Wednesday, March 29, 2006

Mar 29 Uranium Stocks Update: sxr Uranium One (TSE:SXR)

It looks like sxr Uranium One will indeed give the okay to the Honeymoon mine in June of this year, with production set to start 18 months later. The favorable uranium price coupled with the imminent Australia-China accord give more impetus for this uranium company to produce in Australia. Of course, selling the project is always an option, and I'm sure sxr Uranium will consider it. Either way, their main uranium production in South Africa is still on schedule and will debut in 2007.

Now for another word of warning about uranium juniors.

We are due for a major correction.

I hate to be dramatic, but I cannot emphasize this enough. Uranium seems to have caught every investor's imagination, but people are not buying these stocks rationally AT ALL. It doesn't matter if you're in Australia or Canada. The smallest juniors are being bought up in an investor frenzy reminds me of the days leading up to the dot com crash.

Part of the problem is that the biggest bulls of the uranium industry have done their job too well. They present the supply and demand argument, they present the need for uranium to be the alternative energy argument. What is lost is the fact that there are literally hundreds of small uranium juniors who have absolutely NO CHANCE to produce uranium in the next ten years.

Yes, I heard the argument that some uranium companies will be bought up. How many do you think that will be? Do you think it is rational to buy a company now worth >$100 million just for the remote chance that it will be bought up? Is that good investing?

I, for one, am actually quite dismayed at recent developments in the uranium stock investing sphere. Inevitably, the bubble will burst as new uranium investors finally do a little research and find to their surprise that there are less than ten uranium companies in the world that are producing or will produce in the next five years. Supply and demand fundamentals go out the window when you have nothing to supply. Uranium oxide price has no relevance to your company if your company is just starting to negotiate for rigs to drill holes in their property.

If you have speculated in small uranium juniors and have doubled your money in the past few months, do yourself a favor and sell now. Although I truly believe in the value of my own uranium picks--for they are truly the future of uranium companies--i am nonetheless forced to wait for the inevitable bursting of the uranium bubble. We are simply going up too fast, too soon.
 

9 Comments:

Anonymous Anonymous said...

Does your warning also include the imminent producers in some aspect or do you, as I am thinking, believe that even more interest will grow in those who actually CAN produce in near future?

Do you for example regard the recent rise for Paladin as a bubble?

1:39 AM  
Blogger collinsofsachse said...

I think you meant <$100 million.

Also - the run up has been dramatic - but do you think the producers...or near term producers like the ones you have been writing about will be immune to a correction?

This Uranium bull market is a little different than the dotcom frenzy in that there are several legitimate companies that do have earnings and do have resources in the ground - but I do agree that there are a whole lot more "rank speculations" than legit cos.

.......it's never a bad idea to book profits........

6:17 AM  
Blogger Spelunca said...

imminent producers will not be spared, but they will rebound in time. that's why i'll be buying more during the troughs. Paladin's case is a bit of a bubble in my opinion. Not a gigantic one, but I do not think their market cap should be exceeding Urasia's by this much. After all, Urasia is the one that is actually mining uranium out of the ground right now, not Paladin. Paladin's rise is partly by virtue of its immense popularity in Australia from its investing public, and the perceived implications of the Australia-China accord. Do you honestly think it would have spiked like this if all they had going for them was that 3rd sales contract announcement? While I remain long-term bullish on Paladin, I cannot say the same short-term.

One must not forget that there were dotcom companies who did have earnings as well. However, for every 10 dotcom companies I would imagine there was at most 1 or 2. Did they get spared during the dotcom crash? Did the general investing public who foolishly sank their monies into worthless stocks finally found their senses and did not compound their mistakes by fleeing the sector entirely? No, it took a long time for even the good dotcoms to recover. My hope in giving the warning now is that we can deflate this bubble without impeding long-term progress too much. The fundamentals are there for uranium stock investing, but the events of the last few weeks have been ridiculous.

6:42 AM  
Blogger charlottebandit said...

I do agree that we may have another correction (apart from last month's bloodshed), but it may not be as soon as we think.

I've seen some of my previous uranium sells skyrocket with just the least amount of speculative news. Certainly not to justify such a price increase.

--------------

However, solid uranium companies will hold their ground while others will feel the pain.

4:31 AM  
Blogger charlottebandit said...

As for exploration plays, they are the smallest portion of uranium holdings I have.

I only really look for high-grade deposits and excellent management. That drastically reduces the jrs by over 85+%.

4:34 AM  
Blogger charlottebandit said...

Looks like both of SXR's deposits will be online around the same time.

SXR pps will be shooting up if that's the case.

9:27 AM  
Anonymous Ethan45 said...

As you pointed out, there are dozens of new exploration companies riding on historic exploration findings and the fact that they are sitting in the Athabasca Basin. It seems to me that only a small handfull of these companies are actually drilling at this time.

If we are to take a bet on a grass roots play, aren't these the ones we should be watching? If their hyped up historical data truly has value, they should be releasing spectacular results right out of the gate.

I think that watching these early results will give us a window of what to expect over the next year or two from these companies.

Does anyone have a list of those juniors?

8:39 AM  
Blogger charlottebandit said...

I think there are several jrs that are worth their salt, although they haven't received a lot of attention.

Majors are really only interested in high-grade deposits (Cameco, Cogema) where they might be able to line up their uranium portfolio.

Spelunca is right that they won't see the light at the end of the mining tunnel for the next decade. I'm putting just a fraction in some good companies, but really banking on near-term producers & producers.

11:32 AM  
Blogger Ethan45 said...

True enough. I do believe that there is a correction coming this year and the majors and near producers are going to be the only safe place to be.

I did a little research and was only able to find 6 new juniors drilling along the major eastern mine belt of the Athabasca Basin this season:

Pitchstone, Purepoint, Strathmore, Canalaska, Entourage and Northwestern.

If the early uranium money starts shifting this year it will probably go to those who have real drill results of their own.

Let's see if any of these can show anything to earn that favor.

11:57 AM  

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