Could Uranium Enrich Your Portfolio?

Approximately nine months ago, one of the strongest earthquakes in history hit Japan causing a devastating tsunami that hit some of the country's nuclear power plants on its coastline. Despite the strong protective structures, the flooding water was able to wreck the cooling systems of a few nuclear power plants, which led to a leak of a radioactive material to the environment. As a result, the fears of nuclear disasters spread across the world, which tanked the uranium demand and prices.

This also led to falling prices in the uranium stocks and the Global X Uranium ETF (NYSE: URA) has sunk 55% since January, 2011. Nevertheless, the depressed stock prices could provide a profitable opportunity for the investors to buy into the weakness. Benzinga contacted a uranium industry expert to get an insider insight on the current state of the industry and outlook for 2012.

Denison Mines (NYSE: DNN) CFO, James Anderson, agreed that the industry is still suffering from the disaster in Japan and that he expects the uranium demand and price to remain low in the coming months. However, CFO Anderson expects the commodity and equity prices to start rising further down the road in 2012.

When asked about Germany's decision to cut their nuclear power dependence, James Anderson told that he is not concerned about it, as the country is a small user of nuclear power and he sees the future growth coming from countries like China, Russia, and India.

He also mentions that the U.S. demand seems stable and that Denison Mines' uranium main projects are currently in Canada and Utah.

In general, the increased demand by the emerging nations could in fact give a boost for the uranium demand, as the growing economies need to power new economic activity. Additionally, the demand of electricity goes up as the consumers have more disposable income to spend on home electronics.

On the other hand, other BRIC countries but especially China is increasingly investing in alternative energy sources. For example, China invested nearly $50 billion dollars in renewable-energy in 2010, which could pose a significant threat on the uranium demand.

You can follow me on Twitter @TuomoKallio