| Eric Sprott may be Canada's answer to Warren | | | | solve. If we don't have assurance of supply, what |
| Buffet. He's got the Midas Touch and currently | | | | happens?' One thing about Hubbert's Peak that |
| manages more than $3 billion. We talk to Eric | | | | most people don't go to is the economic impact. |
| Sprott about uranium and why is bullish on nuclear | | | | Forget the price of oil. What if we produce 83 |
| energy. | | | | million barrels today, and in 25 years we have 55 |
| Interviewer: | | | | million barrels? What is the world going to do? Do |
| Uranium had been inching higher from 2001 until a | | | | we just have to shut down economies because |
| year ago. Since then, it has soared up the price | | | | we don't have a replacement for hydrocarbons? |
| chart. What is a realistic price for uranium and | | | | Interviewer: |
| how high can you envision it reaching? | | | | Do you think the world governments are |
| Eric Sprott: | | | | prepared for this? |
| There is obviously a shortage between current | | | | Eric Sprott: |
| mine production and current uranium consumption. | | | | Not at all. They show no interest. In fact, I would |
| In order to correct that imbalance, it would have | | | | say one of the real problems with the democratic |
| to be economic to open up new deposits. I'm not | | | | process is, unfortunately, too much time is spent |
| suggesting that it (uranium) has to go to $100 to | | | | thinking about politics. Hardly any time is spent |
| become economic. I don't think that's true. | | | | planning for the future. |
| Probably at $50, it becomes very economic. The | | | | Interviewer: |
| reality is that we've been so slow in getting | | | | On uranium, you recommended a number of |
| started that I think the whole nuclear industry will | | | | uranium companies in your special report. Cameco |
| ultimately prove to be the key energy source of | | | | (NYSE: CCJ) seems to be the one many |
| the future. With demand today at 170 million | | | | recommend. Other uranium companies seem to |
| (pounds), who knows? It might be 300 million | | | | be in the exploration or the more speculative |
| pounds in twenty years. The argument in the | | | | category, and now have some momentum |
| article we wrote is that based on the previous | | | | because of the bull market in uranium. How strong |
| peaks, prices if you put a normal inflation rate on | | | | are the fundamentals in those companies? |
| it, it would equate to something like $100. So, it's | | | | Eric Sprott: |
| not that far fetched that we might get there. | | | | I think the fundamentals for some of the |
| Interviewer: | | | | companies are spectacular, quite frankly. It's |
| If it takes four or five years, or up to a decade, | | | | interesting for us because we had the same thing |
| to get a nuclear reactor going, why are the | | | | happen in gold, when the price of gold was $250. |
| Chinese building so many so quickly? | | | | We tried to imagine what we should buy if, and |
| Eric Sprott: | | | | when, gold went to $400, which we thought it |
| Because they've been doing it right. One of the | | | | would, or $500 or higher. The real opportunity |
| nice things about a centrally organized | | | | always lay in, 'We'll find someone who has a large |
| government is they deal with big issues. | | | | resource that is uneconomic today, but if you |
| Obviously, China has a big issue in energy. If you | | | | move the price up, it becomes quite economic.' I |
| were sitting over there, you would realize, 'My | | | | would say Strathmore Minerals (TSX-V: STM). |
| god, we're starting to import two million barrels of | | | | They have a large resource already identified. In |
| oil. We used to export coal and now we don't | | | | fact, they are acquiring properties all the time that |
| export coal. What are we going to do if our | | | | were identified years and years ago. Yet, at $20 |
| growth rate continues to grow at eight or nine | | | | pound uranium, they probably don't make any |
| percent per year? How much power are we | | | | sense. But, at $40/pound uranium, they are likely |
| going to need? And where is it all going to come | | | | to make tremendous economic sense. Of course, |
| from when there are already shortages of the | | | | the value of the shares can almost - not go up |
| two most commonly used energy sources in the | | | | exponentially - but they can go up a lot. |
| country?' The option you fall back on is, 'Well, let's | | | | You finally tip over that breakeven level, and |
| go nuclear. We have to go into all of them.' And | | | | everything after that is profit. We had an analogy |
| of course, now they're predicting two nuclear | | | | like that in gold area, where one guy went out |
