Thursday, April 05, 2007

Momentum in Favor of Uranium Stocks

Five weeks after the violent global correction in stocks, a series of positive drivers have buoyed uranium stocks back near their previous levels. Highlights include:

March 7: Australia's Energy Resources declaration of force majeure on its sales contracts as a result of flooding in its Ranger mine
March 19: Cameco details remediation plan for its Cigar Lake mine, targets 2010 production
March 20: Uranium Focused Energy Fund closes $195 million IPO
March 23: Uranium spot price raised to $95/lb

Because its news regarding Cigar Lake was deemed to be better than expected, Cameco's stock has regained much of its luster, traversing from $36 to $45 on strong volume in a matter of weeks, buttressed by a "top pick" recommendation by RBC with a target price of $60.

Meanwhile, Cameco's upstart competitors which includes Paladin Resources, Urasia Energy, Denison Mines and sxr Uranium One have also benefited from their status as those few uranium producers with market caps >$2 billion Cdn, receiving the lion's share of new investor attention and institutional support. For example, the bulk of monies in the new christened Uranium Focused Energy Fund will be to hold these "uranium seniors".

Thus, as the inevitable countdown to $100/lb uranium continues, the uranium fundamental story seems to be solidifying. However, the caveat remains that another sudden downturn in the broader market, as what happened in May 2006, may temporarily take the wind out of these stocks in a big way. To me, a vital sign of broader investor confidence would be to take out the old TSX Venture high; otherwise, the threat of a triple top looms and whatever momentum uranium stocks garnered in the last few weeks would be in jeopardy.



Post a Comment

Links to this post:

Create a Link

<< Home