China-Canadian Trade Talks Open Doors For Uranium Producers (URA, NLR, CCJ)

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March 9, 2012 1:46pm NYSE:NLR NYSE:URA

Tom Essaye:  While the world has been consumed watching the geo-political events unfolding in Europe and the Middle East, I think one of the most interesting  events of the year quietly occurred this month between China and Canada.

You see, about two weeks ago officials from Canada travelled to China and  held the largest trade meeting between the two countries in decades. The net result of those talks, the most material and fruitful in years: The signing of a declaration of intent to agree to a Foreign Investment Promotion and Protection Agreement (FIPA).

The lengthy name aside, it’s an important step in further  Canadian/Chinese trade, as it sets a broad framework for ensuring equitable  treatment for foreign investors in both countries. Basically, it removes a  large degree of risk for Chinese and Canadian firms investing with the other country by providing a legal framework and set of laws that protect foreign  investors.

Now to be fair, there is tremendous legal review that has to occur before  this becomes ratified between the two countries, so it’s not like things are  going to change tomorrow …

But the trend of Canadian/Chinese trade is clearly improving (for  context, they have been trying to get this FIPA done since 1994). While better  Chinese/Canadian trade relations is a bad thing for us here in the U.S., it’s a  good thing for Canadian natural resource companies and transportation  companies.

Specifically, this should be long-term bullish for Canadian mining and energy companies, as there will be increased demand for their exports from China’s  growing economy. Additionally, it is bullish for Canadian rails and shipping companies, as they will have to transport these natural materials that will be  exported to China.

Uranium Companies Get Access to China

While trade between Canada and China will increase over a series of  years, one concrete and much more near-term agreement came out of the meetings  …

And that was the amending of a 1994 nuclear agreement that will now allow Canadian uranium companies to export to China — a country where uranium demand (NYSEArca:URA) is set to surge according to the World Nuclear Association. The group also  estimates that Chinese uranium demand will quadruple by 2020 as more power  plants come online.

Federal safety officials  recently gave the okay for the country's first new nuclear reactors in more  than 30 years.
Federal safety officials  recently gave the okay for the country’s first new nuclear reactors in more  than 30 years.

Indeed, good news for uranium producers. What’s more, we also just  learned that federal officials approved the first new nuclear power plant in the United States since 1979. The Nuclear Regulatory Commission approved  Southern Company’s request to build two new nuclear (NYSEArca:NLR) reactors at a current nuclear Vogtle power plant in Georgia.

One way to play this potential growth in nuclear power demand is through uranium miners, which have severely underperformed since the Japanese Fukushima disaster almost a year ago.

While the coast isn’t totally clear for nuclear power or uranium miners,  shares like Cameco (NYSE:CCJ) could be a great contrarian investment that should profit from increased nuclear power here in the U.S., and from increased uranium exports from Canada.

Best wishes,

Written By Tom Essaye From Money And Markets

Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, and Michael Larson. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

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