ISL operations continued, during the uranium depression of the past two decades, with small amounts of production occurring in Texas. According to Energy Information Administration figures published in June 2004, uranium reserves in Texas stand at 23 million pounds of U3O8 based upon $50/pound uranium. By comparison, Wyoming and New Mexico reserves, using that same benchmark, reach as high as 363 million and 341 million pounds, respectively.

This may explain the rush by junior exploration companies, such as Strathmore Minerals (TSX: STM; Other OTC: STHJF), Energy Metals Corporation (TSX: EMC), UR-Energy (TSX: URE), Uranerz Energy (OTC BB: URNZ), Kilgore Minerals (TSX: KAU) and others, to Wyoming. The large quantities of pounds are in Wyoming, not Texas. It may also explain why Uranium Resources (OTC BB: URRE) has looked beyond Texas into New Mexico to develop its ISL operation, and Strathmore Minerals has quickly been advancing through its permitting stage on one of its properties in that state. It is fitting that the big past uranium producing states may again become tomorrows leading U.S. producers. In any event, the entire world of ISL mining owes a debt of gratitude to Charles Don Snow for his pioneering efforts in bringing a heap leach experiment into full fruition as modern-day in-situ mining.

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More investors are now inquiring about Coalbed Methane exploration companies. Just as uranium miners were flying well below the radar screen in early 2004, coalbed methane exploration may very well be the next very hot sector later this year and next. Historically, coalbed methane gas endangered coal miners, resulting in alarming fatalities early in the previous century. This is the fate suffered today by many Chinese coal miners in the smaller, private coal mines. Typically, the methane gas trapped in coal seams was flared out, before underground mining began, in order to prevent those explosions. Rising natural gas prices have long since ended that practice.

Today, coalbed methane companies are turning a centuries-long nuisance and byproduct into a valuable resource. About 9 percent of total US natural gas production comes from the natural gas found in coal seams. Because natural gas prices have soared, along with the bull markets found in uranium, oil, and precious and base metals, coalbed methane has come into play. It is after all a natural gas. But because it is outside the realm of the petroleum industry, coalbed methane, or CBM as many industry insiders call it, is called the unconventional gas. It may be unconventional today, but as the industry continue to grow by leaps and bounds, on a global scale, CBM may soon achieve some respect. Please remember that a few years ago, there was very little cheerleading about nuclear energy. Today, positive news items are running far better than ten to one in favor of that power source.

CBM is the natural gas contained in coal. It consists primarily of methane, the gas we use for home heating, gas-fired electrical generation, and industrial fuel. The energy source within natural gas is methane (chemically, it is CH4), whether it comes from the oil industry or from coal beds.

CBM has several strong points in its favor. The gases produced from CBM fields are often nearly 90 percent methane. Which type of gas has more impurities? No, it isnt the natural, or conventional, gas you thought it might be. Frequently, CBM gas has fewer impurities than the natural gas produced from conventional wells. CBM exploration is done at a more shallow level, between 250 and 1000 meters, than conventional gas wells, which sometimes are drilled below 5,000 meters. CBM wells can last a long time some could produce for 40 years or longer.

Natural gas is created by the compression of underground organic matter combined with the earths high temperatures thousands of meters below surface. Conventional gas fills the spaces between the porous reservoir rocks. The coalification process is similar but the result is different: both the coalbed and the methane gas are trapped in the coal seams. Instead of filling the tiny spaces between the rocks, the coal gas is within the coal seams.

One of the past problems associated with CBM exploration was the reliance upon expensive horizontal drilling techniques to extract the methane gas from the coal seams. Advanced fracturing techniques and breakthrough horizontal drilling techniques have increased CBM success ratios. As a result, a growing number of exploration companies are pursuing the early bull market in CBM. Market capitalizations for many of these companies mirror similar early plays we mentioned during our mid 2004 uranium coverage (June through October, 2004). Industry experts told us there would be a uranium bull market. Now, we are hearing the same forecasts about CBM.

SEVEN TIPS BY DR. DAVID MARCHIONI

We asked Dr. David Marchioni to provide our subscribers with his 7 Tips to help investors better understand what to look for, before investing in a CBM play. Dr. Marchioni helped co-author the CBM textbook, An Assessment of Coalbed Methane Exploration Projects in Canada, published by the Geological Survey of Canada. He is also president of Petro-Logic Services in Calgary, whose clients have included the Canadian divisions of Apache, BP, BHP, Burlington, Devon, El Paso Energy, and Phillips Petroleum, among others. He is also a director of Pacific Asia China Energy and is overseeing the companys CBM exploration program in China.

