Cigar Lake… sunk?

Dave Forest with Casey Research reports that, "The uranium industry is reeling. On October 23, Cameco, the world's largest yellowcake producer, announced that its Cigar Lake mine had sprung a leak. Early attempts to seal the affected area failed, and the underground workings are now completely flooded.

We covered this in a post last week. It's been bullish for uranium. Dave thinks there's even more to it. "This is a pivotal development," he writes. "Cigar Lake is the world's largest undeveloped uranium deposit, holding 232 million pounds U3O8 at a grade of 19%. Production from the mine was supposed to begin in early 2008; at peak, it was thought that the mine would have provided 17% of world uranium supply. In short, this is one of the few projects that could make a significant difference for the uranium market… or, it was.

"Cigar Lake's future is now in doubt. Although Cameco's (NYSE: CCJ) management put on a brave face - saying the company is "committed to develop plans to remediate the project" - we spoke with several uranium professionals in Saskatchewan who told us they now believe the mine may well be lost completely. At the very least, the flood will push back start-up for a minimum of one year, assuring that supply will be even tighter than anticipated over the next several years.

"Considering that the market had little breathing room, even anticipating Cigar Lake's fresh supplies, the situation verges on crisis. A further significant jump in the spot price over the coming weeks is a distinct possibility."

In our opinion, crisis is often just the most visible aspect of opportunity. And as investors-rather than as humanitarians, scientists, or policy makers- that's how we prefer to analyze the world's energy and resource markets. We see what's happened to Uranium and see the same possibility with Zinc. And we see the energy sector on the verge of huge new capital innovations and developments.

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