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TMFBlacknGold (99.37)

Japanese Reactors and Uranium Plays

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March 11, 2011 – Comments (15) | RELATED TICKERS: URA , CCJ , GE

I would like to open a discussion about how the ongoing emergency with two Japanese nuclear power plants will/can affect uranium stocks. After the devasting earthquake, tsunami, and aftershocks the Japanese government reported that it had trouble cooling reactors at two Japanese nuclear power plants in the north of the island. Uranium stocks are trading down across the board in after hours. Luckily, officials have the weekend to cool the reactors (versus investors getting slammed tomorrow if the market was open). If they succeed I would guess uranium stocks wouldn't be hit too hard on Monday morning. Should the situation progressively worsen, uranium stocks might go cliff-diving next week.

Should uranium investors take any action given the possible scenarios? Would this be a good investing opportunity? I have some shares in URA. Long term uranium seems like a winner. Would this event scare governments away from building new reactors like 3 Mile Island and Cherynobyl? Or will the rising price of oil offset some of those fears? Thoughts, links, comments, mass hysteria are all welcome. (I'm surprised there aren't more posts about this situation.)

Also, keep the country of Japan in your thoughts and prayers.

15 Comments – Post Your Own

#1) On March 11, 2011 at 10:54 PM, BillyTG (32.97) wrote:

I'm kind of stubborn with my stock purchases, and am a much better buyer than seller. That disclaimer out of the way, I'm holding my uranium stocks until I see a gigantic rapid appreciation in the short term, or for several years while I let the uranium shortage and energy crisis play out.

A comment I just read on the Yahoo CCJ board said it best. In my own words:  if Japan's nuclear power plant has a serious meltdown, Chernobyl-style, then obviously public opinion on nuclear energy will be shattered, and the rebuilt safe reputation that took so many years will be destroyed overnight. Fallout (pun) will surely mean less support for new reactor projects which will mean less interest in uranium, which will mean uranium stocks will drop, probably significantly for some time.  On the flip side, should Japan's nuke plant have a safe shutdown, public opinion of modern nuclear reactors' safety will be confident and supportive...something that might spur a nuclear renaisaance, ushering in new highs.  If a nuclear power plant can safely survive one of the biggest earthquakes ever, that looks good for nuke safety, doesn't it?  We'll see how the media spins the outcome...

Based on other commentary I've read this evening,  I'll be surprised if Japan's nuke plant is as bad as some are reporting.  Chernobyl, apparently, was the result of total buffoons with poor technology making poor decisions.  Japan, on the other hand, is using much safer technology with more safety features in place, managed by smarter people who are well aware of the ramifications of a bad outcome. 

I'm optimistic that things will turn out okay.  Things are rarely as bad as they seem (or as good as they seem).  I'm also confident that no matter how bad the outcome, uranium will be in high demand this decade, even if it has a temporary downturn.  I won't be buying more shares or selling those I own.

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#2) On March 12, 2011 at 12:18 AM, TMFBlacknGold (99.37) wrote:

I agree with you that the media tends to get out of control. I turned on the news this morning at 7am and they were talking about a "serious problem" at a reactor. They soon got an expert on the phone and in typical media fashion started asking him about worst case scenarios. He basically said, "Calm down pansies". Good point on the sophistication of the Japanese technology too.

Also, just read that the US sent coolant in Air Force planes. Even without the coolant, the reactor cores will drop in temperature in a few days.

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#3) On March 12, 2011 at 12:24 AM, awallejr (80.10) wrote:

Still, this sector can be hurt short term just as GOM drilling had been hurt with the BP spill.  People tend to get more nervous about radioactivity than a few gulls getting caught up in oil.

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#4) On March 12, 2011 at 12:30 AM, TMFBlacknGold (99.37) wrote:

Good point. Depending on how this goes over the weekend I might sell my shares of URA. I hate selling into dips, but if it goes much lower I can cut my losses and buy back in with the same funds.

