By Chris Mayer
Chris MayerChris Mayer is a veteran of the banking industry, specifically in the area of corporate lending. A financial writer since 1998, Mr. Mayer's essays have appeared in a wide variety of publications, from the Mises.org Daily Article series to here in The Daily Reckoning. He is the editor of Mayer's Special Situations and Capital and Crisis - formerly the Fleet Street Letter.
One of the best investments we can make right now is to buy into supplies of relatively secure, low-cost uranium - the feedstock for nuclear reactors. The simple story is that the uranium supply trails far behind demand. The added wrinkle is that supply cannot easily increase.
"In the world of commodities, demand is rarely the compelling reason to get long," observes Robert Mitchell, a general partner at Portal Capital, "Instead, you want to own a commodity where supply is incapable of responding to even a small bump in bids." In other words, you want to buy the commodities where it is very difficult to increase supply. Though hardly a new insight, it's one that investors sometimes forget.
One commodity that aces this simple test is uranium.
Just looking at the raw numbers, the annual mined supply of uranium provides little more than half the annual demand. Most of the balance comes from decommissioned warheads. Furthermore, uranium production is constrained, both geologically and politically. A few years ago, Cameco's enormous Cigar Lake project went "offline" due to massive flooding. This property will not come back online until 2013! (more)
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