Saturday, April 08, 2006

Apr 8 Uranium Stocks Update: Urasia Energy (CVE:UUU )

Over the last few months, Urasia (UUU.V) has kept relatively quiet compared to its main rival Paladin Resources (PDN.TO). While Paladin has reeled off successive positive annoucements, and buoyed further by the intense attention paid to the Australia-China uranium talks, Urasia has been largely silent, content to consolidate at the $3 range. However, this last week has seen a retracement of Paladin back under $4 (briefly) as investors took some profits from the red-hot uranium stock; Urasia, on the other hand, made a big move upwards as they attempted to chase down Paladin for uranium junior supremacy.

As I have said before, these two uranium companies are inextricably linked together and their market values have paralleled each other as well. Recently, PDN.TO has threatened to race ahead of UUU.V, but the end of this week, the two stocks were once again approaching each others' market values. It helped that Urasia announcement its second sales contract for 0.78 million pounds of uranium: perhaps it finally realized the value of communicating these contracts to the public like Paladin does.

In spite of less promotion than Paladin Resources, Urasia is in an equally good position right now. As of March 31st, the uranium company possessed cash and cash equivalents of $147 million, sufficient to meet its development plans and corporate costs for the next twelve months. A good sign of Urasia's vision for their uranium future is the recent purchase of 8 additional drill rigs in February. Paying $13 million is quite a hefty price, but rigs are at a premium these days and UUU.V, just like PDN.TO, realizes the value of ramping up uranium production as soon as possible.

Currently, through its two uranium contracts, Urasia has sold 1 million out of the approximately 1.8 million lbs of uranium oxide expected to be produced this year. Look for them to announce a third contract, and again they will emphasize that this will be contract under current uranium oxide market prices.

With the announcement by Cameco Corporation (NYSE:CCJ TSE:CCO) that their Cigar Lake project will be delayed until the end of 2007, look for Urasia and Paladin to continue consolidating their gains and trending upwards. Investors will be more willing to buy these two uranium producers now that they will have six more months of breathing room before Cameco begins new production.

I remain firmly long-term bullish on both of these excellent uranium stocks.
 

2 Comments:

Blogger collinsofsachse said...

It's very difficult putting a valuation on Uranium stocks because the price of Uranium is such a variable - it appears to be moving onward and upward for now.

When do you think some traditional valuation measures can apply to these stocks - especially the Juniors? Do you think real earnings won't begin to show up until later in '06 or even in '07?

5:29 AM  
Blogger Spelunca said...

quite honestly, real earnings will show up for less than 10 canadian-listed uranium companies by the end of 2007. off the top of my head: denison (DEN.TO), uex (UEX.TO), cameco, paladin (PDN.TO), sxr uranium one (SXR.TO), urasia (UUU.V)

11:42 PM  

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