Friday, June 27, 2008

A Strong Suit

In cards you play a suit until you lose the lead. The “efficiency” theme has been working so well, it makes sense to continue the series a bit longer.

Thorium Power Ltd. (THPW: OTC/BB) produces the ultimate solution to “make an old technology work better.” The company develops thorium-based nuclear fuel designs and offers consulting services to industry and governments on nuclear power generation.

For the scientifically-challenged investors, thorium is a naturally occurring, slightly radioactive metal. Since thorium is more abundant than uranium, some nuclear reactor designs incorporate thorium in their fuel cycle. Indeed, it is a fertile material for producing nuclear fuel and produces less waste. More importantly, thorium-based fuels are proliferation-resistant, i.e. spent fuel cannot be used for the production of nuclear-weapons.

Thorium is about three times more abundant than uranium and is about as common as lead. Deposits can be found in Europe, North America, South America, Africa and Antarctica. India is thought to have about 25% of known reserves with Australia in a close second. Norway, the U.S. and Canada also have significant reserves of thorium.

The idea of using thorium as a substitute for uranium or plutonium has been around for a while. One of the earliest efforts to use a thorium fuel cycle took place at Oak Ridge National Laboratory in the 1960s. Lack of funding shut the project down, but not before the project operated at high power for several months at a time. The broadest and perhaps most important conclusion from the experience was that a thorium fueled reactor concept was viable.

Thorium Power is attempting to commercialize the scientific success with designs and solutions for existing and planned nuclear power reactors. No significant changes are needed to current reactor designs to use Thorium Power’s thorium-based technology. The company is small but building momentum. Thorium reported $3.8 million in sales in the March 2008 quarter, but the majority was booked as deferred revenue. The Company is still using cash to support operations. With $6.7 million in cash and equivalents on the balance sheet, Thorium has a good foundation to build on its growth plan in the near-term, but may need a capital infusion.

Abundant, politically benign, low waste…thorium is quite attractive for a world looking for a better way to produce energy. That makes Thorium Power is a company to watch.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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