Nuclear power is poised to make a comeback, and the spike in uranium demand it will bring over the next few years will send uranium stocks soaring.
While the Fukushima nuclear disaster in Japan in March 2011 stirred a lot of talk about abandoning nuclear power, nations have since come to realize their energy needs can't be met without nuclear being part of the equation.
The Japanese blowout scared the public so badly, in fact, that many governments vowed to severely cut back on nuclear power. Germany said it would quit using it altogether.
But then reality struck.
Major export economies in Europe and Asia have energy-intensive industries that can't just dump nuclear energy overnight.
The best proof that nuclear is not going away is right in Japan, which already has been forced to restart two reactors, and more will be restarted soon.
The Prime Minister of Japan called restarting the reactors a "matter of national survival," because the high cost of imported liquid natural gas was crippling the economy.
And nuclear energy has proven itself to be a safe alternative to the smog-belching coal plants in emerging countries like China and India.
Even oil-rich countries like Saudi Arabia are building new nuclear reactors now -- a clear sign nuclear energy is here to stay.
Simply put, the world not only needs low-cost nuclear power - it needs more, not less of it.
And uranium is the only fuel that can possibly give billions of new consumers in energy-starved countries like India and China the power they need.
Demand Will Drive Uranium Prices
Nuclear power currently provides about 13.5% percent of the world's electricity, and that's likely to grow given the new capacity slated to come online.
A total of 31 nations across the globe have 436 nuclear reactors under production. Globally a total of 95 nuclear reactors are planned over the next two decades with 62 already under construction, according to the World Nuclear Association (WNA).
And each of those plants will use 500,000 pounds of refined yellowcake per year.
But miners can't satisfy the world's current appetite for uranium, much less higher demand in the future.
The WNA has projected 52,221 tons of production in 2012. Meanwhile, uranium demand is expected clock in at around 77,000 tons.
Demand for uranium is expected to jump 7% per year, reaching 110,000 tons by 2017.
Altogether, the planet could come up 400 million pounds short by 2020.
Still, the cost of uranium production means the industry needs to get about $85 per pound to make it worth bringing new mines into production.
But rising demand should take care of that.
"When those supply and demand lines intersect, the only thing that can happen is prices go up," noted natural resources expert Rick Rule recently told The Daily Crux. "If the prices don't go up, the lights will go out."
Fukushima Creates Uranium Stock Opportunity
The Fukushima disaster and all the negative talk that followed sent uranium prices -- and uranium mining stocks -- into a nosedive.
Prices for uranium tumbled to about $41 per pound from $68, according to Ux Consulting.
Uranium stocks suffered accordingly.
The Global X Uranium ETF (NYSEArca: URA), for example, has fallen nearly 23% year-to-date.
But for investors today, that decline is an opportunity.
Despite what happened at Fukushima, the overwhelming appeal of nuclear energy has set the stage for a rebound.
It's only a matter of time before the demand for energy in emerging markets will drive a new nuclear boom.
And with prices at rock-bottom, it's time to put uranium mining stocks on your radar.
Investing in Uranium Stocks
The key question for investors is: when will uranium prices turn around?
Rule says investors with a two- to four-year time frame will be the big winners.
For a pure uranium play, Cameco Corp. (NYSE: CCJ), with its $8.9 billion market cap, is the best of the breed for institutions and small investors alike.
Cameco is one of the world's largest uranium producers, with over 16% of the world's supply. Its McArthur Lake and Cigar Lake deposits are the largest in the world, with over 476 million pounds of proven and probable reserves.
Even though the company just reported weak earnings for the third quarter, analysts are urging investors to scoop up shares on the recent dip.
"We like Cameco on its top producer status...organic growth in safe jurisdictions, healthy balance sheet, vertical integration, and dividend," Raymond James analyst David Sadowski told the Financial Post.
If you're looking for a leveraged play, Denison Mines Corp. (NYSEAMEX: DNN) is a small cap miner with several exploration projects that give it big potential for growth.
Denison is already in partnership with Cameco in a potentially large deposit called Wheeler River.
Denison also has a 22.5% ownership interest along with Cameco in the McClean Lake uranium mill, one of only two in the Western hemisphere.
Eventually, Cameco may buy out the Wheeler deposit and McClean Lake or simply swallow Denison.
If not, its leverage to uranium still makes it an interesting play.
Consider this: When uranium almost doubled in a matter of months towards the end of 2010, DNN rose nearly 300%.
You don't want to miss out on gains like that.