Interviewer:
Before we talk about the potential of uranium shortages and the steep price rise in that energy source, could you explain how you got started with this idea, and what is the philosophy behind Strathmore’s acquisition program of uranium properties?

Dev Randhawa:
Several years ago, Strathmore Minerals started with the idea of acquiring properties “out of the money” at very cheap prices in the belief that the uranium prices would recover so that our assets would be worth more. No one was paying attention to the commodity we chose: uranium. Strathmore Minerals is basically a call on the price of uranium. That’s how we started the company. This strategy is similar to what Lumina Copper (AMEX: LCC) used and what Silver Standard used. For example, the chairman of Silver Standard Resources (NASDAQ: SSRI) is on our board of directors. Our first step was to buy every pound we could for as cheaply as possible. The second step is to buy property that we think we can put into production. We are actively looking for those.

Interviewer:
But uranium has a powerful environmental stigma. Why, then, are you enthusiastic about this type of energy source?

Dev Randhawa:
As with most people, when I began investigating uranium, I thought this was bad stuff. I thought of Three Mile Island and everything else. The more homework I did on this, the more I realized that nuclear power is clean and safe. That is primarily what uranium is used for now. It should be known that no one ever died at Three Mile Island. No one actually died at Chernobyl. Yes, people got sick. Compare that to coal or the oil spills in the fossil fuel sector, and the damage it has done to the environment. The problem is no one is championing nuclear energy. Frankly, the “greenies” have done a great job of burying the story. As I did homework, I found out France relies on nuclear power for about 78 to 80 percent of its electricity needs. I realized that somebody did a great job lobbying and built a very unhealthy picture toward uranium, when really it’s needed. We don’t talk about the cost of coal. We don’t talk about global warming. But, look at what coal has done. Global warming is a function of fossil fuels. That is why you are seeing a growing positive response to nuclear power. For example, one company has applied to put a new nuclear reactor into the US.

Interviewer:
To what do you attribute the recent, steep price rise in uranium?

Dev Randhawa:
Since last year, the price of uranium (U3O8) has climbed back steeply back up. At one point, the price was moving up about $1/pound per month. Uranium’s price is more in line with the price of oil as opposed to other commodities. For a long time, we’ve only produced on the average about 90 million pounds, when we needed 140 (million pounds). There’s been an imbalance for a number of years. This extra came from foreign sources, or from internal US inventories. Since the 1980s, we’ve been using more uranium than we have been producing in the western world. As a result, the extra that we’ve needed has come from Russia, the US government or inventory that utilities had.

Interviewer:
But most investors, let alone the consumer, don’t know that uranium’s spot price has nearly tripled, since bottoming three years ago. Why is that?

Dev Randhawa:
Uranium only makes up one percent of the cost of running a nuclear reactor. The biggest factor in why uranium prices can go up, even more rapidly than gold, is that uranium is insensitive to its use. Uranium prices can go much higher. In casual conversations with a few Toronto analysts, some believe it can go up to $80 or $100/pound. For example, if the price of gold tomorrow went to $800/ounce, it will affect someone’s purchasing decision. The guy might say, “I was going to buy this ring and now it’s up 70 percent because the price of gold is up. Maybe I will buy a silver ring instead.” The same occurs with other commodities. People may change their purchasing decision based on a commodity price doubling.

If the price of uranium went to $44/pound, the average consumer’s electricity bill might go up a few dollars. It is not going to force someone to turn off their power. However, if the price of oil doubled tomorrow, many of us would be driving smaller vehicles. It would make a fundamental difference in how we behave. That’s not going to happen with the price of uranium. It’s like buying pencils for your office. It’s not going to change the way you do business. Even if no nuclear reactors come onboard for the next few years, the ones already there will need the pounds (of uranium). We have a shortage coming up.
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While paper-based investments and real estate are vulnerable to effects of changing times, gold soars. A precious metals investment may save a portfolio when all else fails.

The old Chinese curse, “may you live in interesting times”, has particular relevance to the current epoch of U.S. history. There’s a lot going on right now, much of it scary. Major investors around the world are responding to the events of our perilous age by sinking their dollars, deutschmarks and yen into gold, silver and palladium; Bill Gates, Warren Buffet, and billionaire speculator George Soros to name but a few. Big financial institutions like the Central Banks of Russia and China are also leaping onto the metals bandwagon driving the price of these precious commodities ever higher.

This is spurring a gold rush not witnessed since the Misery Index years of the 1970s. Many financial experts now view gold in particular as an island of stability in a paper-based investment market growing stormier all the time, a development that bodes well for everyday folks who want to shore up their retirement accounts with a precious metals hedge.

“People the world over are losing faith in politicians, and currencies,” says Marc Lubaszka, President/CEO, World Financial, a highly successful investment firm specializing in precious metals based in Studio City, Calif. “This has resulted in a flight to gold and other precious metals, a storehouse of value for more than five thousand years. Investors are taking their money out of paper assets, and putting it where it is likely to earn a better return in uncertain times.”

Old Reliables Unreliable
Investments once considered as stable as granite are rapidly losing ground, Lubaszka explains. Real estate is but one example. Long praised as a slam-dunk by money gurus, home-buying is no longer viewed as a hurdle-free path to profit. Stratospheric pricing and higher interest rates are putting intolerable pressure on the current housing bubble, factors bound to bust the suds sooner or later and drive the overheated real estate market into deepfreeze.

“The housing bubble will burst rather than gradually deflate, following the rapid and violent pattern of decline of nearly every financial bubble throughout history,” Lubaszka says. “Higher interest rates negatively impact not only the health of the housing market but other economic segments as well. The stock market takes a hit because higher rates make it more costly for companies to pay for debt. Higher rates hurt corporate profit margins and reduce stock value, bad news given the deep debt situation so many companies are in today.”

Paper is Passé
According to Lubaszka, the U.S. dollar has lost more than 80% of its original value since the early 70’s when we went to a floating currency, a situation not helped very much by the debut of the Euro in the late 1990s. Unlike American dollars, a portion of the Euro is gold-backed, a stability feature that has helped it outperform the dollar over the long haul. It is for this reason that many foreign investors have been taking money out of U.S. dollars and putting it into gold and oil instead, one explanation for why the price of both has continued to rise in recent months.

“Gold prices are climbing right now because the Federal Reserve is printing dollars in flood proportions to keep the real estate market afloat,” adds Richard Russell, editor Dow Theory Letters, a stock market trends and securities report published since 1946. “This is creating inflation, which erodes purchasing power. All the world’s central banks are inflating right now, reducing confidence in paper globally and encouraging gold-buying. India and China are spurring gold prices as well. India is the world’s largest gold-consumer, and the Chinese government is actively encouraging its citizens to buy gold.”

All are extremely encouraging signs for gold investors. Over the course of the past 35 years, gold has climbed in value from a modest $35 an ounce to nearly $600. Contrast that with the battered U.S. dollar, a currency currently worth only 20% of its value in 1970.

“When gold peaked-out in the 1970s, interest rates were at an all-time high,” Lubaszka says. “Right now we’re waiting to feel the effects of the last 9 interest rate increases which generally take 6-9 months to begin impacting the economy. Now’s the time to buy gold because when rates go up, downward pressure is exerted on real estate, stocks and bonds and commodities like gold tend to increase. The opposite occurs when rates travel from a high to a low. That’s the time to reduce gold assets and increase the paper part of a portfolio.”
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