| reactors every year for the next ten years. Who | | | | and bought all these deposits that would make |
| knows? Maybe five years from now, that will be | | | | sense at $400 gold. The stock has been a |
| four reactors every year. Perhaps when we all | | | | tremendous winner. I think it is up 500 percent. I |
| realize the extent of the energy shortage. | | | | think the same can happen in uranium. That's why |
| Interviewer: | | | | we go to Strathmore and UEX (TSX: UEX). |
| How is this going to be sold to North America and | | | | Interviewer: |
| Europe in the wake of Three Mile Island and | | | | How do you feel about precious metals? |
| Chernobyl? | | | | Eric Sprott: |
| Eric Sprott: | | | | We feel pretty good about precious metals. |
| The way things might change is now that we | | | | We've been pretty bullish for quite a while now. |
| have $50 oil, and the price is almost going up in an | | | | We have liked the fundamentals for gold for a |
| unlimited fashion. Now that we've got coal at | | | | long time for any one of ten different reasons. |
| double and uranium that's gone up, people might | | | | The one reason I fall back on, that gives me |
| finally realize there is not an infinite supply of | | | | tremendous comfort, is the fact the world |
| certain things that we rely on. And that we might | | | | consumes 4,000 tons of gold per year, but mine |
| have to take a more pragmatic view of the | | | | production is 2,500. Anybody who uses any bit of |
| nuclear option. I'm sure that is exactly what | | | | logic knows, in due course, the price will go up to |
| certain countries, including Japan, China and France, | | | | reflect the imbalance between demand and |
| have done. The other thing is that there is a new | | | | supply. I don't care how much gold Central Banks |
| reactor where you can't have a meltdown. I'm | | | | sell, ultimately they are going to have no gold. I |
| not technically strong enough to explain it. The | | | | think people realize that Central Banks have made |
| uranium is in graphite spheres, and they won't | | | | a big mistake selling their gold. |
| melt down unless temperatures reach 2000 | | | | Interviewer: |
| degrees. The highest it ever goes to is 1600 | | | | The China card keeps driving global commodities |
| degrees so it's just not going to melt down. | | | | as they bring their country more technology. How |
| It doesn't matter if things are out of control. | | | | do you feel about the base metals? |
| They won't break down. If that kind of assurance | | | | Eric Sprott: |
| were accepted by the public - if someone could | | | | We haven't really gotten involved in the base |
| prove that that was the case - I think the nuclear | | | | metals. One of the reason we haven't gone there |
| option would be an incredibly viable option. | | | | is we have believed we are in a secular bear |
| Another thing that would make people think | | | | market, and there could be a financial implosion. In |
| differently would be having brownouts for a while, | | | | that kind of scenario the base metals don't do |
| or hyperinflation because of the shortage of coal, | | | | well. But the precious metals can provide safety. |
| natural gas, and diesel fuel. If we had brownouts | | | | That's the distinguishing mark we make between |
| for a while, and of course they have brownouts in | | | | the two. On the China thesis, the demand for all |
| China, which is probably why they are proactive in | | | | of these things would go up. Our problem is we |
| moving nuclear along. | | | | still expect some fallout in the financial arena, |
| Interviewer: | | | | which ultimately would even affect China. We feel |
| How realistic is the global energy crisis moving | | | | more comfortable with the precious metals, and |
| toward a Hubbert's Peak, an energy scenario | | | | we feel more comfortable with energy. Simply, |
| from the year 1970? | | | | energy demand in an economic implosion is pretty |
| Eric Sprott: | | | | inelastic. It doesn't fall off the table. Demand for |
| My view is that it seems very realistic. I think it is | | | | zinc, lead, copper, and aluminum can fall quite |
| very important that we do go back to 1970. Look | | | | precipitously if there was an economic slowdown. |
| at the fact that Hubbert said in 1956 that 1970 | | | | Interviewer: |
| will forever peak out (in terms of energy | | | | Are you expecting an economic slowdown? |
| production). Lo and behold, it peaked out! It almost | | | | Eric Sprott: |
| goes down every week in the United States. | | | | Absolutely, yes. We might be in it now. There are |
| Almost every week, there is a little less | | | | certainly lots of signs that there is not much |
