This from The Daily Reckoning:

Contrary to the common misconception, we have no energy shortage. In fact, we have more energy available than we could ever use. If not for the anti-nuclear movement, the funders of terrorism would not be awash with petrodollars and our economy would be significantly stronger. Unfortunately, rock musicians and actors had more influence on energy policies than scientists like Petr Beckmann, whom I was lucky to have as a friend.

Dr. Beckmann was a Czech refugee from Nazism who spent much of his career in America promoting nuclear power. Until he died, Beckmann was treated as some sort of demon by the environmental movement. No longer.

Today, even green leaders are admitting the folly of rejecting this cheap, clean and safe (when compared rationally with other energy sources) technology. If there were justice, Beckmann would have statues erected in his honor.

The green turnaround on nuclear power is particularly relevant now. President-elect Obama has picked several global warming activists to serve as top officials. The most important is Harvard physicist John Holdren. As presidential science adviser, he could have a significant impact on energy policy. His career, in fact, has focused on climate change, next-generation nuclear energy and nuclear disarmament.

From the perspective of an investor, what does this mean? Among other things, it could rapidly accelerate the transition from the current generation of nuclear power plants to the next. I would, incidentally, never invest in a technology simply because it has political support. Ethanol, for example, had lots of it. It was never a good idea, though, and is finally being recognized as such.

Nuclear power as we know it today is obsolete. Current light water reactors use uranium-235. This fuel is not only expensive, but its byproducts create problems. They are difficult politically to handle and can be used to create nuclear weapons.

Those byproducts are, ironically, the reason we initially adopted uranium-235. America needed the materials for nuclear weapons. Power plants using uranium-235 provided them. Regulators, naturally, favored the technology despite the fact that there were superior fuels – especially thorium.

Thorium is not only far more abundant than uranium-235, but thorium reactors do not produce waste materials useful in nuclear weapons. In fact, the wastes are far less hazardous and much cheaper to deal with. Thorium reactors are safer in general to operate, producing little radioactive threat outside their shielding. They cannot, in fact, experience a catastrophic meltdown.

This is a much bigger deal than it appears on the surface. Fuel costs, though much lower for thorium, don’t play much of a role in total nuclear power costs. In his book The Nuclear Energy Option, Bernard Cohen estimates that safety measures to counter meltdowns account for about 75% of current plant costs. As thorium plants can’t melt down, energy costs would be significantly lower.

Additionally, thorium reactors can be almost any size. Prototypes have been made small enough for military aircraft. This makes them economically viable in developing countries without the additional cost of large-scale electrical infrastructure. Thorium reactors would also be easier to sell internationally because they cannot be used to manufacture nuclear weapons.

The shift to thorium would facilitate economic, environmental and nonproliferation causes. So why are we still building plants that burn uranium-235? This is one of the hazards of government involvement in the sciences. Once grants and regulatory attitudes that favor a technology are in place, they are huge barriers to competitors.

A free market would favor thorium over uranium anyway. Coincidentally, Obama’s administration could significantly reduce barriers to thorium energy production. I’m looking hard now at several ways to take advantage of this development.

There is one potential wrench in these works, though. It’s nuclear fusion, and it could change everything. The fuel for fusion is essentially free, so the cost of power generation is a matter of capital costs and maintenance. I’ve been a skeptic about the economics of fusion, but that has begun to change. It appears that early research grants may have derailed and forced out more promising and cheaper fusion technologies than those favored by various governments’ research efforts.

Source: The Ultimate Alternative Energy

Kinross Gold (K) tabled earnings of $26 million or $0.04 per share in the second quarter, a sharp decline from the $53 million or $0.09 per share earned in the same period a year ago. The bottom line was crushed by higher costs and lower revenues with the cost to produce an ounce of gold hitting $466. Despite the shortfall a strong gold price helped Kinross end the day up C$1.51 at C$17.75.

Aura Minerals (ORA) came out and said that it expects to see a steady state throughput of 1,200 tonnes per day for its Aranzazu project in Mexico by the fourth quarter. Aura ended the session up C$0.10 at C$1.15.

It was a good day for shareholders of Uranium One (UUU) as the company announced record production of 767,100 pounds of U308 in the second quarter with earnings ringing in at $32.9 million. Uranium One also confirmed its 2008 production target of 3.1 million pounds U3O8 and appointed Jean Nortier as president and chief executive officer. The company ended the day up C$0.43 at C$3.73.

