Sunday, December 10, 2006

Dec 10: State of the Uranium World

Firstly, a note of apology for not updating for a month. I have been busy with work (not related to investing) and must give it precedence over this uranium blog.

In the last weeks, uranium stocks have continued to climb, moving smartly along with the broader market. In fact, it seems that uranium stocks outpace the general market during bull runs and double-digit gains are the norm. Conversely, however, uranium stocks have a tendency to precipitously drop just as quickly during sell-offs in the broader market. So, in an analogous way to gold stocks having the tendency to trade more like stocks than the metal, I make myself take a look at the general trend in the broader market, as uranium stocks will be under heavy pressure if investors decide to bail out of the market highs that we have been experiencing lately.

News out from uranium bellweather Cameco Corporation (NYSE:CCJ TSE:CCO) several days ago were significant for two things:

(1) Cameco’s CEO Jerry Grandey announced that the company "may acquire smaller rivals after years of insufficient investment by the industry leaves tight supplies and high prices," with a strategy "to watch very carefully how they succeed. And at some point in time, if they need expertise or money or joint ventures or acquisitions, it would certainly be possible."

(2) Cameco is expecting to drill about 20 holes and plug the Cigar Lake mine leak with cement. Previously it had announced that revised cost estimates and timelines for Cigar Lake would be available in February. Cigar Lake is 50 percent owned by Cameco, with the remainder held by AREVA Resources Canada Inc., Idemitsu Uranium Exploration Canada Ltd. and TEPCO Resources Inc.

With Cigar Lake flooded, Cameco seems to be more willing to go into acquisition mode to compensate for the delay. While the company is already involved in numerous joint ventures, it has not really made a big splash in the acquisition of other larger uranium companies to date. One might presume that the answer seemingly lies in how long it would take Cameco to de-flood Cigar Lake; the longer it takes, the more interested Cameco naturally becomes to acquiring a fairly advanced-stage uranium junior.


Blogger stefan said...

Thanks for adding this info to the blog and can you give us any info on the possible effect of the US govt (DOE?)plans to sell a large amount yearly of its stockpile of yellowcake? I understand the uranium miners want the feds to sell half what they are planning yearly so as to not crash the spot price. Thanks for a great blog, the info you provide has been very helpful.

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