Uranium Didn’t Go Anywhere, Did You?
COMMENTARY–ProspectingJournal.com–While it’s perhaps a bit early to announce the rebirth of the uranium sector, signs are now pointing to a steady comeback as governments and businesses are returning to one of their favourite obsessions: worrying about–and profiting from–the world’s energy needs.
For someone invested in uranium, early 2011 was a classic textbook example of an “unforeseeable” external event. Just like a very convenient Act of God prevents some people from claiming insurance when a tree falls on their car in the U.S., so does a tidal wave prevent nuclear nuts from thinking that their stocks are safe. The ensuing negative worldwide sentiment, however, was just political vote-pandering for unrealistic environmentalism . . . Watch the anti-nuclear politicians backflip in a couple years.
Uranium prices have now arguably stabilized and related equities are up ten per cent in the last three weeks; in other words, it may be safe to assume that we have found the bottom. David Talbot at Dundee Capital Markets stated the obvious, pointing out that uranium stocks are trading well below their real value. And unless wind, solar and tidal energy manage to produce the same energy output as fossil fuels in the next couple years, uranium interest will likely buzz its way on up.
If you scooped up uranium stocks after the crash, good thinking. You can thank the media for this cheap buy, as they pumped a relentless amount of fear into the newswires, while somehow forgetting to mention that there are over 60 reactors under construction in 16 countries. And how many people know that Germany only represents 5 per cent of the demand for uranium? I say let them go “green.”
In terms of low uranium prices deterring miners, recent activity shows promise. Bannerman Resources Ltd. (TSX: BAN), a Perth-based uranium deposit developer, recently received a takeover offer from a Chinese mining company. The U.K. has revealed plans for eight new reactors. Russia, China and India–the most important markets–have all reconfirmed their support for nuclear energy. Cameco is on the lookout for acquisitions (buying them while they’re cheap). And First Uranium Corp’s (TSX: FIU) shares soared more than 50% on Friday after the company announced that AngloGold Ashanti Ltd. agreed to buy nearly 20% of the miner for $28.2 million.
This is not to say that uranium will dominate the headlines anytime soon. After all, the biggest nuclear accident in 25 years smashed stocks across the board, sending giants like Uranium One (TSX: UUU) down more than 50% and destroying countless juniors.
HOWEVER, barring another tidal wave or unforeseen natural disaster, it may be safe to assume that now is the time to dust off your battered portfolio. In a “choppy” market like this, David Talbot suggest senior producers with good liquidity: Uranium One, Cameco Corp (TSX: CCO), and Paladin Energy (TSX: PDN). For the risk-takers out there, the juniors may offer even greater potential.
The Japanese disaster, if anything, verified the long-term strength of the nuclear market. Demand is expected to be up 30-50 per cent by 2020, as the search for energy weighs on the world’s expanding populations and straining resource needs. And really, the fact that “former” oil heavyweight Saudi Arabia has announced that it will build 16 reactors by 2030 says it all.
Disclaimer: The author does not currently hold any shares of any of the companies mentioned in the article. However, some members of Cordova Media Inc., which owns ProspectingJournal.com, may or may not have interests in one or more of the companies mentioned at the time of publication. Staff members from the Prospecting Journal reserve the right to acquire interests in any of the companies mentioned after 36 hours have elapsed upon initial publication of this article.