Our series of telephone and email interviews began while Dr. Marchioni sat on a drill rig in Albertas foothills, the Manville region, until he finished outlining his top 7 tips, or advices, on how to think like a CBM professional.

1) COAL SEAM THICKNESS

Is there a reasonable thickness of coal? You should find out how thick the coal seams are. With thickness, you get the regional extent of the resource. For example, there must be a minimum thickness into which one can drill a horizontal well.

2) GAS CONTENT

Typically, gas content is expressed as cubic feet of gas per ton of coal. Find how thick it is and how far it is spread. Then, you have a measure of unit gas content. Between coal seam thickness and gas content, you can determine the size of the resource. You have to look at both thickness and gas content. Its of no use to have high gas content if you dont have very much coal. The industry looks at resource per unit area. In other words, how much gas is in place per acre, hectare, or square mile? In the early stage of the CBM exploration, this really all you have to work with in evaluating its potential.

3) MATURITY LEVEL OF THE COAL

This is the measure of the stage the coal has reached between the minerals inceptions as peat. Peat matures to become lignite. Later, it develops into bituminous coal, then semi-anthracite and finally anthracite.

There is a progressive maturation of coal as a geological time continuum and the earths temperature, depending upon depth. By measuring certain parameters, you can determine where it is in the chemical process. For instance, the chemistry of lignite is different from that of anthracite. This phrasing is called coal rank in coal industry terminology.

4) PERMEABILITY

When you are beginning to think about CBM production, this and the next item must be evaluated. How permeable is the CBM property? You want permeability, otherwise the gas cant flow. If the coal isnt permeable at all, you can never generate gas. The gas has to be able to flow. If it is extremely permeable, then you can perhaps never pump enough water. The water just keeps getting replaced from the large area surrounding the well bore. The water will just keep coming, and you will never lower the pressure so the gas can be released.

5) WATER

In a very high proportion of CBM plays, the coal contains quite a lot of water. You have to pump the water off in order to reduce the pressure in the coal bed. Gas is held in coal by pressure. The deeper you go, typically the more gas you get, because the pressure is higher. The way to induce the gas to start flowing is to pump the water out of the coal and lower the water head of pressure. How much water are we going to produce? Are we going to have to dispose of it? If its fresh, then there may be problems with regulatory agencies. In Alberta, the government has restrictions on extracting fresh water because others might want to use it. One could be tapping into a zone that people use as water wells for farms and rural communities. Both water quality and water volume matter. For example, Manville water is very salient so nobody wants to put it into a river; this water is pushed back down into existing oil and gas wells in permeable zones (but which are also not connected to the coal).

6) FUNDING

To be able to access land and do some initial drilling, i.e. the first round of financing, it would cost a minimum of C$4 million. This would include some geological work and drilling at least five or six wells. In Horseshoe, that would cost around C$4 million (say 1st round of finance); in Manville, about C$9 million. This is under the assumption that the company doesnt buy the land. The land in western Canada is very expensive and tightly held. Much of the work is done as a farm in drilling on land held by another for a percentage of the play. (Editors note: During a previous interview, Dr. Marchioni commented about his preference for Pacific Asia China Energys land position in China because comparable land in western Canada would have cost $100 million or more.

7) INFRASTRUCTURE

The geology only tells you whats there, and what the chances of success are. You then have to pursue it. Can we sell it? Gas prices are local, meaning they vary from country to country, depending whether it is locally produced and in what abundance (or lack thereof). How much can we extract? How much is it going to cost us to get it out of the ground? Are there readily available services for this property? Will you have to helicopter a rig onto the property at some incredible price just to drill it? Will you have to build a pipeline to transport the gas? Or, in China as an example, are there established convoys for trucking LNG across hundreds of kilometers?

One addition, which we have mentioned in previous articles, and especially in the Market Outlook Journal, Quality of Management Attracts PR, it is important that the CBM company have experienced management. This would mean a management team that includes those who have gotten results, not only a veteran exploration geologist but a team that can sell the story and bring in the mandatory financing to move the project into production.

There are two primary reasons why many of these coalbed methane plays are being taken seriously. First, the macroeconomic reason is that rising energy costs have driven companies in the energy fields to pursue any economic projects to help fill the energy gap. Coalbed methane has a more than two decades of proof in the United States. The excitement has spread to Canada, China and India, where CBM exploration is beginning to take off. Second, the fundamental reason is that exploration work has already been done in delineating coal deposits. There are, perhaps, 800 coal basins globally, with less than 50 CBM producing basins. In other words, there is the potential for growth in this sector.

