Uranium continues to be the one commodity to have missed out on the recent boom, although more nuclear power plants are under construction or in the planning stage than ever before. China alone is planning or constructing over two hundred plants.
No clear source of power generation clear of polluting carbon emissions and not dependent upon fossil fuels and that is capable of meeting ever increasing world wide demand has yet emerged to challenge the nuclear option. Nor are their any substantiated forecasts that any alternatives are in the pipeline.
The International Energy Agency estimates that just to only half greenhouse gas emissions, 1400 operating nuclear power plants worldwide will be required by 2050.
Uranium producers and explorers continue to show their confidence as unabated activity continues despite a virtual price freeze in the yellow cake since coming off its highs last year.
An example of this confidence can be seen in recent buyouts and co-operative activity among miners and explorers.
Despite further setbacks due to flooding at its’ massive Cigar Lake project, Cameco, the worlds largest uranium producer continues to show its confidence in the long term future for the nuclear power industry.
After the purchase of a 70% stake in the Western Australian exploration Kintyre project earlier this month the company has now announced that it has taken an 11% stake in Govi High Power Inc for $28 million, with the option of a buying a further 10% for $31 million.
Govi holds the exploration rights to vast amounts of land in Niger, known to have uranium resources.
However the technical picture for uranium continues to be bearish and it may be due to this that the metal price is unable to break out to the upside that the fundamentals indicate. Investors interested in uranium and its producers should bear in mind the price of the metal is fixed on a week-by-week basis for forward contracts and is not subject to the day-by-day fluctuations of other commodity prices.
Unlike other commodities the market is not regulated and is informal.
We believe that the best way to play this market is by investing in carefully selected producers. The technical outlook for Denison Mines (DNN:NYSE), a major producer looks encouraging and Cameco (CCJ:NYSE) being on the acquisition trail and with prices of both stocks around their bottoms for the past year a buying opportunity may have opened up.
This is a complex market with numerous considerations outside the normal scope of investment decision making so we urge you to focus your research and, if you enter the market, be prepared to be patient.
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- boozwatt.com | October 10, 2008