Monday, May 29, 2006

Australian Uranium Stocks Listing (June)

Acclaim Exploration ASX:AEX
Adelaide Resources Limited ASX:AEX
Alliance Resources ASX:AGS
Apex Minerals ASX:AXM
Arafura Resources ASX:ARU
Ashburton Minerals ASX:ATN
Aura Energy ASX:AEE
Australian United Gold ASX:AUL
Bannerman Resources ASX:BMN
Batavia Mining ASX:BTV
BHP Billiton ASX:BHP
Bullion Minerals ASX:BLN
Cazaly Resources ASX:CAZ
Compass Resources ASX:CMR
Contact Resources ASX:CTS
Curnamona Energy ASX:CUY
Deep Yellow Ltd ASX:DYL
Encounter Resources ASX:ENR
Energy Metals ASX:EME
Energy Resources of Australia ASX:ERA
Equinox Minerals ASX:EQN
Extract Resources ASX:EXT
Georgetown Mining ASX:GRG
Globe Uranium ASX:GBE
Gold Search ASX:GSE
Golden State Resources ASX:GDN
Goldstream Mining ASX:GDM
Glengarry Resources ASX:GGY
Giralia Resources ASX:GIR
Great Western Exploration Limited ASX:GWE
Green Rock Energy ASX:GRK
Havilah Resources ASX:HAV
Hindmarsh resources ASX:HMR
Image Resources ASX:IMA
Jindalee Resources ASX:JRL
Kalgoorlie Boulder Resources ASX:KAL
Korab Resources ASX:KOB
Marathon Resources ASX:MTN
Matrix Metals ASX:MRX
Maximus Resources ASX:MXR
Monaro Resources ASX:MRO
Monax Mining ASX:MOX
Nickel Australia ASX:NKL
Nova Energy ASX:NEL
Omegacorp ASX:OMC
Paladin Resources ASX:PDN
PepinNini ASX:PNN
Redport ASX:RPT
Polaris Metals ASX:POL
Red Metal ASX:RDM
Reefton Mining ASX:RTM
Rio Tinto ASX:RIO
Scimitar Resources ASX:SIM
Siberia Mining Corporation ASX:SIB
Southern Gold ASX:SAU
Southern Cross Exploration ASX:SCX
Stellar Resources ASX:SRZ
Strike Resources ASX:SRK
Summit Resources ASX:SMM
Toro Energy Limited ASX:TOE
U3O8 Limited ASX:UTO
Uranex ASX:UNX
Uranium Exploration ASX:UXA
Washington Resources Limited ASX:WRL

American Listed Uranium Companies (June)

BHP Billiton Limited (NYSE:BHP)
CanAlaska Ventures (OTC:CVVLF)
Cameco Corporation (NYSE:CCJ)
Entourage Mining Ltd (OTC:ETGMF)
Fronteer Development Group Inc. (AMEX:FRG)
Lakefield Ventures Inc. (OTC:LKFV)
Rio Tinto (NYSE:RTP)
Uranium Energy Corp (OTC:URME)
Uranium Resources, Inc. (OTC:URRE)
U.S. Energy Corp. (NASDAQ:USEG)

Sunday, May 28, 2006

Uranium Stocks Post Correction

An inevitable broad-based correction hit the TSE and Venture exchanges and uranium stocks were not spared. As I have cautioned before, there were many uranium juniors whose market caps were out of proportion to their actual value. These were the companies who were hit worst of all and who have been slow to rebound.

Out of panic selling, however, comes opportunity and many bargains could have been found during the nadir of correction. For example, Duane Parnham, CEO of Forsys Metals Corp. (CVE:FSY) added 40,700 shares from May 12-19, increasing his personal stake during a time where FSY plunged from $1.93 to $1.59 (it is back up to $1.80).

Of course, the fundamentals of uranium supply and demand has not changed a single iota during this time. Weekly uranium oxide spot price from is still at US $43.00/lb. Speculative buying and selling were largely to blame for the the massive upward trend of uranium juniors, and the painful correction thereafter.