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#5) On March 12, 2011 at 3:37 AM, GPWASR10 (< 20) wrote:

I will be using this opportunity to strengthen my Long Term Uranium Plays (URZ, DNN, ES, CCJ). The Plant seems to be quite stable, and the shut down went smooth under the circumstances. I think this may play out positive over the next few months. And I doubt it will effect China's energy policy either way.

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#6) On March 12, 2011 at 4:01 AM, mhy729 (40.88) wrote:

Japan earthquake: nuclear disaster feared after power plant 'explosion' from telegraph.co.uk

It would seem that the fear-mongering media may have it right this time.  And the news that there has been damage along the west coast of the US, with several people swept away by the ocean, really does open your eyes on how far-reaching the destructive power of this is.

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#7) On March 12, 2011 at 6:36 AM, BillyTG (32.97) wrote:

Thinking some more about this...

1. The world is in a major energy crisis as it is.  There will probably be a world war this decade, fought, at least in part, over energy concerns.

2. With oil supply being pinched by revolting Middle Eastern and African countries, any further energy resource restrictions creates compounding problems.

3. Japan's nuclear plant is indeed looking worse and worse. While it might not be Chernobyl, the radiation leakage might already be enough to result in fatalities.  The public and media will harshly punish nuclear energy.

4. I'm guessing there will be some serious upward price pressure on other energy sources like oil.  Just as problems with oil create a greater demand for alternative energies, so too do problems with nuclear energy create a greater immediate momentum for all other energy types.

Still planning to hold what I have (but will be watching the market closely Monday), and definitely not planning to buy, even if uranium stocks totally dump next week---I want to keep as much cash on hand as possible for better investment opportunities.

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#9) On March 12, 2011 at 8:49 AM, BillyTG (32.97) wrote:

Thinking even more...

the news is out of hand, and any hope for a happy public outcome is gone, in my opinion.  I'm expecting my uranium stocks to drop like rocks monday. If the U stocks open, say 20-40% lower Monday morning, and then there's a big selloff from the bell, pushing them another chunk down, where does that leave a small investor?  Once again, I'm probably going to hold my shares for several more years while nuclear sentiment very slowly recovers.

Glad to own silver/gold right now...but also this underscores the importance of being diversified in at least a few different sectors, PMs included.  There are unpredictable surprises around every corner.

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#10) On March 12, 2011 at 10:07 AM, TMFBlacknGold (99.37) wrote:

Man don't you guys sleep? haha

So, I woke up this morning and said "CRAAAAAPPPP!". Uranium stocks are most likely going cliff-diving next week.

HOWEVER, a Fool has to analyze this sitution and see how it is different than previous nuclear events. 3 Mile Island and Cherynobyl were both caused by system failures without the outside help of a natural disaster. Now of course a radiation leak is a radiation leak no matter the cause. But with most new planned reactors coming on line in devloping countries I seriuosly doubt uranium will go into an unrecoverable period. Will it get hit? Of course. China and India aren't going to stop stockpiling yellowcake though. Wouldn't they take this dip as an opportunity to buy more?

The little guy will have to deal with the fallout (no pun), but I think uranium will come back. It might not be months like the BP spill, but it will come back. The country that has the most to lose is the US. We think nuclear power is some type of voodoo magic. A lot of reactors were cancelled after 3 Mile Island and we haven't built any since (I think there is one almost on line in the south somewhere, but that was the first.)

I don't want to sell into a huge dip, but depending on where uranium stocks open (can't be that high) I may sell and get back in at a lower price.    

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#11) On March 12, 2011 at 10:47 AM, BillyTG (32.97) wrote:

Absolutely right about India and China...they could not care any less about public opinion.

Regardless of how this situation ends, the media has already caused enormous damage.  Right now, the nuclear plant fallout looks like it won't even be that bad, that the safety technology actually worked pretty well, and that things are being managed well. But, the media has already crucified nuclear safety and I fully expect a hit on Monday.  Assuming the plant doesn't meltdown and spew radiation into the jetstream and result in countless deaths, uranium stocks might recover very quickly, in weeks not years.

It will be interesting to follow next week. Keep us updated on what you do!

