30 Years after 3-Mile Island, Nuclear Power Poised for Comeback

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"Flat out, there's just not enough 'yellow cake' to go around."

In the U.S. market, the appetite for electricity continues to soar. While electricity demand will "only" increase by 50% in the United States between now and 2030, demand will increase 400% in China and six-fold in India. Overall, across the planet, electricity consumption is expected to double by 2030, increasing by 17 trillion kilowatt hours.

Renewable sources of energy won’t be enough to make up the difference. While they will be an important adjunct source of power - and will provide profitable investment plays for those who pick the right players - renewable alternatives won’t make a meaningful contribution to the world’s energy needs before 2030, the International Energy Agency reported recently.

While the U.S. wastes time doing the old "Washington two-step," the rest of the world is racing ahead with plans to up the ante in the nuclear power game. There are currently 440 nuclear reactors in 31 countries that generate about 16% of the world’s electricity. Under current projections, 630 reactors will be operating in 55 countries by 2030. That’s a 43% increase in the number of reactors alone.

The fuel for the reactors in those plants all depend on a scarce commodity - uranium. Flat out, there’s just not enough "yellow cake" to go around. It takes 7 to 10 years to transform a uranium discovery into a fully operational mine. With that kind of lag time, it’s clearly almost impossible for supply to keep up with demand.

Until recently, the market reflected the scarcity, rising as high as $137 a pound in 2007. But lately, despite the global shortages, uranium prices have nose-dived. Prices have fallen to about $42 a pound, leading to a sharp decline in the share prices of mining companies.

With the worldwide growth in the industry - and a classic supply/demand imbalance in the making - someone is eventually going to have to pay the price. So when uranium prices advance - most likely to new highs - expect mining stocks to advance in virtual lock step.

So at least for now, notwithstanding expected global growth in the sector, the financial crisis and the mothballing of mines makes any uranium play a long-term proposition - with a hefty payoff for those with the patience to see it through.

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