Chris Berry discusses emerging economies, uranium and the Athabasca Basin at WRIC 2013
by Greg Klein
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It’s through his work with House Mountain Partners that Chris Berry came to his niche, energy metals. His presentations and Morning Notes articles show fascination with the interplay of macro-economic forces, geo-politics and the natural resource sector, “especially the junior mining natural resource sector because that’s where we see so much wealth-generation and wealth-creating opportunity, the current market notwithstanding.” On May 26 he focused on uranium, its growing demand and jurisdictional risk at Vancouver’s World Resource Investment Conference 2013.
Berry sees two opposing global forces putting the West at a disadvantage to the East, but not without potential for Western companies and their investors. He describes Western economies as “treading water” with sagging employment, industrial production, purchasing power, capital utilization and GDP growth. If the “largesse” of money-printing ended, “you would essentially pull the rug out from under these industrialized economies.”
Contrast that with the emerging economies, not just Brazil, Russia, India and China, but also countries like Indonesia and Colombia. Their middle classes keep growing. Even so, they’re increasingly aware that their standard of living doesn’t compare to that of the developed world. Essential to their aspirations is cheap, reliable energy, Berry maintains. That makes a “long-term case for commodity demand, in particular energy metals.”
As he explains, there’s “hundreds of millions, if not billions of people who live at say 10% to 20% of our quality of life and they want what we have. They want iPads, they want iPods, they want refrigerators… that implies infinite demand for finite resources. I’m not going to tell you that all trees grow to the sky and copper’s going to go to $9 a pound and lithium’s going to go to the roof. That’s not how markets work.”
But the world’s witnessing a phenomenon “that we call convergence. Emerging countries understand what we have and how we got there and they’re tailoring their economies to join us.”
That leads him to “four metals that I’m focusing on right now—scandium, cobalt, tungsten and uranium.” He emphasized the latter. “I think uranium is, across the entire commodity complex, one of the only true contrarian plays I see out there.”
Media coverage following Fukushima, however, has “clouded the longer-term issue.”
The very considerable nuclear infrastructure already in place provides very considerable incentive to maintain existing capacity. “Decommissioning any of these reactors comes at a very steep cost,” Berry explains. Citing info from the Nuclear Energy Institute, he said decommissioning can take years and could cost up to $1 billion per reactor. With about 436 reactors in operation, he asks whether governments and taxpayers would foot the bill to shut them down and build wind, solar or natural gas infrastructure instead.
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