Uranium Energy CEO Amir Adnani, with $50,000 of yellowcake

No tour of Uranium Energy Corp.'s processing plant in Hobson, Tex. is complete until CEO Amir Adnani pries the top off a big black steel drum and invites you to peer inside. There, filled nearly to the brim, is an orange-yellow powder that UEC mined out of the South Texas countryside.

It's uranium oxide, U3O8, otherwise known as yellowcake. This is the stuff that atomic bombs and nuclear reactor fuel are made from. The 55-gallon drum weighs about 1,000 pounds and fetches about $50,000 at market. But when Adnani looks in, he says, he sees more than just money. He sees America's future.

"The U.S. is more reliant upon foreign sources of uranium than on foreign sources of oil," says Adnani, who himself was born in Iran and looks out of place in South Texas with his sneakers and Prada vest.

America's 104 nuclear power plants generate a vital 20% of the nation's electricity. Back in the early 1980s the U.S. was the biggest uranium miner in the world, producing 43 million pounds a year--enough for nuclear utilities to source all the fuel they needed domestically. But today domestic production is down to 4 million pounds per year.

Perhaps worrisome, our biggest supplier is cutting us off. For the past 20 years America bought 20 million pounds a year from Russia, courtesy of dismantled nuclear weapons. But in 2013 the $8 billion Megatons to Megawatts Program comes to an end. Growing production from Kazakhstan (39 million pounds per year), Canada (18 million) and Australia (12 million) will fill the gap. But China, with 15 nuclear reactors, 26 in the works and 100 more planned, will increasingly compete for these finite supplies.

Adnani insists that he can close the yellowcake gap through a technology that is similar to the hydraulic fracturing, or fracking, that has created the South Texas energy boom. Fracking for uranium isn't vastly different from fracking for natural gas. UEC bores under ranchland into layers of highly porous rock that not only contain uranium ore but also hold precious groundwater. Then it injects oxygenated water down into the sand to dissolve out the uranium. The resulting solution is slurped out with pumps, then processed and dried at the company's Hobson plant.

Standing next to a half-dozen full drums of UEC's yellowcake, we're not wearing any protective gear, save a hard hat. We don't need to. The uranium emits primarily alpha radiation, easily stopped by our skin. That doesn't mean yellowcake is safe. Inhaling or swallowing it--in drinking water, for instance--can cause kidney and liver damage or cancer.

That's why Adnani's plan has prompted concern in a region otherwise nonchalant about environmental impacts on health and comfortable with the risk-reward ratio that comes with fracking. This part of Texas is in the core of the Eagle Ford s hale, currently the most profitable oil and gas field in the U.S. The people around here understand that the fracking of this shale, the injection of billions of gallons of sand-and-chemical-laden water, takes place 2 miles beneath the ground. They know that steel pipe cased in concrete, when engineered correctly, is not going to leak chemicals into their water.

UEC's process doesn't take place 2 miles down. Rather, it's dissolving uranium from just 400 feet to 800 feet down--not only from the same depths as groundwater but from the very same layers of porous rock that hold it. "By design it's much worse than fracking," says Houston attorney Jim Blackburn, who is suing UEC on behalf of residents near the company's new project in Goliad, Tex. "This is intentional contamination of a water aquifer liberating not only uranium but other elements that were bound up with the sand. We know this process will contaminate groundwater; that's the whole point of it."

UEC argues that it is doing the environment a favor. "We're taking out a radioactive source from the aquifer that won't be there for future generations," says Harry Anthony, UEC's chief operating officer. Adnani adds: "The water is already polluted. Uranium is so close to the water table such that by-products like radium and radon are already in the water. We're pumping water out of the polluted aquifers and reinjecting less radioactive water."

Such analyses haven't mollified critics. But they've proven enough for this unknown company to move full steam ahead. "The Eagle Ford," smiles Adnani, "will be the site of a uranium boom."

Adnani's putative uranium boom is 45 million years in the making. Back then volcanoes dotted West Texas and New Mexico, blanketing the countryside in a thick layer of ash that contained uranium and other elements. As uranium is easily dissolved by water, most of it washed out into the Gulf of Mexico over the millennia. But enough got stuck along the way--converted into solid ore when it came in contact with natural gas bubbling up from below--to produce one of the largest uranium deposits in the U.S.

Enter UEC, which already has one mine in operation, a second under construction and a handful more in the works, making it the most notable uranium producer in South Texas. As companies go, it's still a pip-squeak. Founded in 2005 in Vancouver, its roots are more in marketing than mining. Before UEC Adnani, just 34, was founder of Blender Media, an investor relations firm catering to speculative Vancouver mining companies. Adnani's cofounder was his father-in-law, Alan Lindsay, 61, who, in the words of Citron Research analyst Andrew Left, "has left behind nothing but companies that have promised high hopes and left investors with empty pockets." That would include defunct or bulletin-board firms like Strategic American Oil, Phyto-medical, TapImmune and MIV Therapeutics. Adnani says that as nonexecutive chairman of UEC, Lindsay has no day-to-day role with the company. And besides, he says, when Left critiqued UEC a couple years ago "we hadn't produced a pound of uranium. Since then we have executed on everything that Citron said we wouldn't be able to do."

UEC is listed on the American Stock Exchange and the Frankfurt Stock Exchange. BlackRock, Oppenheimer Funds and the closed-end Geiger Fund all hold large chunks, and the company boasts a market capitalization of $250 million, despite a net loss of $25 million in the past year on yellowcake sales of $13.7 million. Over five years it's run through more than $100 million, though money from follow-on stock offerings have kept it debt free, with $17 million in reserve. Shares peaked at $6.70 in the months before Fukushima. They're down to $2.45 now.

UEC inherits a checkered legacy. From the 1950s through the early 1980s big oil and chemical companies like Union Carbide, Exxon, Chevron, Conoco and even U.S. Steel mined uranium in South Texas. Not only did they find a lot of the stuff while hunting for oil and gas, but the federal government, amid the Cold War, even required that they also run tests in every oil and gas well to check for the presence of uranium. The oil companies sold their yellowcake to the government for the production of nuclear weapons and reactor fuel. "Back then every company was down here," recalls Anthony, who was a young engineer for Union Carbide. "This was the stomping ground."

But in the process, they made a mess, gouging out muddy pit mines and building tailings ponds to hold toxic sludge left over from processing ore with acid. A uranium mine in Karnes County was designated a Superfund site; it remains polluted, as does the nearby Falls City uranium mill site, where, the Department of Energy says, "contaminants of potential concern are cadmium, cobalt, fluoride, iron, nickel, sulfate and uranium."

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