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« Uranium Price Jumps $10.00 | Main | Tell us about your best stock »

URANIUM: Sealed Bids Only Please!

There is a 100,000 pounds of uranium up for grabs today by sealed bids only.

Later on today in the US we understand that an auction will take place via sealed bids for 100,000 pounds of uranium. The outcome of this auction will more or less set the price for uranium, as it is so thinly traded we don’t have much else to go on. We do not know the make up of the bid team or how many bidders are involved. We can make an assumption that there will be a number of utilities on the list and just maybe a few other interested parties.

At current price levels this is a $7,500,000 decision.

Now, take the reigns off your imagination and try to drift through the possible events of last few days. You are on the team, a director maybe, of one the companies bidding for this package of uranium. There are a number of questions that you need to consider:

1. Just how badly do we need this uranium?
2. Can we afford to miss out on this opportunity in the hope of cheaper prices later down the line?
3. If we do not buy it now will it cost more to buy later on?
4. How needy are our competitors?
5. A fellow director may argue that it is too high a price to pay (he is the accountant) another will point to the chart and say it looks to us like uranium is heading north. (He is young and new to the board and actually has a chart) Compared to our profits this is a drop in the ocean says the enlightened one. The “wait and see brigade” will fumble with their mobiles hoping that it doesn’t go to the vote.
6. If we don’t get this shipment what are our alternatives for obtaining uranium?

And so our captains of industry wrestle with today’s most urgent of matters.

While we are down here at micro management level there exists the possibility that one of the bidders is not just needy but desperate and will adopt the view that they must get it regardless of price. Which brings us to the question of what price will be achieved in this auction? Well, we haven’t a clue, but we are cavalier enough to take a wild guess, as this is only a trip down imagination lane.

$82.50 per pound.

So there we go, meeting adjourned.

But not yet! The young buck with the chart pops up with the following suggestion:

If we can please drag ourselves back up to Micro Management level the board members need to realize the this sort of pain and anguish is set to continue. These meetings will keep coming back like a recurring nightmare. So the big question is how can we get out of this mess and get back to the good old days of golf in the afternoons and home before the rush hour?

He puts forward his solution, the answer is to pay the premium and take out one or more of the top quality uranium stocks. Do whatever is necessary to gain control of the supply and remove our company from this constant threat of vastly inflated prices!

His suggestion is greeted with Silence!

The accountant tries to hide a damp patch on his pin stripes as the others shuffle in their seats muttering costs, shareholders, and hostile takeovers.

Where is Gordon Gekko when you need him, we ask?

Enjoy today.

20 February 07

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Reader Comments (1)

Hey, since I like your website so much, I thought I would add one wrinkle to the mix. The bidders are not all nuclear power plants. there are hedge funds out there that have absolutely no necessity for the metal itself, other than as an investment to sell later at a much higher price. Do they care what price they pay? No, why should they. In this market of extremely short supply, they are actually bidding up the price (market makers) for their own benefit, in a way. Just think, if the price is high this time, what will happen next time. I do like the perspective of uranium-net that the utility companies are now going to have to decide whether they will go long-term and lock into a supply at any price, whether that means buying their own supply by investing heavily in a miner, or taking a long-term contract at a Spot Price floor and no ceiling. Yes, it will happen this way, maybe not this time, but sometime soon. Then the buying panic will begin. I've never ridden a Bhrama bull before, so I hope I can hang on long enough.

February 21, 2007 | Unregistered CommenterBob G.

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