This is why picking the right uranium stock is essential. While it was disheartening to see Urasia Energy (CVE:UUU) plunge from all the way down to $2.67 from the $3.40 mark, the fact that I have full confidence in its management and its status as one of the emerging uranium producers in a market with unchanged fundamentals gives confidence to average down my buying price. The stock right now is at $2.95.

Great companies will always live through corrections. Urasia, Paladin Resources (TSE:PDN), Forsys, Ur-Energy (TSE:URE), sxr Uranium One (TSE:SXR), and Uranium Participation Corporation (TSE:U) can give you that measure of comfort even in these volatile times.

Saturday, May 13, 2006

7th Uranium Stocks Pick: Forsys Metals Corp (CVE:FSY)

Few are the places in this world where a uranium mine can open within a few short years of applying for a permit. Namibia was one of them as Paladin Resources (TSE:PDN) managed to obtain government approval, perform Pre-Feasibility and Bankable Feasibility Studies, and accelerate their building to the point where they are scheduled to begin producing uranium oxide in a few short months. Investors of Paladin have been greatly rewarded as the company transformed itself into a uranium near-producer; Paladin has basically outperformed every other Australian stock for the last few years.

It did help that Namibia is very amenable to mining in general, and especially, uranium mining. Rio Tinto's (NYSE:RTP) Rossing mine has been operating in Namibia for decades, and currently produces 7.7% of the world's uranium. In fact, the government of Namibia owns 3% of the company while the mine accounts for 10% of the country's GDP. In other words, Namibia is reliant on uranium and quite amenable to further uranium production coming out of their country.

Paladin's Langer Heinrich is only forty kilometers away from Rossing, and claims the status as the imminent second uranium mine in Namibia. This, along with visionary leadership, experience with mining uranium, and clear communication with investors has vaulted Paladin as the preeminent uranium junior, with a market cap even beyond that of uranium producer Urasia Energy (CVE:UUU).

Now, the astute investor would wonder, is there a third prospective mine in uranium-friendly Namibia? Indeed there is, and the company aiming to put it all together is Forsys Metals Corp. (CVE:FSY).

The company's main uranium interest lies in the Valencia deposit, about the same distance away from the Rossing mine as it is away from Langer Heinrich. An NI 43-101 report verified what Goldcorp had discovered a few decades ago when they had drilled 108 holes into Valencia:
(1) there was a lot of uranium (>20 million lbs)
(2) that it was easy to mine out, being mostly near the surface
(3) unsurprisingly, the mineralization is similar to the Rossing mine and amenable to open-pit mining.

With this in mind, the company initiated a Pre-Feasibility Study in mid-November of 2005. Forsys has drilled 18 holes to date and results have been encouraging. In addition, with $25 million in cash, the company projects to be able to complete the Bankable Feasibility Study without having to raise more capital.

In evaluating a uranium junior, one would want to know who the management is and what they've been doing on the insider market.

Duane Parnham, Chairman & CEO
Ownership: ~ 3 million common shares
Last Insider Activity: April 25, 2006 acquired 15,000 shares @ 2.10

Wayne Isaacs, President
Ownership: ~ 440,000 common shares
Last Insider Activity: October 21, 2005 acquired 10,000 shares @ 1.26

Rick Bonner, Exploration Manager: 25 years with BHP & Diavik
Ownership: ~ 1.7 million common shares
Last Insider Activity: April 27, 2006 sold 10,000 shares @ 2.48

Roger Laine, Director, 15 years experience with COGEMA

Allan Walden, Project Manager: former Namibian mining commissioner

With 45 million outstanding shares, Forsys has reasonable insider ownership. While Forsys does not have a bankable name to fall back on like Urasia has with Ian Telfer or Ur-Energy has with William Boberg, the company has assuredly the right people in place with the right connections to facilitate a smooth transition into eventual uranium production in Namibia.

