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Is uranium the new gold for 2006?

Updated: May 3, 2013 12:14PM

If oil is black gold, is uranium the new gold? It's a question worth asking, even as gold soars into record high territory. It closed Friday at $588.40 an ounce.

Gold is the traditional precious metal hedge against governmental mismanagement of paper currency. But you can't use gold to keep you warm in the winter or keep you cool in the summer. It won't keep the engines of industry running, and it won't provide the electricity to keep your computer humming. For that, we need energy -- an ever-increasing amount of energy, as the citizens of the world demand the basics of modern life.

It's all that demand, plus the potential scarcity of fossil fuels, that the world must now consider. No one knows when the world will "run out" of oil or what modern techniques might yet be invented to squeeze it out of shale or drill more deeply into the earth's core. Or what the environmental impact of burning all that fuel might be on our atmosphere.

But since much of the known oil reserves are concentrated in politically and militarily unstable countries, it seems wise to consider Plan B: nuclear energy.

The reality of demand

Forget for the moment the politics of nuclear energy, and the emotional fears of disaster, and consider the reality of energy demands. One man has been on the forefront of writing about this issue since the turn of this century. James Dines has labeled himself "The Original Uranium Bug." It's a takeoff on his reputation as "The Original Goldbug," for which he was known starting in the 1960s, when gold was trading at $32 an ounce.

Since Dines began writing about uranium and recommending uranium stocks to readers of his newsletter (www.dinesletter. com), the price of uranium has soared to $41 a pound from $7.10, up more than 400 percent. Dines says this is only the start of the move. In a section of his annual forecast issue, he writes about "The Coming Great Switch to Uranium."

Writes Dines: "Nuclear energy produces zero greenhouse gases, largely comes from deposits in politically stable and friendly countries (Canada, Australia, America), there is enough uranium for a billion years using breeder reactors, soaring prices for fossil fuels have left nuclear power increasingly cheap on a relative basis, and nuclear power could be used to split ordinary water into its components -- oxygen and hydrogen -- to power fuel cells for cars for everybody in the world."

Dines acknowledges that there is a problem with radioactive waste, and only half-jokingly suggests we blast it into space on a rocket. But he figures we'll come to some solution, noting: "Either that gets solved or we shiver in the dark, so coming generations will have to solve that problem somehow."

In the meantime, Dines has led his subscribers (including this writer) into investments in a variety of companies that either mine uranium or are involved in building reactors worldwide. He points out that the United States now gets one-fifth of its electric power from its 103 commercial reactors.

France gets 78 percent of its power from nuclear, followed by countries such as Lithuania, Slovakia and Belgium, each of which gets nearly two-thirds of its power (though a far smaller amount) from nuclear. And the growth in demand for nuclear fuel is coming from unexpected places, such as Bulgaria, which has announced it will build its seventh nuclear reactor and export energy to Greece, Turkey and other neighbors.

China is at the bottom of the chart of nuclear power generators, just beginning to build reactors. But, Dines notes, "China is all over Australia, trying to lock up its uranium, just as securely as the Europeans grabbed the world's oil in the 20th century."

Who's got the uranium

Where will all this uranium come from? From mining companies in the United States, Canada and Australia. And, along with the price of uranium itself, the stocks in those companies have already soared, with Dines' proprietary index of uranium stock prices up 1,112 percent in the past few years. Dines considers this just the beginning, and recommends a diversified portfolio of uranium stocks.

Those stocks might be wildly speculative, but the markets are waking up to the issue of energy independence that will dominate our future. And I write this column to give James Dines some well-deserved credit for his far-sighted investment advice, once again. That's The Savage Truth.

Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.

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