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« Uranium Stocks: A nice jump across the board! | Main | Uranium One Incorporated: A Damaging Strike »
Monday
Oct272008

Uranium Stocks: Still in the Dog Box!

Uranium Chart 28oct08

Chart courtesy of www.U308.biz

A cursory glance at the charts of many uranium stocks shows us that we are still in the dog box as the pounding continues. As the above chart depicts the spot price for uranium has been trending down for some time and now stands at $46.50/lb. The long-term uranium price remains unchanged at $75/lb, according to Ux Consulting and over on the NYMEX the futures price varies from $44/lb for October 2008 delivery and up to $59/lb for February 2010 delivery.

The economic slowdown and the dash for cash have taken their toll on the energy sector with the price of oil also trading down from its highs to around 62.20/barrel as we write.

We have looked for the bottom of this cycle and failed to find it. Until the current de-leveraging exercise runs its course we could be in for more of the same as the unwinding of positions originally purchased on margin are dumped in favour of cash. The only bright spot we can see is that the Nuclear Power Corporation of India have stated that they intend to increase their nuclear capacity by five fold in five years, following a deal between India and the United States. Fingers crossed that a few more morsels of positive news filter through in the months ahead.

Try and have a good one.

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Reader Comments (11)

Here's the bright spot: If you're reading this, you're probably one of the very very very few who sees the inevitability of uranium's long-term rise as nuclear power becomes the obvious solution to the world's looming energy shortage. Since investors and speculators intend to send uranium stocks to zero (they're 95% there - just a little more to go), it means that we'll be among the few around to pick up the pieces.

So, if you can manage to (1) Buy when the decline is over (has to be soon since we're so close to zero), and (2) Survive 5-10 years without selling your shares, then I'd be surprised if you didn't do extremely well with your shares.

I could be wrong. But if I am, we'll all be cold, hungry, and in the dark anyway. :) Good luck all!

October 27, 2008 | Unregistered Commenterdbr

dbr, Im sure that todays investor does not want to wait 5-10 years, but we take your point.

October 28, 2008 | Unregistered CommenterUranium Stocks

uranium companies especially the majors are near if not at the bottom.The stock market looks ahead so i would say in 2-3 years these prices will be at all time highs.

October 28, 2008 | Unregistered Commenterrich

I distinctly remember reading comments along the lines of "this stock/sector is 90%+ of its highs therefore the only way is up..." about the tech stocks during the DotCom selloff back in 2000/1. A lot of these companies subsequantly folded so your comment regarding them going to zero is not as daft as it sounds at first reading. Its likely a LOT of players will burn their cash, be unable to re-finaance and simply fold -or perhaps have their assets bought up for 'cents on the dollar...'

Having said that I do remain positive for those companies that can weather this storm -perhaps even more so because as numerous commentators are starting to say the whole commodities/mining sector has been under-invested in for a long-long time (particularly oil) and this supply side shock is going to hit us hard in the years ahead as 2 Billion+ Chindians start consuming like Yanks. In fact wrt. oil it is likely that we may not be able to build out the infrastructure to combat the natural decline rates quick enough: the oft-talked about 'Peak Oil' event will have occurred. I suggest that sometime around 2012 +- a year or two we will all 'wake up' and realise this and there will be an enormous dash for Energy infrastructure to prevent a systemic collapse.

Back to Uranium.

If the fwd spot price is indicating ~$59 in a little over 15 months then this is a +30% premium on current prices. I reckon this should be factored in to stocks sometime next summer. Between now and then there could be another 20-30% selloff in the S&P (N. Roubine) and Commodities could get whammied more than this.

I will be keeping an eye on the US election (McCain=U++), energy sector generally and numerous macro-env. indicators + company health indicators like asset value, cash position, etc. and look to get in on what is likely to be a long U.Bull market in the next decade. Until then I do not wish to catch a falling knife. -Good luck all!

Regards, Nick.