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Interviewer:
Before we talk about the potential of uranium shortages and the steep price rise in that energy source, could you explain how you got started with this idea, and what is the philosophy behind Strathmores acquisition program of uranium properties?

Dev Randhawa:
Several years ago, Strathmore Minerals started with the idea of acquiring properties out of the money at very cheap prices in the belief that the uranium prices would recover so that our assets would be worth more. No one was paying attention to the commodity we chose: uranium. Strathmore Minerals is basically a call on the price of uranium. Thats how we started the company. This strategy is similar to what Lumina Copper (AMEX: LCC) used and what Silver Standard used. For example, the chairman of Silver Standard Resources (NASDAQ: SSRI) is on our board of directors. Our first step was to buy every pound we could for as cheaply as possible. The second step is to buy property that we think we can put into production. We are actively looking for those.

Interviewer:
But uranium has a powerful environmental stigma. Why, then, are you enthusiastic about this type of energy source?

Dev Randhawa:
As with most people, when I began investigating uranium, I thought this was bad stuff. I thought of Three Mile Island and everything else. The more homework I did on this, the more I realized that nuclear power is clean and safe. That is primarily what uranium is used for now. It should be known that no one ever died at Three Mile Island. No one actually died at Chernobyl. Yes, people got sick. Compare that to coal or the oil spills in the fossil fuel sector, and the damage it has done to the environment. The problem is no one is championing nuclear energy. Frankly, the greenies have done a great job of burying the story. As I did homework, I found out France relies on nuclear power for about 78 to 80 percent of its electricity needs. I realized that somebody did a great job lobbying and built a very unhealthy picture toward uranium, when really its needed. We dont talk about the cost of coal. We dont talk about global warming. But, look at what coal has done. Global warming is a function of fossil fuels. That is why you are seeing a growing positive response to nuclear power. For example, one company has applied to put a new nuclear reactor into the US.

Interviewer:
To what do you attribute the recent, steep price rise in uranium?

Dev Randhawa:
Since last year, the price of uranium (U3O8) has climbed back steeply back up. At one point, the price was moving up about $1/pound per month. Uraniums price is more in line with the price of oil as opposed to other commodities. For a long time, weve only produced on the average about 90 million pounds, when we needed 140 (million pounds). Theres been an imbalance for a number of years. This extra came from foreign sources, or from internal US inventories. Since the 1980s, weve been using more uranium than we have been producing in the western world. As a result, the extra that weve needed has come from Russia, the US government or inventory that utilities had.

Interviewer:
But most investors, let alone the consumer, dont know that uraniums spot price has nearly tripled, since bottoming three years ago. Why is that?

Dev Randhawa:
Uranium only makes up one percent of the cost of running a nuclear reactor. The biggest factor in why uranium prices can go up, even more rapidly than gold, is that uranium is insensitive to its use. Uranium prices can go much higher. In casual conversations with a few Toronto analysts, some believe it can go up to $80 or $100/pound. For example, if the price of gold tomorrow went to $800/ounce, it will affect someones purchasing decision. The guy might say, I was going to buy this ring and now its up 70 percent because the price of gold is up. Maybe I will buy a silver ring instead. The same occurs with other commodities. People may change their purchasing decision based on a commodity price doubling.

If the price of uranium went to $44/pound, the average consumers electricity bill might go up a few dollars. It is not going to force someone to turn off their power. However, if the price of oil doubled tomorrow, many of us would be driving smaller vehicles. It would make a fundamental difference in how we behave. Thats not going to happen with the price of uranium. Its like buying pencils for your office. Its not going to change the way you do business. Even if no nuclear reactors come onboard for the next few years, the ones already there will need the pounds (of uranium). We have a shortage coming up.

Interviewer:
Why do you believe a uranium shortage is in the cards?

Dev Randhawa:
Bottom line is: the nuclear reactors are going to run out of fuel. You have to know that permitting takes a long time in the uranium industry. Its not like finding a gold property tomorrow and maybe two years from now you are pouring gold. Typically, the permit takes at least three years out. Because nuclear reactors need it, thats what is causing the price rise. Demand has kept going higher, but production has fallen off the chart. In this industry there are only about half a dozen companies exploring for uranium. At one time, back in the late 1970s and early 1980s, there were almost 150 uranium companies. There hasnt been any underground mining since the early 1990s. And that doesnt even include a wild card: there has been talk that by 2020, 90 percent of the nuclear reactors coming onboard will be for China.

Interviewer:
And what would reverse uraniums steep price rise?