| production. This is now with very high oil prices. It | | | | robustness in the U.S. economy. I have some |
| looks like his theory, for the geographical area | | | | very strong views as to what should ultimately |
| called the United States, worked. Do we think it is | | | | happen in the U.S. My views are predicated on the |
| going to work in the world? I tend to believe it is. | | | | fact that the government reports a deficit of |
| I believe there are projections for Great Britain, | | | | $400 billion, but there are also government |
| which I think are at about 4.2 million barrels/day | | | | reports that suggest, on a GAAP accounting |
| right now, that in ten years from now, will be | | | | basis, that the true deficit in 2003 was $3.4 trillion. |
| down to 700,000. That's what happens when | | | | We can all ignore it, and everyone has ignored it. |
| fields go into decline. They go down, and you can | | | | But, the reality is that the liabilities are accruing for |
| not resuscitate them. Everyone who studies the | | | | Social Security and Medicare in the U.S. at a |
| topic knows that no significant discoveries have | | | | tremendous rate. There has been no provision for |
| been made since the 1960s. | | | | it. There was a paper released by the U.S. |
| What I mean by significant are giant oil fields - like | | | | Treasury Department about a year ago that said |
| Ghawar. For example, people now consider a | | | | the present value of their obligations, that are not |
| 100-million barrel field a big deal, and 500 million is | | | | funded, is $44 trillion. Again, we can choose to |
| great. Well, one hundred million is like 1.2 days of | | | | believe it or not believe it. I happen to believe it. I |
| world's supply, and 500 million is eight days supply. | | | | made the point that politicians are in it to be |
| You have got to find a lot of those every year. | | | | re-elected, and they are not dealing with the real |
| We don't find them. We have hardly found | | | | issue. |
| anything. The Caspian Sea? I am guessing it is 500 | | | | The real issue is they are making promises to |
| to 700 million. It's the one thing we point to, the | | | | their citizens that they can't keep. And they're not |
| thing in the Caspian Sea, which we have been | | | | going to keep them. I would hate to be a retired |
| pointing to for the last three years. Let's say it is | | | | person or a young person in the U.S. Somebody is |
| 800 million barrels, it is ten days' supply. It's | | | | going to have to bear the brunt of all these |
| nothing. | | | | funding issues that haven't been taken care of. |
| Interviewer: | | | | Beginning in 2008, the baby boomers start |
| There have been some pretty incredible | | | | collecting these things. That's a real cash problem. |
| estimates as to how high oil can go. The highest | | | | Before, it was just a bookkeeping problem. You'll |
| we're read of stands at $182 for a barrel of oil | | | | have a huge influx of people collecting their Social |
| and $15 per gallon of gasoline. Your comments? | | | | Security and getting free Medicare. It's got to be |
| Eric Sprott: | | | | funded. Anyone who's looked at the problem has |
| When you get into any commodity, where there | | | | agreed that no one has done anything about |
| is a bonafide shortage, there is no limit on the | | | | funding it. You have to cut what your promises |
| price. There is hardly any limit on the price. | | | | were, which is what all the European governments |
| Because that last guy still wants that last barrel of | | | | are now trying to do. They're all cutting back on |
| oil. I always say, when a commodity is starting to | | | | the pension. Most companies are cutting back on |
| break loose, 'Never put a ceiling on it because you | | | | them because they can't fund them. The trend is |
| never know where it is going to go.' You look at | | | | in place here: What we thought we were going to |
| what is going on in the world oil situation. If I was | | | | get, we're not going to get it. Am I bearish? |
| (in charge of ) certain countries, I would probably | | | | Gosh, we've had forty years of living off of |
| be changing what I'm doing. You can see China | | | | savings that were supposed to be saved to |
| going throughout the world signing agreements | | | | provide this future. It was all spent. Everyone just |
| with countries to assure oil supplies. It's a | | | | chooses to ignore it. |
| government mandate to go out and secure their | | | | COPYRIGHT © 2007 by StockInterview, Inc. |
| supplies. I think people at the government level | | | | ALL RIGHTS RESERVED. |
| realize, 'We have issues here that we have to | | | | |