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Warren Irwin: Uranium Series Part 7: Cameco’s McArthur River Mine will Never Re-open

Warren discusses the lack of a “knock your socks off uranium rally” but he still feels the trend is our friend. Some of the developments in Kazakhstan have resulted in production cuts. KazAtomProm may be incentivized in the short term to keep a lid on the price of uranium until after their IPO. Then they may start acting more like a private company than a government-backed entity.

The big news from Canada is with Cameco and their shutdown of the McArthur River Mine. It shows how serious they are about trying to get the uranium market back into line. He doesn’t see them restarting the mine due to it being one of the most technically challenging in the world.

He is quite familiar with NexGen’s Arrow resource, and if he were in management at Cameco, he would look at the cost benefit of closing the McArthur mine versus acquiring other assets. He feels that it’s almost inevitable that Cameco will buy an interest in NexGen’s Arrow.

The public view on uranium in Australia seems mixed as many environmental groups incorrectly see it as negative. People keep discussing the Olympic Dam Mine expansion and how that could bring on additional uranium production, but from a cost-benefit perspective, he doesn’t see that happening any time soon.

China has forty-five nuclear plants and fifteen more that are under construction with even more in planning. Even in China, there were concerns due to Fukushima and they had to re-evaluate their plans. The reality, however, is that China needs to use nuclear to shut down their coal-fired power plants. They will need increasing amounts of uranium after 2020.

Talking Points From This Week’s Episode:
• McArthur River mine is technically challenging and may not be re-opened.
• Warren feels that Cameco will eventually acquire NexGen’s Arrow Resource.
• China has no real alternatives but to build out nuclear energy.

Warren Irwin is President and Chief Investment officer of Rosseau Asset Management Ltd. He founded the firm in 1998 after several successful years as vice president and director of special investments at Deutsche Bank Canada. The firm’s flagship event-driven hedge fund, Rosseau LP, was established on December 31, 1998, and has since earned a reputation for solid long-term performance earning over 50% the return of its benchmark index. Irwin started his career as a bond analyst for Scotia Capital Markets where he developed the Universe Bond Index, the Canadian bond market benchmark, and shortly after that developed and managed Canada’s first bond index fund. He is a Chartered Financial Analyst and holds a Bachelor of Mathematics from the University of Waterloo and a Master of Business Administration from the University of Western Ontario.

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