Andy Millette

Trading Note

While people scramble to make sense of what is going on in this crazy world, we here at the Market Traders remain steadfast in our views that the 6 billion people who inhabit this earth are going to require huge amounts of commodity resources going forward. The frightening disconnect between this reality and the battered down junior resource market will soon start to right itself as the world awakens once again to the notion of the ongoing Commodity Supercycle.

One area of the resource market that has been absolutely smashed to bits is the Uranium sector. But, that may be about to change in rather stunning fashion. Consider the following points:

~33% of global proven oil reserves are controlled by "Nationalized" oil companies that are not necessarily friendly to the USA.

Solar and Wind Power are not viable nor reliable enough as replacements for hydrocarbon energy.

Carbon Dioxide (greenhouse gas) emission is a serious concern that politicians will be addressing head on. This issue is playing a role in the current Canadian and US political campaigns.

Nuclear energy is an emission free energy solution with a zero carbon footprint. The USA has 104 operating nuclear reactors that collectively mean 700 million fewer tons of carbon dioxide entering the atmosphere annually.

EPRI is calling for a 25% increase in nuclear output by 2020 to meet the growing demand for electrical energy.

Industry experts estimate there are enough uranium reserves worldwide to feed the nuclear industry for 40 more years if no more reactors are built ever again.

Problem is, there are 30 reactors under construction right now around the globe with many more planned. The nuclear industry is about to experience a uranium supply shortfall.

The recent price spike to $130/lb was an early warning of what is to come.

The USA consumes ~52 million pounds of Uranium annually, but only produces ~5 million pounds.

The Megatons to Megawatts program to recycle Russian nuclear warheads supplies half of the USA demand. But, this initiative will expire in 4 years time.

Kazakhstan is fast developing into a significant uranium producer. Combine this with the notion that Cameco's Cigar Lake project in Canada is a failure and the prospect of the USA nuclear industry having to rely on Kazakhstan for product takes on a daunting political dimension.

China is moving quickly to forge alliances with Uranium producing nations so as to secure a future supply.

Reliance on both foreign Oil and foreign Uranium would seriously compromise the strength of the USA as a world power.

Domestic sources of Uranium must be found and developed quickly.

On this latter note, we observed this week that 2 junior Canadian companies are gearing up to do some potentially amazing things in the State of New Mexico. Canadian based Uranium City Resources (TSXv:UCR) has entered into an option agreement with Canadian based Running Fox Resources (TSXv:RUN) whereby UCR can earn up to a 60% interest in Running Fox's lucrative property located south and west of Albuquerque, New Mexico.

This area was intensely explored back in the 1970s by the likes of Gulf Minerals and Occidental Petroleum. Gulf Minerals in fact located several million pounds of Uranium in a number of smaller deposits. When Uranium prices crashed in the early 1980's, exploration efforts in the area stopped. After a 25 year hiatus, this area is now popping up on people's radar screens again. But, this time there's more. Not only was Uranium found back in the 1970s, so too was Vanadium. Back then, there was scant little need for Vanadium. Today, Vanadium is a much sought after metal that is primarily used as an alloy element in the steel industry to make steel stronger. Look up a price chart of Vanadium and you will see what I mean.

If the historical efforts by Gulf Minerals are any indication at all, it would appear that Uranium City Resources and Running Fox Resources are going to create quite a stir in the Uranium world when they start their exploration program in this area. Senior management at Uranium City Resources are now also on the lookout for additional such joint venture opportunities in other parts of New Mexico and even in Arizona too.

There is an expression that says "when the going gets tough, the tough get going". And this is exactly what we are seeing with these 2 companies. Instead of sitting about and feeling sorry for themselves in these ugly markets, they are taking decisive action and looking to make progress. Investors looking for opportunities in these beaten down markets would be wise to take a look at these 2 companies.