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« Fronteer Development Group: A Twin Pronged Assault | Main | The China Shakeout »
Saturday
Mar032007

CCJ: A readers view

In the uranium space CCJ is the premier investment.

Over the next several years their hedges roll off and their earning will dramatically increase. With the spot and futures currently at $85, they will print money. While I do not have the exact numbers at hand, they will realize something like 35-40 this year and 50-60 next year.

Looking further out, their new contract is written with about 40% locked in and 60% at spot when delivered. If you go back 3 or 4 years ago, uranium was under $10 lb and the contracts written needed to protect their downside. Whether Cigar Lake ever produces does not change the economics of their reserves in other places. Just check the concentration of their reserves vs. any other company. The concentration is about 100 times better than their competitors.

Bruce power will also be a gold mine. Nuclear power is gaining ground and I see little that will affect it. CCJ should be a core holding for anyone who believes that nuclear power has an important role in the future.

Mustaque


03 March 2007


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Reader Comments (3)

You may well be correct however, as an ex-Engineer myself I still need to be convinced that CCJ can stop the water ingress at Cigar Lake and recover the uranium, time will tell.

March 3, 2007 | Unregistered CommenterUranium Stocks

For Bruce Power to become a 'gold mine', the price of electricity per kwH will need to rise significantly. Ontario has already backed away from deregulation of electricity prices in a rather dramatic U-turn. Will this change in the future and will they allow price to control demand? Somehow I doubt it. Cheap electricity seems to be regarded as a birth-right in Ontario.

One hopes that Cameco will handle contract pricing for uranium sales in a way that will maximise returns. However, they certainly did not anticipate rising prices and have locked in far too much production at low prices, severely damaging investor returns. I, for one, am not convinced that they will get it right.

March 4, 2007 | Unregistered Commenterdcpc

To Mustaque,
You are entitled to your opinion and if you wish to buy CCJ and hold it for a long time until you see a good return, that is your choice. But let's look at CCJ's price action. It rose to about US$112 around Jan. 2005 and split 3 for 1, then went on another tear and hit US$78 and split 2 for 1 in early 2006. So the new trading price in early 2006 after the 2:1 split was about US$39. Today, over 14 months later, it is trading at US$36. You may think it is a good investment but the market appears to disagree with you. Why has the share price stabilized over the past 14 months when almost every other uranium miner (producers, near-producers, advanced exploration) have gone up 50% to 100%, and even more in that same time frame? Cameco may have been too slow to gobble up new miners when they were cheap.
But the biggest concern has to be those long-term contracts they have locked into at reallt low uranium prices. We're not talking about one or two years here, it's more like 6 or 7 years before they produce enough uranium metal to satisfy those outstanding contracts. That's the problem the Cigar Lake FLOOD (not seepage) has caused for them; they were relying on Cigar Lake's production and now it is delayed until ???. Where will they get the uranium to fulfill their contract commitments? Well, they will have to buy it on the open market, or buy up some near-term miner. But that will cost them a premium at today's spot prices. So, had they been a little quicker to see the future, they might have bought those promising miners a few years ago when they were just pennies. This is not unlike BHP Billiton's problem with being locked in to old contracts. It's too bad, but I don't really care that much. I'm putting my money into SXR, FRG, MGA, LAM, DML (all on the TSX) and some of the smaller miners with good properties. So there, I've tried to help you out by providing some alternatives, but whatever you do, always spread your investments out to include 10 or so miners, and spread the geopolitical risk, too.
Bob G.

March 5, 2007 | Unregistered Commenterstoneygulch

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