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Wednesday
Dec172008

Uranium Stocks still in hibernation!

Uranium Chart 18dec08
Chart courtesy of u308.biz.


As we can see from the above chart the mini rally in the uranium spot price was short lived as the festive season brought with it some lacklustre trading. The chart also shows the price of oil falling out of bed and gold beginning to recover from the recent sell off caused by the flight to cash.

TradeTech commented as follows:

As year-end approaches, there is a growing gap between bids from willing buyers and offers from willing sellers, primarily due to a mismatch in delivery timing desired by the parties. Sellers are generally looking to place material sooner than buyers are willing to accept delivery. Spot demand remains strong, but a significant portion of active demand involves delivery in 2009. In particular, one non-US utility is looking for approximately 2 million pounds U3O8 with delivery to occur by June 2009. As year-end approaches, there is a growing gap between bids from willing buyers and offers from willing sellers, primarily due to a mismatch in delivery timing desired by the parties. Sellers are generally looking to place material sooner than buyers are willing to accept delivery. Spot demand remains strong, but a significant portion of active demand involves delivery in 2009. In particular, one non-US utility is looking for approximately 2 million pounds U3O8 with delivery to occur by June 2009.

Over at NYMEX the data tells pretty much the same story with the December 2008 contract trading at $53/lb and the December 2009 contract trading at $59/lb.

Uranium stocks continue to remain range bound with the odd exception and at a very low level indeed, maybe the Obama effect will bring this tiny market sector back to life next year. We have constantly monitored the horizon for signs of a recovery but it appears to be hibernating like an over fed bear that can’t be bothered at the moment.

Got a comment, fire them in.

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Wednesday
Dec032008

Uranium Participation: Bucking The Sector Trend

Uranium Participation: Bucking The Sector Trend


Whilst the majority of uranium stocks, and in fact most stocks across the board, appear to be fizzling away in recent month, Uranium Participation appears to be challenging with this recent rally, perhaps indicating a slight change in sentiment towards the sector.

Uranium Participation has rallied from below $5 to above $7 in just two months, a gain of over 40%. Meanwhile other uranium stocks, such as those in mining and exploration, have been making lower lows. The Relative Strength Index (RSI) is also moving higher, which is a sign of growing strength in the stock.

Perhaps there is some hope in this rally, as U.TO gets pushed higher by the uranium spot price rising to $55/lb during the last two months. This could be a sign that things are getting better, or at least are taking a pause from getting worse, in the uranium sector, and that we could be moving closer to a turnaround.

For those not familiar with this stock, Uranium Participation is a fund which holds physical uranium, thereby by purchasing shares in the company, one gains exposure to fluctuations in the uranium price.

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Sunday
Nov302008

Uranium-Stocks: Portfolio Update 01 December 2008






(Chart from u308.biz)

The uranium spot price stands at $55/lb according to UXC and TradeTech with the long-term price of uranium trading at $70/lb.

The long term factors behind uranium and nuclear power appear to have been completely disregarded over the past year or so, with the relentless dumping of uranium stocks and, more recently, the commodity itself with drops now being seen in the long term price.

However our intention remains to stay put as the damage has already been done to our uranium holdings, and we are holding our positions at heavy losses until such time that the uranium industry turns around, although we acknowledge this could be some time away.

Here follows our portfolio update as of 1st December 2008:

Cameco Corporation – Watch
This uranium heavyweight closed down at $17.23 on Friday, having taken a real battering in both the mainstream market sell off and the water problems at Cigar Lake. We currently have no position and are not buyers at this point.

RPT Uranium Corporation – Hold.
We bought RPT on the 19th February 2007 for $0.42 and sold it for $0.62 on the 13th June 2007 for a profit of 47.6% in 4 months. We then bought it back at around 50 cents, however RPT closed yesterday at $0.085

Uranium Participation Limited – Hold
Not much change in this stock since our last portfolio update, now trading at $7.39 as opposed to $7.74. We bought at $11.97 on 21 November 2006 so we well and truly in the red with this trade, however the position is a better condition than many other uranium stocks.

