Profiting from the Climate Disaster

 Profiting from the Climate Disaster

We might be in for some nasty weather soon. There are a lot of warning signs that a global environmental disaster will happen in the next few years or decades, and many intelligent people have spoken out about it. Nearly daily, one voice—that of the brilliant James Lovelock—resounds through the world's media. The rapid sequestration of carbon dioxide emissions and the activation of additional nuclear reactors were his proposed solutions.

Is there another option? Up north, near the Arctic Circle, you can enjoy balmy 74 degrees Fahrenheit all year long. Resulting from research that was published in Nature not long ago. There was an event known as the Palaeocene Eocene Thermal Maximum (PETM) approximately 55 million years ago. This PETM event involved the massive emission of greenhouse gases, such as carbon dioxide, which heated up the entire planet. That kind of heat could be visible later this century, according to Lovelock.

"Investment Implications of an Abrupt Climate Change" is the title of a 56-page report that was released by another intelligent man with whom we have had numerous conversations this year. Global warming and climate change will have far-reaching consequences for the financial sector, according to a persuasive argument put forth by Market Strategist Kevin Bambrough and Eric Sprott, CEO and Portfolio Manager of the illustrious money management firm that bears his name. It would be wise for you to peruse it.

Choose Between Nuclear Power and Affordable Arctic Real Estate

What other options do we have to safeguard our finances, except than considering the possibility to purchase enormous plots of land close to the Arctic Circle, which Dr. Lovelock's findings make us momentarily think about? Too much realism for the present moment is likely to be climate change, global warming, and the impending end of the world. However, in the next 10–30 years, what are your plans? Our conversation with Julian Steyn, co-author of A Brighter Tomorrow with Senator Pete Domenici of the United States, took place last week. He was a reasonable and conservative man who even wrote, "I am afraid I do agree with his (Lovelock’s) concerns."

If the statistical analysis provided by the United Nations Intergovernmental Panel on Climate Change (IPCC) is to be believed, then any reasonable person would want to begin safeguarding their wealth today to guarantee the survival of their family and lineage in the future. Reputable researchers have sifted through reams of data to determine the current state of affairs about melting glaciers, increasing temperatures, rising sea levels, and so on. No one else feels the same way, and smart people aren't praising solar panels or wind farms as "the solution." For them, nuclear fission reactors are an absolute must, and the sooner they go online, the less effort we'll have to put in later on.

A plausible solution has been proposed by Eric Sprott and Kevin Bambrough, who have also presented a convincing argument for why we should not waste time anymore. The authors of the paper did not intend for you to be alarmed and encouraged to assassinate any environmentalist or anti-nuke activists you may encounter. Good day, gentlemen. Governments and decision-makers have a plan thanks to Sprott and Bambrough. The most critical thing is that they have offered us very controversial recommendations for preventing financial losses in the impending catastrophe.

Just because a meteor hits the earth doesn't mean anything (though that may happen, too). Putting water on high heat causes global warming. It begins by getting heated, and then it grows warmer still. It becomes hot in the end. So, the water comes to a boil. That is to say, the disaster will simmer for some time, bringing forth economic and political unrest, among many other problems—perhaps more accurately stated in biblical terms. Regrettably, the majority of us will hold off on waking up until the next Hurricane Katrina is within a short distance away.

The writers discuss climate change and global warming in every possible way throughout the first part of the report. You may be alarmed by the crevices that Messrs. Sprott and Bambrough discovered. Did you know that the melting glaciers that filled the Ogallala aquifer in the US are causing it to dry up? This is the biggest aquifer in the world. A third of the global population currently lives in areas with inadequate access to fresh water. Despite being in close proximity to water, we might not have access to a glass of potable water. Discover the motivation behind the Saudis' rapid construction of desalination plants. Think about it if that dry climate persisted over 90% of the Earth's surface.

When global temperatures rise, what happens? One consequence of rising urbanisation, GDPs, and demand for "civilisation" amenities is an increase in carbon dioxide emissions. Earth is projected to become a boiling pot before the century ends because to deadly CO2 emissions, which increase global temperatures, poison air, and kill plants (and humans).

More Uranium is Necessary for Nuclear Expansion.

Kevin Bambrough sounded the alarm, saying, "This IS the perfect storm," not in the meaningless cliché sense but as an irate voice urging decision-makers to seriously consider the consequences of carbon dioxide emissions. An increase in nuclear reactors is urgently required, he informed us. He sent us to the work of environmentalist Patrick Moore, who argues that the United States should go from using 80 percent fossil fuels to using 60 percent nuclear power.

According to the scenario put forth by the former co-founder of Greenpeace, Bambrough extrapolated the 2030 predictions made by the World Nuclear Association (WNA). After that, the world's 441 nuclear reactors will be unable to meet the skyrocketing demand for nuclear electricity, which is already at 368 Gw. Based on Moore's assumption of 60% nuclear reliance, he calculated that nuclear power will meet 18,900 Twh of the total power demand in 2030, which the WNA predicts might reach 31,500 Twh. According to Bambrough's calculations, the world will need approximately 2,700 nuclear reactors by the year 2030 in order to generate that amount of electricity. Bambrough not only anticipated the "potential" for a 600% surge in operational nuclear reactors in the next quarter of a century, but also determined the amount of uranium needed to power them.