October 28, 2008 | Unregistered CommenterNick Outram

We just have to have confidence in the FUNDAMENTAL that uranium is, and will be, a viable energy resource alternative. The wheels are already in motion for the dependence on the fuel...new plants are being erected...and will probably STILL be in the works....despite this ecomomic turmoil. There are some sectors...and some issues where we have to curl up into a fetal ball...energy...is not one of them, and hopefully we'll be in the mix when all the dust settles. +++ (that means fingers crossed )

October 28, 2008 | Unregistered CommenterRon L.

The problem with some of these near zero Junior companies is they could easily go bankrupt or out of business for many reasons, so picking the low priced companies for long term gains is wishful suicide. Choose wisely!

October 29, 2008 | Unregistered CommenterPaul

Ron,

I'm with Paul on this -the problem is NOT with Uranium, its with finance.

Its likely that some of the biggest bounce-backs will occur in those juniors that survive. So, IMO, a good place to start would be to compile a list of beaten up juniors and rank them in terms of their cash assets and burn-rate. Those companies that survived the Dotcom crash where ones that had sensible business models (making some money) AND cash to get them through those lean years The ones that died had a fast burn rate and no income. This is a lot of work but I think it would be invaluable information to seperate the 'falling knives' from the 'bouncers'...: anyone got the info??

Of course, the safest bet would be to put your money into one of the biggies like Cameco, but then the upside would also be limited.

Nick.

October 29, 2008 | Unregistered CommenterNick Outram

the major uranium stocks like cameco and paladin,have been decimated as well.these are the sort of stocks to be buying if you believe nuclear energy is the way forward. Once the elections are over things will hopefully look clearer on the nuclear front although i believe Mc Cain would be better for Uranium

October 29, 2008 | Unregistered Commenterrich

Hi Rich,

I have had my eye on Paladin for a while and almost bought some when it fell to $4. I'll probably form my 'core' Uranium portfolio with about 50% of these 'biggies', 25% of specualtive 'will survive' juniors and 25% 'other' like processors and builder-outers. Another option would be an ETF if one exists.

My question is -other than wading through a pile of company reports- is there a list of Ur. miners giving ranking, net assets and cash burn? (or should I just wait till next summer and see who's still alive? :o)

Nick.

October 29, 2008 | Unregistered CommenterNick Outram

Hey Nick....yah the question you pose, essentially, is: "who are the companies with the solid fundamentals, financials and what the heck,...technicals....that are worth a ride ? Well that's a universal question (and a good one) for ANY stock consideration.

For stocks in general....all of those tools in your tool box are all wonky....as the market voltility is something, historically we have not seen. If one wants to "dabble" in that environment...it is "gambling" not investing, no ?? and that can be fun too...as long as you're not playing with your food budget.

For the uranium picture..the only demarcation i can see is to onvest in those companies that are PRODUCING as opposed to those who are in DEVELOPMENT and EXPLORATION.

So who is produing? Cameco, Uranium One, Paladin, Denison and ERA.

Who is developing? A whole swack of names.

The "catch-all" that has a nice mixture of companies......UF.Un.TO...I've bought that and have stuck it in a desk drawer waiting for the upswing in a few years.

So if the commodity is sound (and if we can agree on that ?) then with this current craziness about us...then we wathc the "biggies" get hammered...wait for the impending bottom....BUY with both hands....and "wait".

If that isn't active enough for an investor...well then maybe day trading AIG stock may be more fun ? :)::)::)::)

October 29, 2008 | Unregistered CommenterRon L.

Hey Nick

Picking a winner...well the universal goal

Seems that at the very least it is PRODUCERS vs DEVELOPERS.
Producers = Cameco, Unranium One, Paladin, ERA, Denison.
Developers " = a whole host of companies.

I bought a "catch-all" mixture...UF.Un.TO...and have placed it in a desk drawer for a year of so and will wait for the craziness to abate.

October 29, 2008 | Unregistered CommenterRon L.

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