Strateco Resources Incorporated – Hold
We made a small investment in RSC at $2.30 but it crashed to $1.70 at our last update, before falling further to close Friday at $0.48, another major disappointment.

Crosshair Exploration and Mining Corporation Watch
We continue to watch CXX, however at $0.11 it has been completely pummelled and in fact, the stocks deterioration began before other uranium stocks, and before the uranium price starting to drop. Therefore we remain firmly on the sidelines with this one.


Laramide Resources Limited – Buy
We bought at $5.78 on the 28 July 2006 so again we are still in the red with this one, since it closed at 97 cents on Friday. When we were sitting on a paper profit of around 80% we sold half of our position in order to buy other uranium stocks, as we needed a bigger spread of stocks at the time.

Mega Uranium Limited – Buy
We bought MEGA at around $4.0 on 27 July 2006. MGA was trading at $0.72 yesterday. It appears that despite the positive news coming in from down under regarding uranium mining, the stock is continuing to slide, so buying this one is very much a speculation.

Khan Resources Ltd - Hold
We bought Khan on the 5th March at $3.63 and it has since dropped to lower levels due to licensing issues with the Mongolian regulators. So, in anticipation of Khans management team finding a resolution to this problem we decided to buy again. (See Khan Resources: A speculative buy) the stock rallied and we took a profit of 15% in a matter of days before the stock fell back again. Khan is still having a torrid time trading closing yesterday at $0.165. We would not make a small investment in this company but would seriously consider taking it over if we had the firepower available, since the company is extremely undervalued.

Aurora Energy Resources - Hold
We bought Aurora on the 5th March 2007 at $14.17 and it is now trading at $1.21, a total hammering for our position. This is due the sell off in the sector, as well as licensing issues in the central mineral belt.

Strathmore Mineral Corporation - Hold
We bought STM on the 14th April 2007 at $4.96 and it is currently trading at $0.24, which is a very disappointing performance indeed.

Ur-Energy - Hold
We bought Ur-Energy on the 23rd April 2007 at $4.75 and we also bought again on the 24th August 2007 when we acquired more stock at $3.03. We had hoped to have bottomed on this one, but it was not to be and it closed yesterday at $0.70, however it has made a recovery from trading for under 40 cents recently.

Denison Mines Corporation – Watch
We don’t own Denison (DML on the TSE) despite trying to buy it when times were better. However on 28 July 2008 we purchased the JAN09 Call Options of Denison Mines Corporation at a strike price of $7.50 for $1.10 per contract and they unfortunately closed yesterday at $0.05, so we’re dead in the water on this one.

Other than sit tight through these torrid times, there is little we can do right now. This situation may remain with us for some time, so we will just have to hold on until the argument for nuclear power begins to take centre stage again and gives the uranium price a boost.

One ray of hope on the horizon is that when the recession fully hit home, governments around the world will be looking to increase public spending to boost the economy and create jobs. Nuclear power could figure in this spending, especially since it is a logical step to be making anyway.

If you have any comments or suggestions then please feel free to add them to this article whether you agree with us or not.


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Wednesday
Nov262008

Lost Principles


In the mailbag this morning we received this article from Olivier Garret, Chief Executive Officer of Casey Research regarding the current economic crisis, peak oil, inflation, precious metals et al, which we hope you find enjoyable.

As the economic crisis continues to unfold, recently a sense of uncertainty has begun to pervade the market. Even dyed-in-the-wool risk takers admit that they don’t know what to think anymore. Inflation, deflation, recession or depression – there are so many vagaries that it appears to be anyone’s guess what will happen next.