Is it merely a dead cat bounce or is it the emergence of some strength for the beaten down resource sector? We will see what Thursday trading has in store.

Source: Resource Stock Roundup Thursday August 14, 2008

In its weekly inventory report, the Energy Information Administration said the crude stocks dropped by 400,000 barrels for the week ending August 8. Gasoline supplies plunged by 6.4 million barrels, marking a decline of more than 14 million barrels in three weeks.

Distillate stocks were off 1.7 million barrels, while refineries were operating at 85.9% of capacity, down from 87% a week earlier, the EIA said.

“Capacity utilization is now at a four-month low, reflecting refiners’ reluctance to process crude oil,” wrote Chris Lafakis, of Moody’s Economy.com. “Every major crude-oil refiner reported losses in its refining business in the second quarter … As a result of this financial stress, refiners are curtailing their processing efforts.

“Nonetheless, a sustained increase in gasoline demand will boost the gasoline crack spread and coax refiners to boost production,” Lafakis believes.

He also noted that “gasoline demand is now less than 2% below its year ago level … Evidence of stronger demand cuts to the core of the ‘demand destruction’ thesis, which has been the primary catalyst pushing crude-oil prices lower.”

In the uranium sector, Cameco (CCO) announced further flooding at its Cigar Lake project, the world’s richest undeveloped uranium deposit, with the potential to one day meet 10 percent of global demand. The company didn’t say what new remediation efforts will be necessary, nor if the projected 2011 startup date would be affected.
Source: Oil has an Up Day, EIA Report Seen as Bullish, Cigar Lake Floods Again

Recently I’ve been telling my readers about an incredible deal that had just been signed between China and the Democratic Republic of the Congo. For those of you who are new… I’ll give you a quick reminder…

Congo is one of the most mineral-rich places on earth. Africa’s biggest country is said to hold just about every mineral know to man – gold, copper, diamonds, uranium…

In April this year the Chinese sealed an agreement with the Congo government that is going to see China invest $9 billion dollars in reviving Congo’s war-ravaged infrastructure and mines.

In return they will get access to the African giant’s vast mineral wealth. About $3 billion of that is going to be invested in reviving the mines. But a massive $6 billion is going to be spent on building desperately needed infrastructure. China is going to build about 2,400 miles of new roads, 2,000 miles of railway, 32 hospitals, 145 health centres and two universities.

There are only about 3000 miles of roads in the whole Congo at the moment. So the impact on the country is going to be huge…

In return, China is going to get access to some 10.62 million tonnes of copper and 620,000 tonnes of cobalt. That could add-up to more than $42 billion in profit for the Chinese in the coming years.

The sheer size of the deal has completely blown away China’s rivals. Western mining companies and governments have been left reeling as China appears to have locked-up some of the most valuable mineral deposits in the world. And they aren’t very happy…

What are the Chinese up to?

Last week, Hong Kong’s respected South China Morning Post newspaper, carried an article on the deal. I’m going to quote it at length here, because I think it’s an excellent window into how the Chinese actually view their move into Africa:

“Poor Congo! It can never get a break from meddling westerners. But what can it expect, since it is doing a multibillion-dollar deal with China.”

“Worse, this deal, estimated to be worth US$9.25 billion, involves valuable natural resources and will entrench China, for years, in the affairs of a key African country as big as Western Europe. And, as with many similar massive investment schemes across the continent, it is pitting China investors against western institutional lending and aid bureaucrats and mining companies.”

True enough. And the simple fact is that most western companies just aren’t going to have the resources to go head-to-head with the Chinese government in the scramble for Africa. One of our current plays has done just the opposite. It’s providing the infrastructure and support-services that are going to be necessary for the multinationals and Chinese state-owned giants to get their loot out of Africa… find out more about this play here…

The article goes on…
“Sure, there is no guarantee China will deliver. But even if they deliver just half of what they promise, it will benefit the country enormously, which hitherto has been more newsworthy in the west for civil wars and exotic diseases like Ebola.”

“China is taking on enormous risks with the deal. The tonnes of resources sound good on paper, but some of Congo’s mines and concessions are underdeveloped and dangerous to operate; others remain to be explored and developed. The technical and operational challenges are great.