Dev Randhawa:
The only thing that could kill this market would be if Russia discovered it had a lot more pounds to sell. Or the US government, through USEG, came up with more pounds. When we first entered the market, eight years ago uranium rose to around $17-$18/pound. Then it fell. What happened was the U.S. government sold their uranium to a private group, who turned around and dumped it into the market, from then until last year. In October of last year, the Russians were also dumping uranium onto the market for their hard cash.

Interviewer:
If replacement value for uranium comes in the form of exploration costs to find and mine this energy source, what would that cost be?

Dev Randhawa:
Realistically, it would be $20 to $22/pound. I know some are going to say they can do it for less. By the time you take your exploration costs, development costs, and so on, you really need to get $22 to $25 for most properties to go into production and still make money. Thats why most of what you see in the market are ISL (in situ leach) projects. On one property we discovered, it would cost between $16 and $17/ pound to pull it out of the ground. But on others, it might take $20 – 22/pound to pull it out of the ground, after labor costs and sell it on a forward contract. Canada is producing the most uranium because of the grades. Some say Canada has the lowest cost, but thats not quite accurate. What they mean to say is that the cash costs are the lowest. People forget that it costs up to $2 billion to put some of these into production. Cameco (NYSE: CCJ) was a creature of the government at one time. They were treated that way.

Interviewer:
Earlier you noted that investing in Strathmore Minerals was basically a call on the price of uranium. Can you clarify what you meant by that?

Dev Randhawa:
As uranium prices, the share price of Strathmore Minerals should rise. If you look at Bema (Amex:BGO), when gold prices were at $265/ounce, what was it worth? As the price of gold moved up, it had value. Has it gone into production yet? No. Silver Standard (NASDAQ:SSRI) is similar, but it has had to tell its story because people are so focused on gold. The key for investors is not to go where the crowds go, but to go where you can find value. If you believe that nuclear power is the place to be, and the shortage is real, you have got to own uranium stocks.

Interviewer:
What sets Strathmore Minerals apart from any other exploration companies in this sector?

Dev Randhawa:
I challenge any junior exploration company to show an individual who has actually put an ISL (in situ leach) uranium mine into production, including Cameco. They just arent around because the industry has been dead since the early 1980s. There arent many experts left in this business. The last standing geologist, which Cogema had, was David Miller, who is now working with Strathmore Minerals, as our head consultant. He is the one who has put the Strathmore strategy together. Weve been looking in southern and eastern Africa. Strathmore is going wherever there are pounds that others have overlooked. Our competitive edge is a database we acquired from Kerr McGee (NYSE: KMD), which used to be number one in the uranium industry. Recently, we announced properties in Wyoming that could be satellite ISLs. We have enough pounds there that we could throw one of them into production. But we still need higher prices. We are still in the acquisition stage.

Strathmore is going to be very aggressive in picking up properties that we think have pounds in the ground or smaller properties that we think can be ISL-able in the US. Everything were looking at in the US is for ISL. In Canada, we have over 700,000 hectares in the Athabascan region. Thats a major asset for us. Its one of the richest areas in the world for uranium. Some of our targets are near existing mines. In Quebec, weve got a large property that was drilled by Uranerz. Robert Quartermain has certainly been a part of that strategy. Thats what he did with Silver Standard, and thats what were doing here. We are aggressively going after properties. When sophisticated investors meet our team, they see the story weve got and they see our management. Youll see why we were able to millions of dollars in financings. Our strategy has been to buy the has-been properties, the low fruit in all the trees. And thats what weve been doing.
Devinder Randhawa

Mr. Randhawa founded Strathmore Minerals Corp. in 1996 and is currently the Company’s CEO. Mr. Randhawa also founded and is currently the President of RD Capital Inc., a privately held consulting firm providing venture capital and corporate finance services to emerging companies in the resources and non-resource sectors both in Canada and the US. Prior to founding RD Capital Inc., Mr. Randhawa was in the brokerage industry for 6 years as an investment advisor and corporate finance analyst. Mr. Randhawa was formerly the President of Lariat Capital Inc. which merged with Medicure in November 1999 and the was the founder and former President and CEO of Royal County Minerals Corp. which was taken over by Canadian Gold Hunter (formerly International Curator) in July 2003. Mr. Randhawa also founded Predator Capital Inc., which became Predator Exploration. Mr. Randhawa received a Bachelors Degree in Business Administration with Honors from Trinity Western College of Langley, British Columbia in 1983 and received his Masters in Business Administration from the University of British Columbia in 1985.

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