Is Uranium Now A Buy?

July 7, 2008 | By | Reply More

Europe stockpiles 2158 tonnes of natural uranium above the current yearly usage of 19,774 tonnes with the major share coming from Russia. Canada supplied 18%, Niger 17% and Australia 15%.

If Europe is stockpiling does this now make Uranium a buy?Global uranium demand is seen as steady but the diversity between the spot price and forward contract prices raises uncertainty over the next moves.

For now we would only consider buying into a major producer and holding for the long term but if you fancy a gamble now might be a good time to pick out a junior miner with solid prospects.

For the record Uranium One Inc., based in Toronto and a major uranium miner in South Africa and Kazakhstan reports second quarter sales up by more than double to 685,000 pounds.

The Company has arranged to borrow up to $100 million from two Canadian banks on top of cash in hand of $145 million to fund acquisitions.

It believes that renewed activity in nuclear energy will lead to rising world demand and is expanding production accordingly. It also suggests that the spot price of uranium may rebound to $90 a lb. from its present level of around $60 a lb. by the end of this year.

Our take on this is biased.

We bought into Cameco and an Australian miner when the uranium price had climbed above $80 a lb. and have been looking at losses ever since.

At that time the move to nuclear energy was not nearly as popular with the greens as it is now becoming, simply as it is the only viable alternative to polluting, expensive and diminishing fossil fuels.

Also considerable media exposure was being given to the Chinese plans for vastly increasing the number of nuclear power plants in the country to meet soaring demand.

Those plans remain in situ while global awareness of an increase in energy demands coupled with a doubling in the price of oil, natural gas and coal costs steadily increasing keeps electricity supply and costs stays in the news every day.

We note also an increase in the number of commentators talking the market up, still only a trickle but will it turn into a flood?

Despite this investors are still wary of the nuclear and uranium markets and speculators have totally abandoned the scene.

For the time being and until we can see some positive interest from market players we will continue to grit our teeth and stick with our current holdings.

It may just be that a combination of events, such as an awareness that uranium is the only commodity that is growing in demand but not enjoying the price bonanza prevalent in the rest of commodity sector will set off a spark that ignites a bonfire under uranium, its producers and the nuclear industry.

To paraphrase “hope lives eternal in the market players breast!”


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Category: Uranium

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