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Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Access to Water of Paramount Importance for Mining Operations

Commodities / Metals & Mining Feb 21, 2008 - 10:19 AM GMT

By: David_Petch

Commodities

Best Financial Markets Analysis ArticleCareful about Moving to Nevada - I have one thread that basically sums up the title for the introduction so please read before continuing further into the article: http://www.physorg.com/news122050436.html . Access to water is essential for mining and nuclear power plants and if Lake Mead continues to decline in volume, the Hoover dam will become a modern day Pyramid…a derelict of the past that had a purpose only to be viewed as a monument of the technical savvy of those that went before them. This event could affect millions of people, so as an aside, avoid purchasing real estate in Vegas because it likely is entering a long-term bear market.


This article was originally posted for the benefit of subscribers on February 13th , 2008

Denison (DML.TO) has 4 operational mines at present alongside their White Mesa Mill in Nevada , along with most of their major operations and exploration properties around the globe. At present, production in Nevada has been hampered by ventilation shaft permitting and a lack of experienced miners (seems to be the main problem everywhere these days). Three new mines are expected to come into operation in 2008, giving a total of 7 mines in operation within Nevada . I suspect that beyond 5 years, there is going to be a squeeze on Uranium production in Nevada , with this one article from 3 years past hinting at such an event: http://www.iht.com/articles/2005/12/30/news/gold.php . For our investment purposes, 3 years from now is about the point in time when we should begin to cash in the chips.

The mining techniques for Denison in the Nevada area are physical mining based, not ground source leaching, which would pose numerous problems, especially when the aquifers are being drained. The following article sums up the problem: http://coloradoconfidential.com/showDiary.do;jsessionid=D8F49379879E9FD9840E5A44A893EE96?diaryId=3339 . The white Mesa Mill processes all of the ore from the surrounding mines, so contamination of groundwater is restricted.

Denison has a very broad portfolio of Uranium mines and properties, with plans to produce 5 million pounds/year by 2011. Personally, I think this number is a little on the high side as stated in the latest corporate presentation: http://www.denisonmines.com/files/objects/Dec_18_07_WEB.pdf . US production is expected to be between 2.3-2.8 million pounds/year by 2011, but I suspect it will be more like 1.5-2 million pounds/year, just because of problems associated with available water. There are no nuclear power plants in the State of Nevada . Internal sources of electricity are the Hoover dam (faces declining electrical production from Lake Mead retreating), coal plants, natural gas plants, geothermal plants, small solar plants and imported electricity.

I have used Denison as a model company in Nevada because they have an established footprint there and provide a critical energy source needed to power the US . It is funny to note that a byproduct of gold mining in Nevada the past few decades has been water as per the second thread of the article in order to keep the mine dry. The future for gold mining will be restricted by the availability of water. Energy is more important than gold when it comes down to hard choices, so watch for Nevada politicians to grant future mine developments to Uranium companies instead of gold miners as water supplies continue to dry up.

Declining fresh water supplies around the globe are going to have implications on mining output, which will likely result in lower amounts of Uranium available for market. One of the longer-term projects for Nevada and California will be the installation of desalinization plants, pending available funding. There are plans to try and prevent a water crisis in Los Vegas by spending some 200 million dollars on drilling wells around the region and pumping in the water. These wells are slated to go down some 1600-1800 feet and it would literally take hundreds of years for the water table to recover. I would hope the EPA would have common sense to prevent this from occurring, given the potential for habitat destruction and accelerated losses to riverbed volumes and Lake Mead .

The take home point to this essay is to add water supply to the list of items essential for determining whether a mine (gold mine, oil sands, Uranium mine) will go into production or not.

A major portion of the work I do is technically oriented, but I am starting to write 2-3 editorials per week, such as the above. For further viewing of prior work, simply click on the Archive section of this site. I update the AMEX Gold BUGS Index, AMEX Oil Index, US Dollar Index, 10-Year US Treasury Index, S&P 500 Index as well as commentary on market-related issues and new technical analysis findings. We follow some 60 stocks, with a focus on core positions and stocks that actually make up our personal portfolio. As well, the keeper of the site, Captain Hook writes 3-4 articles per week discussing macro issues, ratio analysis of various markets and an in-depth study of put/call ratios and shorting candidates.

Have a good day.

By David Petch

http://www.treasurechests.info

I generally try to write at least one editorial per week, although typically not as long as this one. At www.treasurechests.info , once per week (with updates if required), I track the Amex Gold BUGS Index, AMEX Oil Index, US Dollar Index, 10 Year US Treasury Index and the S&P 500 Index using various forms of technical analysis, including Elliott Wave. Captain Hook the site proprietor writes 2-3 articles per week on the “big picture” by tying in recent market action with numerous index ratios, money supply, COT positions etc. We also cover some 60 plus stocks in the precious metals, energy and base metals categories (with a focus on stocks around our provinces).

With the above being just one example of how we go about identifying value for investors, if this is the kind of analysis you are looking for we invite you to visit our site and discover more about how our service can further aid in achieving your financial goals. In this regard, whether it's top down macro-analysis designed to assist in opinion shaping and investment policy, or analysis on specific opportunities in the precious metals and energy sectors believed to possess exceptional value, like mindedly at Treasure Chests we in turn strive to provide the best value possible. So again, pay us a visit and discover why a small investment on your part could pay you handsome rewards in the not too distant future.

And of course if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line . We very much enjoy hearing from you on these items.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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