Despite the current, volatile environment, though, our expert team at Casey Research maintain their core prediction: that a highly inflationary cycle is not far off. While we, along with several external experts, continuously review our assumptions and conclusions and encourage dissenting opinions and analysis to avoid biased conclusions, so far we keep returning to our views about what’s coming. That said, the hardest thing to predict is not what will happen, but when.

The way I see it, the swift, far-reaching and mostly ill-conceived reactions from most of the world’s governments under the leadership of two apprentice sorcerers (Bernanke and Paulson) have until now resulted in a widespread run for an exit to nowhere, a deep credit freeze, and total and indiscriminate mistrust in the market and all of its players.

The fact remains that in the last year, many principles that have long been rooted in the success of capitalism have been thrown out of the window.

· First, market players discovered that the longest-lasting asset bubble in recent history was made possible by poor regulations (as opposed to lack thereof), greed, and the misunderstood and misrepresented risks of credit derivatives.

· Second, we found out the real meaning of “too big to fail.” If a business is large enough and has enough clout, it doesn’t matter how poorly managed it has been, it will be bailed out at the expense of taxpayers (us) and investors (us again).

· Third, we found that the rating systems the financial markets had been relying on have been misleading investors and failing to identify some of the riskiest asset classes. As a result, investors and all other economic agents are left with no means of evaluating risk as they conduct business, hence the credit freeze and rush to cash.

· Fourth, to add to the confusion, the U.S. Fed and Treasury, followed by many other central banks, have been altering the rules of the game by the minute (buying toxic waste at face value, bailing out certain financial institutions but not others, becoming shareholders of several behemoths in the banking and insurance industry, and trumping all accepted rules of creditors’ and stakeholders’ priority, prohibiting the shorting of certain classes of assets on a moment’s notice).

· Last but not least, the U.S. presidency, weakened by almost eight years of mismanagement, has continued to show total lack of leadership. It has empowered a couple of technocrats to run the country’s finances without leadership until a new administration gets in and, hopefully quickly, figures out what to do. To make matters worse, the EU has shown its ugliest face and demonstrated a fact we all truly knew but didn’t want to recognize until recently -- that economic unity and coordination is easy in good times but almost impossible when the going gets tough.

No wonder economic actors are wreaking havoc as they race for shelter.

Add to this the fact that all natural resources have been hammered by the combination of a credit freeze and lower real and anticipated demand from most industrial nations.

Finally, junior exploration stocks – being very thinly traded and rightfully considered to be in a higher risk class -- have been hammered twice as hard as the rest of the markets (hence the performance of the TSX-V, which has lost 76% in the last year and 30% in the past 30 days alone). The fact that many hedge funds had to unwind large positions in such a small market certainly did not help values.

What does this mean for investors in this market?

We all have suffered significant losses in our portfolios, and although our choices may have reduced some of the downside, quality companies have been hit almost as hard as fly-by-night juniors with no future.

Several of our companies are trading at or below cash value and get no goodwill for the significant assets and outstanding management teams they have assembled.

Although there is no way to tell when we will hit a bottom in these markets, we believe that once tax-loss selling season is over and reality settles in, we will see the beginning of a slow recovery process for the best of the juniors. Investors who have the ability to stay the course and are invested in the highest-quality juniors will recover from their losses and benefit from what will eventually be another bull market in commodities.

Precious metals and agriculture, followed by certain segments of the energy sector, will lead the way to widespread price increases across the range of commodities. While we can’t predict the exact timing of this run, the fundamentals are in place once the world economies take a turn for the better or at least stabilize somewhat.

Here is why:

· The current crisis is taking tremendous amounts of needed capacity off the supply pipeline. Whether it be energy, base metals, or agricultural goods, projects to bring online expensive oilfields and alternative fuel sources are being shelved and will take years to get back on track. Mines are closing and projects are being canceled, thereby removing much of the supply; the credit squeeze is cutting down on agricultural investment, and working capital constraints will dramatically limit supply.