“No western government or corporation would commit so much capital resources in a single enterprise because, as one analyst said of western investments in the continent in general, they mistake their own ignorance and prejudice for risk assessment.

“So, here is a potentially good deal for Congo, and the International Monetary Fund is unhappy. Likewise some western mining companies, which signed dozens of contracts with the country during the last civil war. The chickens are coming home to roost for the companies in the latest sorry attempt at exploitation by the west.”

What he means by that is that many of the small mining exploration companies that entered the country during the Civil War in late 1990’s are now seeing their contracts being cancelled. A lot of these contracts were one-sided deals which left the Congo government holding the short end of the stick. With the support of their powerful new Asian friend, these small American and European companies are now being forced out. And here’s the Post’s rhetorical flourish at the end:

“China is offering real economic growth and opportunity to sub-Saharan Africa, something the west has never done. Poor countries need all the help they can get, from whatever sources they choose.”

The ONE company that can beat the Chinese at their own game…

Why am I revisiting the Congo today? Because when I first wrote about China’s investment deal with the country early last month, I mentioned that we were looking at several investment opportunities in that country…

And we have found one. In fact, if I’m right about it, it’s going to offer the sort of profits that make China’s deal with the Congo look small…

You see, earlier this year, a group of shadowy tycoons who operate in Africa struck a deal that gives them access to the Congo’s richest mines…the sort of thing that the Chinese can only dream about. They’ve got all the right connections and they’ve got the cash to pull it off. And our latest recommendation is going to put you right in the thick of it.

Source: Secret Deals, Africa’s Richest Mines

In Taipan Daily, Irwin Greenstein examines another country looking to uranium as a source of clean energy, with potentially significant implications for the market:

The current decline in uranium prices gives these China super-traders a critical inflection point to pick up the slack and clean up the environment.

China could benefit greatly from plunging uranium prices… as well as investors who take a long-term position in China’s growth.

Uranium futures contracts through the end of this year are trading in the mid $60 range. By comparison, U308 uranium was priced at about $140 per pound as early as January of this year.

The steep decline in uranium could be just what the Chinese need to make their move before manufacturers start moving out entirely to countries such as Vietnam.

There is a growing sense of urgency to corner the uranium market.

This stealth team of Chinese traders is armed with a $300-billion war chest to grab up every last ounce of U308 uranium. And if anyone can pull this off, it’s the Chinese.

Unlike gold, oil or copper, there’s no regulated trading exchange for U308. You can’t buy an ETF for it. U308 moves in a near-underground economy of secretive auctions where uranium trading is fast and furious.

The absence of a regulated trading exchange gives an enormous advantage to a stealth team of Chinese traders instructed by the government to track down every last pound of U308.

This crackerjack team is headed by a cabinet-level rising star who is chauffeured around Beijing in a big, black Audi. He sports a cigarette holder like FDR and is considered one of China’s top economist.

Under his brilliant supervision, the Chinese uranium traders will draw on a war chest of $300 billion in U.S dollars. That amount is nearly twice the size of the world’s largest mutual fund. It’s about six times bigger than the legendary Magellan Fund. And it’s bigger than the world’s top four mutual funds combined.

Over the next 15 years, China plans on building 30 new nuclear reactors. Without those critical reactors, the country’s environment and economy could be heading straight for the dumpster.

China desperately needs another 23,000 megawatts to maintain its nonstop growth.

And 23,000 megawatts is a massive amount of electricity. It’s how much New York City lost during the great blackout of 2003, when 19 million New Yorkers were plunged into darkness and the city was dead in the water.

That’s why China is committed to shelling out $50 billion on 30 nuclear power plants. The country must make the leap from 8.7 million kilowatts today to 40 million kilowatts by 2020. It’s the most ambitious nuclear power expansion in history.

For investors interested in China, the move to nuclear energy is great news. It means that China will overcome its energy problems — removing another obstacle to long-term growth.

A $1 billion deal signed last week with Russia to build and supply a uranium enrichment plant in China was another step towards civilian nuclear independence, less than two decades after its first nuclear generator came on line.

But China is also ramping up its domestic nuclear expansion plans […] its own experts admit they will have to devote most of the country’s technical know-how and a large portion of both listed and state-owned firms’ capital to what will be the fastest nuclear build-out the world has ever seen. It will need to start construction on about 4 new generators a year through 2015 to meet its ambitious target.