When one considers that Paladin currently has a market cap of 1.9 billion and Forsys that of 87 million, the upside potential of the latter is made immediately obvious. Of course, Paladin's uranium projects are much more advanced than Forsys', but that difference can mostly be attributed to time, and not fundamentals. Forsys essentially IS Paladin, just at a previous stage. Paladin rushed through their Bankable Feasibility Study in 2 years and is doing their best to fast-forward into uranium production within a year of finishing their BFS. Forsys would be wise and is indeed following that same path as emblazoned by Paladin. Long-term investors should give this company a hard look as it is reasonably priced compared to its more famous uranium junior counterparts like Alberta Star or Western Prospector.

Wednesday, May 10, 2006

China + Uranium Supplies: An Analysis

Along with other base and precious metals, China picked uranium to stockpile as part of its five-year plan to make sure the country has adequate natural resources to supply its amazing growth. Indeed, the country is building two new nuclear reactors a year for the next twenty years so uranium oxide should definitely be on China's wish list.

The question for uranium investors, then, is to tease out what China's strategy for uranium might be. Yes, they did sign an accord with Australia, but in order to secure supplies within a relatively short window of five years, they had better hope that Australian legislation changes in a hurry to permit more uranium mines.

In fact, it is unlikely that Australian uranium could totally satisfy China's uranium thirst within the next five years, even with BHP Billiton's (NYSE:BHP) Olympic Dam expansion. China will likely adopt a multi-tiered strategy for uranium as they did with oil, with a mixture of buying companies outright and, for others, JVs.

Thus, for uranium oxide producers like Urasia (CVE:UUU), Denison Mines (TSE:DEN), UEX Corporation (TSE:UEX) and near-producers like Paladin Resources (TSE:PDN), sxr Uranium One (TSE:SXR), this announcement by China can only be interpreted as being positive for their respective companies and their investors.

Monday, May 08, 2006

Uranium Stocks Volatility

If you check out Canadian uranium stocks lately on PreciousMetalResources, you'll find that many of them are trading with speculative volatility, often jumping up >10% on day while dropping the same amount on another.

For example, these nine uranium stocks today had jumped greater than 10%:

(1) Gravity West Mining Corp (GRW.V) up 24%
(2) Strateco Resources Inc (RSC.V)
(3) Monster Copper Corp (MNS.V)
(4) UGL Enterprises Ltd (UGS.V)
(5) Buck Lake Ventures (BUC.V)
(6) Pele Mountain Resources (GEM.V)
(7) Rodinia Minerals Inc. (RM.V)
(8) IGC Resources Inc. (IGC.V)
(9) Crosshair Exploration (CXX.V) up 10.7%

while these three uranium stocks fell more than 10%:

(1) Marum Resources Inc. (MMU.V)
(2) Strategic Metals Ltd. (SMD.V)
(3) Rare Earth Metals Corp (REM.V)

Before you conclude that uranium stocks in general did well this Monday, consider this caveat: 25 uranium stocks fell greater than 5% while only 18 gained greater than 5%.

What we are seeing right now is a period of extreme volatility in the uranium stock stratosphere. Caution is advised and a great deal of risk tolerance is needed if one wishes to buy uranium stocks at this moment.

Saturday, May 06, 2006

Cameco Corporation (NYSE:CCJ TSE:CCO) Q1 Analysis

I make it a point to read CCJ's Q1 results, because, even though it's not one of my six favorite uranium plays at the moment, it is the dominant company in the uranium sector and its financial results often contain valuable nuggets on both the now and the later of this industry. So without further ado, here is Cameco's publication of their results, with my commentary interspersed between:

Revenue $285 million
Gross profit $97 million
Gross profit 34%
Earnings before taxes $89 million
Average realized price 19.61 ($US/lb)
Sales volume 12.0 million lbs
Production volume 4.3 million lbs

Uranium Results
First Quarter

Compared to the first quarter of 2005, revenue from our uranium business rose by 265% to $285 million due largely to a 179% increase in sales volume. The timing of deliveries of nuclear
products within a calendar year is at the discretion of customers. Therefore our quarterly delivery patterns can vary significantly. An increase in the realized selling price also contributed to the higher revenue, rising by 45% (in US dollars) over the first quarter of 2005. The average realized price in Canadian dollars, however, increased by only 29% due to the strengthening Canadian dollar relative to the US dollar. The increase in the average realized price was the result of higher prices under fixed-price contracts and a higher uranium spot price, which averaged $38.96 (US) per pound in the first quarter of 2006 compared to $21.80 (US) in 2005.