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#12) On March 12, 2011 at 11:54 PM, TMFBlacknGold (99.37) wrote:

Some more facts to consider:

The Japanese reactors are 40 years old. Newer plants are constructed much differently than their predecessors. They operate more efficiently - some with the ability to use "waste fuel" - and have more safety features built in.

Flooding the reactors with seawater and boric acid (to capture neutrons ie radiation) is a last ditch effort. The reactors will never be functional again. Apparently one of the plants was scheduled to be decommissioned at the end of this month anyway.

Traceable amounts of radiation leak naturally when the rods are not at the bottom of the reactors. When the emergency systems of a plant are engaged the rods are sent to the bottom, which is considered safer.

The Japanese government is obviously between a rock and a hard place. They can try to play it off, contain the situation, and be winners. Or if they play it off and they can't contain the situation they won't look very good. There is a fine line they don't want to cross when releasing information. We likely don't have all of the facts, but that doesn't mean the worst case scenario is taking place.

As far as I'm concerned, if a half-dozen 40 year old nuclear reactors can hold up against a 8.9 earthquake, a tsunami, and two dozen aftershocks of at least 5.0 without melting through the center of the Earth (China Syndrome anyone?) - Nuclear Power 1 Haters 0.

Take one look at comments on any major news site and one thing becomes obvious: people don't know Shitake about what is going on. People as in everyday people. That being said these next few weeks won't be pleasant for uranium investors. I'm torn between what to do, but I see it like this. I'm young and nuclear isn't going anywhere in the long term. It may take time for me to recover my position, but I am fortunate enough to have time. I may actually wait to see how this plays out and increase my position in URA. I can call it even much sooner in the ensuing uranium recovery that way.

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#13) On March 13, 2011 at 9:55 AM, mhy729 (40.88) wrote:

As far as I'm concerned, if a half-dozen 40 year old nuclear reactors can hold up against a 8.9 earthquake, a tsunami, and two dozen aftershocks of at least 5.0 without melting through the center of the Earth (China Syndrome anyone?) - Nuclear Power 1 Haters 0.

I agree with this...and as you mentioned newer plants have more safety features built in.  As you might imagine, the news coverage of this tragedy is quite heavy in Korea, which is perhaps Japan's closest neighbor.  South Korea derives a significant portion of its energy needs from nuclear power, and one of the news reports today covered the additional safeguards present in newer designs.  The current crisis, though indeed serious and worrisome, will likely not cause much of a wrinkle in the use of nuclear power in Japan or any other country with significant commitments to it as an energy source.

I've seen mention of CCJ, DNN, and the uranium-based ETF URA.  What do people think about NLR or PKN?  I've long been thinking of investing in the sector, and though it always feels a little 'icky' to try finding profit opportunities from a calamity, this will likely prove to be a good time to 'support' an energy sector that is going to see some short-term hate.

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#14) On March 13, 2011 at 1:24 PM, TMFBlacknGold (99.37) wrote:

Good question mhy. Here’s a quick comparison:

Most daily volume:   URA, NLR, PKN.

Highest cash %:  URA (12.95%), PKN=NLR (0%).

Stock %:   URA (87.05%), PKN (95.7%), PKN (100%).

Top 3 Holdings:

NLR (Cameco 8.37%, Constellation 8.32%, Exelon 8.15%).

PKN (Areva 7.97%, Toshiba 5.43%, Uranium One 3.85%).

URA (Cameco 17.57%, Uranium One 14.1%, Paladin 8.71%).

Price:  URA ($19.04), PKN ($21.42), NLR ($25.51).

Shares Out:   PKN (1.75mln), URA (in between), NLR (10.3mln).

So as you can see it depends on how much exposure you want. URA is a little top heavy in its top holdings, where NLR is more balanced. URA does have the flexibility and perhaps advantage of having cash. So I wouldn’t be surprised if they use that cash to shore up some of their holdings once uranium stocks bottom out, which would put them in a better position (?). Expect all of these to be hit. It will be interesting to see how each recover.

 

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#15) On March 13, 2011 at 2:17 PM, TMFBlacknGold (99.37) wrote:

For stock % NLR has 95.7% and PKN has 100%.

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