“Uranium represents the long-term solution to potential fuel shortages – and it offers a solution to global warming, to boot,” says Jason Simpkins in Money Morning.

“Uranium-powered commercial nuclear plants are cheap to operate, can run a long time, and when operated correctly cause little pollution.

“So where should you look for profit opportunities? If you look at the charts, some uranium mining company stocks appear to move up and down in virtual lockstep with spot prices.”

Read more here to find out how to cash in on this future money spinner with Jason’s hot uranium company tips.

“Alternative energy opportunities such as uranium and so-called ‘green energy’ investments will benefit from soaring prices for conventional energy sources,” says William Patalon III in Money Morning.

“When it comes to these profit plays, it will pay to keep all your bases covered.”

It’s an acronym for the emerging economies of Brazil, Russia, India, and China. Goldman rightly believes these populous nations will be far more prosperous and powerful in 2050 than they are today.

A long-term commodity bull might say, “Forget the BRICs… Give me the ABCs.”

The ABCs in this case are the ultimate destinations for resource investors… Australia, Brazil, and Canada. Each is blessed with awesome energy, metals, and agricultural wealth… and each ABC currency is soaring right now. Our chart of the week is the “A” currency of the group, the Aussie dollar.

Due to the soaring prices of coal, gold, copper, uranium, oil, iron ore, and natural gas, the Aussie dollar has climbed 50% since 2002. This is a huge move for the currency of a stable nation… and another sign the age of the ABCs is here.

Source: Forget the BRICs, It´s the Age of the ABCs

For some reason, Gambia’s president, Dr Yahya AJJ Jammeh, has it in his mind that Carnegie Minerals is stealing his precious metals. So he threw one of Carnegie’s mining engineers in jail.

All of this is a lesson in risk. Carnegie’s share price graph now looks like someone’s been jamming on the brakes to stop within ten yards. The shares are bouncing sharply around 3p having crashed from 8.25p. This is a bit sad as it raised money from investors in February at 4p.

Britain’s Foreign Office (FO) website for Gambia gave no warning that this sort of thing could happen. Perhaps this is because the drama has been going on since February. The site was last updated on January 2. Not a lot of help for UK investors!

So the FO has Gambia down as a republic under multi-party democratic rule. The ruling party currently holds a huge majority (45 of the 48 elected seats). The president came to power in a bloodless military coup which toppled the elected government in 1994. Only 1.7m people live there. The economy is all about tourism and peanuts. Foreign aid fills the gaps.

The site does state that trade with the UK is strong. The UK is consistently among Gambia’s top two or three trading partners — not that this means a lot!

UK exports to Gambia to 2006 amounted to £14.0m, down from £16.47m the previous year. Trade in the opposite direction was valued at £3.5m, up from £3.3m the previous year.

Jammeh obviously has ambitions to boost Gambia’s status. He wants the country to become an oil state. He’s been quoted by the BBC as saying that this could usher in a “new future”.

Trouble is, no one has yet found any oil!

He also made a claim to be able to cure AIDS in three days. Last year he said he was treating ten patients with secret herbal-based medicines.

The “economic crime” of finding uranium

So, warnings of more than one kind are in order here, even if they’re not spelt out on the FO site! The best to be said of Gambia is that it seems a mite bizarre. So what were Carnegie and its investors doing there?!

Carnegie was floated on AIM to tackle the Astronhe SeneGambia Mineral Sands project. This is a cross border project extending along the coastlines of Gambia and southern Senegal. Its aim was to produce zircon/rutile concentrate for sale at the mine gate.

This project was a 50-50 joint venture with off-take partner Astron, which has ties to China. Any concentrates were to be shipped bulk in containers to China for final processing. Washed sand was to be sold to the local construction industry.

Carnegie also has exploration projects in Australia and the US. Until January 16 it was getting on with its business of keeping all this work ticking over. Then, the bomb shell hit.

A presidential dictat ordered Carnegie to stop working in Gambia. As alleged by the president, Carnegie was commercially mining titanium and uranium. This was an economic crime. It had a licence only for mineral sands.