Analysis: Cameco's results are skewed in that they sold almost three times the amount of uranium that they actually produced, thus explaining why their profit was so large compared to the first quarter of 2005. The Canadian dollar continues to be a hindrane to all uranium companies, as it continues to strengthen against the US dollar; it will definitely have a negative impact on company profits.

Our earnings before taxes from the uranium business improved to $89 million from $7 million last year, while the profit margin rose to 34% from 15% in 2005 due to the higher realized selling price.

Uranium Outlook for Second Quarter 2006
Our earnings from the uranium segment are projected to be about half of those in the first quarter of 2006 due to lower sales volumes. We expect deliveries to be about 50% those of the first quarter 2006 due to the timing of customer requirements. The average realized price is expected to be similar.

Uranium Outlook for the Year 2006
In 2006, we expect uranium revenue to be 20% higher than in 2005 due to a projected 18% improvement in the expected realized selling price (in Canadian dollars) and a 2% increase in deliveries. Uranium sales volume is expected to be about 35 million pounds in 2006. Cameco's share of uranium production for 2006 is projected to increase slightly to 21.4 million pounds of U3O8 from 21.2 million in 2005.

Uranium margins are expected to improve to about 30% compared to 23% in 2005.
The second quarter and the 2006 financial results outlook for the uranium business segment is
based on the following key assumptions:
- no significant changes in our estimates for sales volumes, costs, and prices,
- no disruption of supply from our mines or third-party sources, and
- a US/Canadian spot exchange rate of $1.16.

Uranium Price Sensitivity 2006
For the remainder of 2006, a $1.00 (US) per pound change in the uranium spot price from $41.00 (US) per pound would change revenue by about $2 million (Cdn) and net earnings by $1 million (Cdn). This sensitivity is based on an expected effective exchange rate of $1.00 (US) being equivalent to about $1.22 (Cdn), which accounts for our currency hedge program.

Analysis: essentially, Cameco is betting that the uranium price will increase faster than the Canadian dollar strengthen against its American counterpart, buttressing their bet with currency hedging.

Uranium Market Update

Uranium Spot Market

The industry average spot price (TradeTech and UxC) on March 31, 2006 was $40.75 (US) per pound U3O8, up 12% from $36.38 (US) at December 31, 2005. This compares to $22.55 (US) on March 31, 2005 and $20.60 (US) on December 31, 2004.

Total spot market volume reported for the first quarter of 2006 was 5.0 million pounds U3O8. Although lower than the 12.2 million pounds transacted in the first quarter of 2005, prices continued to increase, as supply remains tight.

Industry sources indicate that discretionary purchases, or purchases not for immediate consumption, remained strong accounting for about 50% of first quarter spot volume. This reflects utility purchases, likely for inventory building, and both trader and investment groups taking positions in a moving market.

Analysis: Interesting. One way of interpreting this is that regular buyers are becoming somewhat reluctant to buy are these prices and that much of the demand and subsequent price increase of uranium oxide is driven by investment demand, such as my 5th stock pick Uranium Participation Corporation (U.TO), a company that buys uranium oxide for the sole purpose of storing it and acting as the uranium equivalent of CEF.

Uranium Long-Term Market
The industry average long-term price (TradeTech and UxC) on March 31, 2006 was $41.50 (US) per pound U3O8, up 15% from $36.13 (US) at the end of December 2005. This compares to $27.25 (US) on March 31, 2005 and $25.00 (US) on December 31, 2004. The long-term market continued to be active in the first quarter as utilities attempted to mitigate the risk of potential future supply shortfalls by securing long-term contracts with reliable primary suppliers. Currently, we estimate that more than 200 million pounds will be contracted in the long-term market for 2006 compared to 240 million pounds in 2005 and a five-year annual average of 80 million pounds. The trend for long-term contracting is well above historical levels and may decline from the 2005 level.