Wednesday, October 25, 2006

Cameco's Disaster Fuels Uranium Boom (Part 2)

Yesterday's gains by uranium juniors not named Cameco continued today as all but two of the twenty uranium companies posted green figures. SXR and Ur-Energy continued their double-digit ascent while Paladin traded a staggering 30 million shares.

These are all good and well, but since I touched on the same thread yesterday, I will attempt to place my observations in another context.

Word amongst uranium investors first circulated several days ago about a uranium story that broke on Marketwatch. Myra Saefong wrote what basically amounts to a uranium primer, mainly for those investors curious, but with little or no prior knowledge of the sector. The only companies mentioned were, of course, Cameco, and Uranium Participation Corporation.

Similarly, on RoBTV today, Cameco's water problems put the immediate spotlight on uranium. Lunch Money did a brief segment detailing Paladin as a more speculative, but possible alternative to Cameco. A chart of five uranium stocks was shown, comprising of UEX, Paladin, Denison, IUC, and SXR Uranium One.

Finally, the Canadian Press released an article entitled 'Uranium Stocks Surge' and detailed the rise of Paladin, SXR Uranium One, Forsys, Urasia, Denison and IUC.

The point that I'm trying to get at is this: money is pouring into uranium, but disproportionately so towards the "large caps" of uranium, the mid-tier junior producers/near-producers. Whether it is from institutional investors bailing out of Cameco or Norther American investors who have just started to notice uranium, the publicity and the attention are on a select group of stocks, the ones that I have observed being spewed over and over again.

And when one thinks about it, why not? Seriously, what are the alternatives to Cameco? If you wanted to invest in uranium, but wanted a stock at least, if not roughly equal in market cap (nobody is remotely close), or even just a TSX-listed stock, the choices are few and far between. One of my picks Forsys Minerals was mentioned in the same breath as Paladin and SXR. Why? Well, how many other uranium companies are TSX-listed?

I will not talk about uranium price forecasts at this point, but from what I'm observing, uranium investing education is still only in its infancy and savvy investors will do well to keep this consideration in mind.


Blogger pkkkk said...

What is your opinion of BHP as an uranium investment?

1:02 AM  
Blogger Pissed Off Old Man said...

BHP are expanding olympic dam the biggest miner in the world but even with the biggest mine in the world it only accounts for $700m per year and thats the rub world production is less than $7b per annum, give or take a $b so someone could buy the entire supply or even multi year supply . For instance China with a $1T in reserves could buy 10 years Uranium production at todays prices for say $70-100B, no on ereally knows how many reacters are being built and +25% of the current production is going to speculators , I am new to this topic but with so little be produced it could be the first place we see massive geo political energy competition what do you think?

6:39 AM  
Blogger Spelunca said...

BHP is certainly the bluechip mining stock in ANY portfolio..i'm sure you can hold that stock for as long as the mining supercycle and be happy about it. having said that, I'm not personally interested in BHP because of my focus in uranium pureplays..the caveat, of course, being that i don't have all my money in uranium in the first place =P

8:09 PM  
Blogger Pissed Off Old Man said...

how about Summit Resources SMM on asx they have an enormous ore body in a stable country, Paladin have bought into this with their purchase of Resolutes stake in the same mine so now the only hurdle is Aborginal agreement to mining and Governemnt green light to open the mine both of which seem imminent, looking at the technical its just broken its previous high

9:53 PM  
Blogger Pissed Off Old Man said...

the other one in oz seems to be toro energy (TOE) on the ASX, they have all the area next to Olympic Dam pegged, they have the drilling rigs, experienced management and great pedgree with Oxiana and Mintaur with a very supportive government both at a state and federal level

9:58 PM  
Blogger sliman1 said...

What do you think of Energy Resources of Australia ERA.AX. It is a producer. Do you know what the premium over the price of uranium is in U.TO.

12:22 PM  
Blogger Spelunca said...

to be honest, I do not focus on Australian uranium stocks because I live in Canada..the most I can handle right now is to keep an eye on things internationally and follow some point I want to investigate further, but right now, I can't really give any good advice on Australian U for U.TO, it usually traded at about a 15-20% premium but I imagine that has really gone up in the last few days..

8:36 PM  
Blogger Pissed Off Old Man said...

I watch the Austrains closely as i think this will be a key sector going forward the Aust PM has recently speculated on providing a soup to nuts mine-enrich-export fuel rods- take back rods-sotre waste this will be key as it will remove the need for enrichment in every country that wants to use go nuclear for power between Canada and Aust they have 60% of world resources that can be put into production.

I took Toro energy on float and it went form $0.25 to 1.42 in 3 days (I sold at 1.32) if you invested in every Uranium IPO this year and sold with a week on each occassion you would be showing +60% return, Toro energy is no at 0.72.

When you get the time it doesnt take much research and its easier money than the US-Canadian markets

ERA have a single mine with a limited life span but they are sitting on very very useful reserves locked in Aborignal native land, to unlock them there has been long negotiations which will come head in the next 12 mths.

Have a look at (SMM) Summit they are flying upward at present . The key is that BHP,ERA,SMM are in very large mining districts with infrasctructure deployment put in place for other various other resource mining so they are easier to bring into production.

BHP are investing $5B in expanding Olympic Dam , Toro have pegged virtaully all land in the area with good drilling resultd to dates so they are a good bet in the speculative explorer category

1:54 AM  

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