edictable primary demand, very large secondary supply, large secondary demand, and marginally adequate uranium production capacity.

The large secondary supply (uranium not produced from mines and mills in that year) is currently about 40% of world supply. It has such components as excess inventory, enrichment tails stripping, recycling of used fuel components, and—most importantly—dismantled Russian nuclear warheads.

Let me

This past weekend, spot uranium prices jumped to $52/pound, as first announced by TradeTech LLC. Uranium miners were celebrating. When the spot price traded below $40/pound, some U.S. uranium mining projects may have been uneconomic. Because U.S. electric utilities have now begun purchasing above $50/pound, new hope emerges for many junior uranium development companies. The question is: Will uranium stay at these levels. To answer our question, we turned to Gene Clark, Chief Executive of TradeTech. At our request, he wrote the essay, which follows, describing what may lie ahead and whether or not investors should consider junior uranium stocks for investment purposes.

Gene Clark: Speculating on the $50 Uranium Barrier

On August 31, 2006, the NUEXCO Exchange Value soared through the $50 level for the first time in its history, reaching $52 per pound U3O8. The Exchange Value is the longest running price indicator in the uranium market – in continuous publication since August 1968. The last era in which the spot price was anywhere near this level was in the 1970s, when the Exchange Value peaked at $43.40. That price, however, equates to over $100 in today’s dollars. So, in real terms, the current price of $52 is only half-way to matching its historical high.

Although it is tempting to compare the two eras, the situation today is vastly different from that of the 1970s. The 1970s were characterized by spurious demand, minuscule secondary supply, and a huge world-wide excess uranium production capacity—left over from the U.S. military production-incentive program. But perhaps the most important factor was the total embargo on importation of uranium for use in the United States. In contrast, today’s market has firm and predictable primary demand, very large secondary supply, large secondary demand, and marginally adequate uranium production capacity.

The large secondary supply (uranium not produced from mines and mills in that year) is currently about 40% of world supply. It has such components as excess inventory, enrichment tails stripping, recycling of used fuel components, and—most importantly—dismantled Russian nuclear warheads.

Let me e

uestion, we turned to Gene Clark, Chief Executive of TradeTech. At our request, he wrote the essay, which follows, describing what may lie ahead and whether or not investors should consider junior uranium stocks for investment purposes.

Gene Clark: Speculating on the $50 Uranium Barrier

On August 31, 2006, the NUEXCO Exchange Value soared through the $50 level for the first time in its history, reaching $52 per pound U3O8. The Exchange Value is the longest running price indicator in the uranium market – in continuous publication since August 1968. The last era in which the spot price was anywhere near this level was in the 1970s, when the Exchange Value peaked at $43.40. That price, however, equates to over $100 in today’s dollars. So, in real terms, the current price of $52 is only half-way to matching its historical high.

Although it is tempting to compare the two eras, the situation today is vastly different from that of the 1970s. The 1970s were characterized by spurious demand, minuscule secondary supply, and a huge world-wide excess uranium production capacity—left over from the U.S. military production-incentive program. But perhaps the most important factor was the total embargo on importation of uranium for use in the United States. In contrast, today’s market has firm and predictable primary demand, very large secondary supply, large secondary demand, and marginally adequate uranium production capacity.

The large secondary supply (uranium not produced from mines and mills in that year) is currently about 40% of world supply. It has such components as excess inventory, enrichment tails stripping, recycling of used fuel components, and—most importantly—dismantled Russian nuclear warheads.

Let me

e Exchange Value is the longest running price indicator in the uranium market – in continuous publication since August 1968. The last era in which the spot price was anywhere near this level was in the 1970s, when the Exchange Value peaked at $43.40. That price, however, equates to over $100 in today’s dollars. So, in real terms, the current price of $52 is only half-way to matching its historical high.

Although it is tempting to compare the two eras, the situation today is vastly different from that of the 1970s. The 1970s were characterized by spurious demand, minuscule secondary supply, and a huge world-wide excess uranium production capacity—left over from the U.S. military production-incentive program. But perhaps the most important factor was the total embargo on importation of uranium for use in the United States. In contrast, today’s market has firm and predictable primary demand, very large secondary supply, large secondary demand, and marginally adequate uranium production capacity.

The large secondary supply (uranium not produced from mines and mills in that year) is currently about 40% of world supply. It has such components as excess inventory, enrichment tails stripping, recycling of used fuel components, and—most importantly—dismantled Russian nuclear warheads.

Let me

ompare the two eras, the situation today is vastly different from that of the 1970s. The 1970s were characterized by spurious demand, minuscule secondary supply, and a huge world-wide excess uranium production capacity—left over from the U.S. military production-incentive program. But perhaps the most important factor was the total embargo on importation of uranium for use in the United States. In contrast, today’s market has firm and predictable primary demand, very large secondary supply, large secondary demand, and marginally adequate uranium production capacity.

The large secondary supply (uranium not produced from mines and mills in that year) is currently about 40% of world supply. It has such components as excess inventory, enrichment tails stripping, recycling of used fuel components, and—most importantly—dismantled Russian nuclear warheads.

Let me

edictable primary demand, very large secondary supply, large secondary demand, and marginally adequate uranium production capacity.

The large secondary supply (uranium not produced from mines and mills in that year) is currently about 40% of world supply. It has such components as excess inventory, enrichment tails stripping, recycling of used fuel components, and—most importantly—dismantled Russian nuclear warheads.

Let me explain what I mean by “secondary demand,” since I believe this might be the first time this phrase has been used in our industry. We have historically treated “uranium demand” as the requirement for fueling nuclear power plants: for natural uranium, the base requirements for feeding the enrichment process required for most nuclear power plants; in the case of natural uranium reactors, the input for fuel fabrication.

This treatment of uranium demand, although historically not too inaccurate, has become na?ve, in view of the evolving sophistication of the market’s participants. This previous definition of demand can technically be labeled as “primary demand” and is also commonly referred to as “reactor requirements.”

Secondary demand, then, is uranium purchased from the market for purposes other than immediate use as nuclear power plant fuel. The real question, from the standpoint of trying to understand price formation and movement, is whether “secondary demand” is merely a minor perturbation at any given time in the market, or whether it is a major determinant of spot prices. And, if the latter, what impact does secondary demand have on long-term prices?

Before proceeding, let me state that I, personally and professionally—as well as TradeTech as an organization—have no inherent interest in which direction the uranium market moves. We are merely students of the market. We derive our income wholly from reporting and analyzing the market’s events and prices, rather than uranium brokering and trading or investing in nuclear companies. For that reason, our success lies in the ability to provide unbiased, accurate and detailed market information to our clients—those buyers, sellers, and investors.

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