Bambrough claims that the world's uranium mining production is currently hovering around 100 million pounds. The world's utilities will need approximately 1.3 billion pounds annually by 2030 if nuclear energy increases as Moore claims it should. "The supply of uranium may well be the most limiting factor," Bambrough remarked in reference to a global nuclear energy buildup.

The spot uranium price might see a new justification for a sustained surge if this one pans out. In order to entice sufficient investment capital to fulfil the increase in demand, Bambrough stated, "Much higher uranium prices will be required." The last six years have seen uranium prices soar, so this has already started. After reaching a low of $6.40/pound in late 2000, the price of long-term uranium has risen dramatically, and it has recently traded as high as $46/pound. The conclusion drawn by Bambrough is valid. Compared to the 1950s, when uranium was at its peak, the current cost of building an underground uranium mine is prohibitive. Construction of any uranium-producing facility, including an ISL operation, is slowed down and costs more due to environmental restrictions.

“Marginal miners will become price setters," Bambrough stated. The heavy investment in firms like Strathmore Minerals (TSX: STM; Other OTC: STHJF) and Energy Metals (TSX: EMC) by the Sprott Asset Management funds becomes understandable in light of this. During our initial conversation with Dev Randhawa, CEO of Strathmore Minerals, in June 2004, he informed us that his plan was to buy uranium sites that were unprofitable at prices below $20 per ounce in order to profit from a sustained increase in the price of the metal. As the price of spot uranium has risen, his strategy has continued to benefit stockholders. Assuming Bambrough is correct, the junior uranium developers may find success as Internet sensations. This past November, newsletter writer James Dines came to that same conclusion, and others have reiterated it in various reports.

For decades to come, "Large low-cost producers may be able to reap Middle East-like oil profits," Bambrough reported. The smaller uranium companies are poised for great success if the gap between production costs and spot uranium continues to expand. The uranium production of those firms who delayed mining will be sold at a profit-to-production spread similar to what ExxonMobil or ChevronTexaco already enjoy.

Increasing uranium prices likely annoy fuel traders more than utilities, who are concerned about construction expenses. Nuclear power plants actually have fuel costs that are ridiculous. "Fuel costs (for nuclear) are merely 4.5 percent of total costs, even with uranium at $40 per lb," Bambrough stated in his paper. Nuclear power would only see a 6.75 percent increase in cost if uranium prices reached $100/lb, an additional 150 percent increase. The price of coal as a fuel is 35% and that of gas is 73%. Additionally, they contribute significantly to atmospheric CO2 levels.

Unless every country on Earth agrees to use nuclear power, what else can be done? Potentially more challenges lie ahead. The CO2 emissions issue, according to Lovelock, ought to have been handled fifty years ago. The atmospheric cycle for the emissions takes 50–100 years.

Food, water, and energy supplies will all experience disruptions, according to the Sprott report's co-authors. National security issues, skyrocketing grain costs, and increased investments to supply water and energy to those who aren't in over their heads in debt are all things they foresee. As a result of central banks flooding the money system with liquidity, they anticipate a currency crash. In the face of overwhelming economic disaster, gold will naturally play the role it has always played.

Is this level of reality too much for you? Shall we simply observe the outcome for the time being? We may not have such good fortune. The Chief Claims Strategist at Swiss Re and other experts expressed concern about the impact of global warming on future generations, stating in a CERES paper from March 2006 that the issue could have far-reaching social and economic consequences.

The reasoning and assumptions of Messrs. Sprott and Bambrough are, therefore, spot on. Stop procrastinating and start making progress right now, not in thirty years.

We sent David Miller the Sprott report before finishing this column to get a second opinion. His varied roles include consulting for the IAEA, serving as a senator for Wyoming for three terms, leading Strathmore Minerals (TSX: STM), and providing an encyclopaedia of information on uranium, geology, nuclear power, and politics. "Coal was the fuel of the 19th century," he said fairly directly. Oil was the fuel of the twentieth century. Their respective economic cycles have ended. In the approaching century, uranium will play a pivotal role as an energy source. As the new millennium has progressed, the chorus of nations demanding nuclear power has only grown louder. Maybe Moore's energy mix may materialise, or at least the nuclear industry will experience significant growth, bringing it closer to his desired percentage.

Our two-year study of uranium and nuclear power has left one critical question unsolved. Even though we have received several responses, we are still not convinced. The question of whether the world's nuclear reactors have access to enough "already mined uranium" and ongoing mining production to fulfil the expected worldwide demand for power remains unanswered. For the question posed above, the decisive word is "available." Almost every rock contains uranium. Worldwide, there is around 1.7 billion pounds of what is known as "already mined uranium" in storage. When the time comes, though, will there be an adequate supply of uranium for the utilities?

If this does not happen, the current spot price of uranium may resemble the price of gasoline around 1965 in the future.

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