Mineral sands are an important source of zirconium, titanium, thorium, tungsten, rare earth elements, as well as the industrial minerals diamond, sapphire, garnet, and occasionally precious metals or gemstones. So if it was processing uranium this was out of order.

Presidential claims of super-power status to come

Two days later the president announced the good news to the Gambian people, amidst the celebrations of Islamic New Year. Gambia was now a source of strategic mineral resources! Hurrah for all of us!

And he reminded them that a few years before he had announced the country also had oil.

Now the biggest find was uranium! It had been there all along, but he had not been able to announce it!

“But I wanted to make sure that what I announce is a reality,” his speech went. So the country must stop being divided and work together on the oil and uranium to become a great superpower…

This was to be a superpower of hope for humanity, where people of all kinds could live and work together in peace! Obviously, that excluded Carnegie’s people.

On February 14, Carnegie’s licence was cancelled. Then, a couple of days later, in spite of reassurances that Gambia accepted that it had not found uranium, Gambian police detained the new country manager.

Charlie Northfield, who had only just been appointed, was bundled into prison on landing.

Carnegie pointed out in vain that traces of uranium are found in soil everywhere. So, of course there was some in the Gambian soil — but not in anything like the commercial quantities the president dreams about.

A few days later, and $450,000 poorer after bailing out Charlie Northfield, Carnegie wrote off its Gambia operations.

Now Carnegie is sticking to more normal places

Now Carnegie is sticking to more normal places. It is still operating in Senegal, a country where there are fewer funny stories to be found (a good barometer).

And it has announced a three-year co-operation agreement with the US Geological Survey to look for rare earth deposits in the US.

No-one is forecasting any profits for a long while. Last year Carnegie made a pre-tax loss of £1.7m, or 3.19p a share.

Yet, before its Gambian adventure, Carnegie had been tipped as an interesting little speculation for those precious rare earths.

The lesson is — beware of any country where the stories of its rulers are as bizarre as they are in Gambia!

Keep mining!

Erin and Isabel

Source: Carnegie Minerals’ Gambian Adventure

“Prepare for the onslaught of relatively inexpensive Chinese turbines,” said Steve Sawyer, head of the Global Wind Energy Council, in Wired magazine.

In 2007, China became the world’s number one producer of photo-voltaic cells, holding 35% of the market. Sawyer reckons that China will make enough equipment to generate 10 gigawatts of power annually by 2010 — more than half the capacity that the whole world installed in 2007. More from that story:

China has three big reasons for jumping feetfirst into the carbon fight. Obviously, there’s the threat of climate change — flooding in China’s coastal cities, drought in the country’s interior. Second, there’s political instability: Air and water pollution is already a flash point for public protests. And then there’s the burgeoning export market for green products stamped made in china.

Will renovating the planet spur the first wave of homegrown Chinese tech innovation? Jeff Immelt, CEO of General Electric, thinks so. “China has as much or more at stake than anyone,” he said at a recent corporate summit. “Solar energy, carbon sequestration — we’re going to be blown away by China’s progress over the next couple of decades.” If only they could clean up Beijing’s air in time for the summer Olympics.

Jason Simpkins is bullish on nuclear power as a solution to the world’s energy needs. “If coal is the short-term solution to the world’s energy needs, uranium is the long-term play,” says Jason in Money Morning.

“That said, it’s also become clear that – with the enhancements to plant design and operation – commercial nuclear energy is the safest, cleanest, cheapest source of the massive amounts of electricity that will be needed to achieve three key objectives: 1) To fuel global growth; 2)To avoid a worldwide energy crisis; and 3) To battle the long-term environmental effects of global warming.”

So it follows that as worldwide demand for electricity skyrockets – as it will – the shares of companies that provide these two key fuels also will take flight.

And they make for almost-perfect partners.

That’s because coal represents the world’s short-term solution to the problem of a rapidly climbing global demand for power. It’s plentiful, it’s cheaper than other available alternatives, and a big percentage of the world’s power plants are set up to burn this fossil fuel.

Uranium, on the other hand, represents the long-term solution to potential fuel shortages – and it offers a solution to global warming, to boot. Uranium-powered commercial nuclear plants are cheap to operate, can run a long time, and when operated correctly cause little pollution.

The New ‘Black Gold’

India, a growing economic and industrial power, relies on coal for nearly 70% of its total energy supply. And the World Coal Institute expects India’s energy consumption to rise by as much as 8% to 10% annually through 2020.

Coal also is used to satisfy the Red Dragon’s energy appetite, providing 78% of China’s total power needs. Coal demand in China jumped nearly 9% last year – meaning the Eastern power now accounts for a full quarter of the world’s annual coal consumption, The Wall Street Journal reported.

Five years ago, China exported 83 million metric tons more coal than it imported. But last year, the nation’s surplus dropped to a meager 2 million metric tons. That means more than 80 million metric tons of coal (about 12% of the internationally traded market) has been taken out of global circulation.

Vic Svec, a senior executive at Peabody Energy Corp. (BTU), the world’s largest private-sector coal producer, referred to China’s ability to influence the price of commodities as a “butterfly effect.” In other words, Svec told The Journal, “demand from Beijing can ripple back to Queensland, Australia, or Gillette, Wyoming.”

Svec’s right. China’s recent development is part of the reason the highly desirable low-sulfur coal from the coal-laden Powder River Basin in Wyoming and Montana has climbed from less than $10 a ton last year, to nearly $15 a ton – a price gain of 50%.

Central Appalachian coal, the benchmark grade widely used by power plants, jumped from $40 a ton in early 2007, to nearly $90 a ton now, according to a recent report by the Associated Press. That’s price increase of 125% in just a single year.

Meanwhile, the weekly index for power station coal prices at Australia’s Newcastle port, a benchmark for the Asian market, averaged $126.45 per metric ton in the month of April, up nearly 40% from January. The port’s weekly price index rose to $133.63 per metric ton for the week ended May 9 – an 11-week high according to the globalCOAL NEWC Index. The index is up approximately 49% this year.

According to the Energy Information Administration, world coal consumption could expand by 74% from 2004 to 2030. And that will only drive prices higher.

While demand for coal is at an all-time high, the same can’t be said for coal supplies. Harsh weather conditions and infrastructure constraints in coal-producing regions have severely crimped supplies.

In South Africa, power shortages and flooding have closed down several key mines. With such setbacks, the price of coal coming out of South Africa’s Richards Bay Coal Terminal, the world’s largest, jumped nearly 90% last year.

Xstrata PLC, the world’s biggest exporter of power-station coal, said that first-quarter coal output fell 3.6% after floods and rain delays diminished supplies from Australian mines. Monsoon rains throughout the region also impacted archrivals Rio Tinto PLC (RTP), and BHP Billiton Ltd. (BHP).

Meanwhile, China, a leading producer and consumer, was devastated just a few months ago by the worst blizzard of the past half-century. Three weeks of snowfall killed at least 60 people and cost the country approximately $7.5 billion.

China had already closed a multitude of coalmines in 2007, after they were deemed unsafe. The subsequent weather problems only exacerbated that situation, forcing the closure of a great many more mines and prompting China to restrict exports. Major roads and railways also were shut down, creating traffic congestion during the thickly traveled Chinese New Year – and making deliveries highly problematic for drivers.

As the cold of winter gave way to the higher temperatures of spring and summer, yet another weather-related challenge emerged. This time around, the double-whammy of higher-than-expected temperatures coupled with sparse rainfall are straining thermal power plants: The warm weather is boosting the use of energy-intensive air conditioning even as those same higher temperatures have dropped the water level of the rivers that spin the huge power-producing turbines at hydroelectric dams.

If you’re looking to play surging coal prices, Money Morning Investment Director Keith Fitz-Gerald suggests taking a look at Yanzhou Coal Mining Co. (YZC). The China-based Yanzhou is nicely diversified in several ways:

• First, it not only operates underground coalmines, Yanzhou also operates a railway transportation network for shipping coal.
• Second, Yanzhou’s focus on low-sulfur coal products means it finds demand from large-scale power plants and from metal-producing companies all around the world. The reason: Low-sulfur coal can be combined with coking coal in a metal-production process known as “pulverized coal injection,” or PCI. That combination gives Yanzhou a nice extra bit of industrial diversification.
• Third, investors can add geographic diversification to the profit mix as they analyze sector plays.

Provided with these positives, it should be no surprise to investors that Yanzhou’s first-quarter profit more than doubled, climbing more than 112% on surging demand for the fuel and on the higher trading prices seen in the markets around the world.