· The world’s demographics are not changing, nor are the aspirations of a hard-working, fast-growing middle class in emerging economies. The changes that drove commodity markets up for the last few years are long lasting and real.

· Peak Oil and peak-everything. There is limited supply for many commodities, and although there are alternatives (curbing consumption and finding alternative sources of energy), it takes large investments to do so. In current markets, many of these investments are going to be put aside until the next crisis/shortage hits – at which point we will have years of a commodities bull run before an equilibrium is reached.

· We anticipate that China, Russia, and India will take advantage of low commodity prices to secure very large, long-term supply commitments while the Western world licks its wounds and tries to recover. By the time we do, an even larger portion of the world’s available resources may no longer be available on the markets, for example oil and gas.

In the last edition of Casey Energy Opportunities, Marin Katusa pondered how the U.S. is going to replace the supply of uranium when the HEU program with Russia is set to expire in 2013. The answer is that the U.S. will struggle to replace 40% of its needs, and this will benefit a handful of U.S. suppliers with proven reserves. Currently shares of these companies, which have the cash to develop resources or are already producing with positive cash flows, are incredibly cheap – a win-win situation. Eventually similar opportunities will come from copper and strategic metals.

· We can expect the world to continue to be a very unstable place, where regional conflicts can quickly spread and spin out of control, with obvious impact on the smooth supply of key commodities (Gulf region, Nigeria, former Soviet republics, to name a few). In fact, a widespread financial crisis could precipitate those events as conflicts are often linked to economic hardship.

· The unprecedented deficits, a wave of bailouts, and growth in the money creation by central banks in the Western world will eventually lead to massive inflation. In the U.S. alone, the monetary supply has increased by 50% since early September. This will unequivocally reverse the current short-term deflationary pressures and lead to a steep devaluation of the dollar and other major currencies. At that point, precious metals and all tangible assets are poised for a strong recovery.

So, if you ask me if I am still bullish on the resource sector, my answer yes, now more than ever. Juniors are juniors, and when things go wrong, they get beaten down. The strong ones with great teams and lots of cash will survive and prosper, the others will disappear. When commodities come back with a vengeance, there will be fewer companies, almost all with good projects… and those who are invested in these few companies will see a very sizeable appreciation of their capital as the broader public returns.

It’s very hard to be a contrarian investor, especially when all forces seem to be against you, but one thing the markets have taught me is that memory on the Street is unbelievably short, and they will come back.

***

Not only is the economy presently going haywire, there’s also still the boogeyman of Peak Oil looming on the horizon. While oil prices are at a low not seen for a while, it is all but certain that this sweet relief for motorists won’t last very long.

When oil prices come roaring back, the energy market will virtually explode… and, if you are safely positioned in the right stocks by then, your bank account will too. Learn more about how being a contrarian investor can earn you a fortune – click here.

Got a comment – then let us have it!

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stocks, silver stocks and uranium stocks, please click on the links.

Monday
Nov172008

Uranium Spot Price Up to $53/lb!

Uranium Chart 18nov08



As we can see from the chart above the spot price for uranium has crept up a little recently from $45/lb to $53/lb over the last few weeks, according to TradeTech who commented as follows:

“Significant demand continues to emerge with off-market buyers acquiring over one million pounds U3O8 equivalent in five transactions over the past week, with each transaction concluded at successively higher prices. The buyers were utilities, intermediaries, and producers. Buyers are willing to pay higher prices to secure material and sellers, sensing that the momentum has shifted back in their favour, are raising offer prices with each new inquiry from buyers. As a result, TradeTech’s Spot Price Indicator rose this week to $53.00 per pound U3O8, up $5.00 from last week’s indicator.”




Even though the long-term price, $70/lb, is the price to watch it is encouraging to see the spot price make some progress in the right direction. The mining stocks in this sector remain bombed out with just the occasional flicker of life here and there such as the takeover of Forsys Metals Corporation. However we will continue to look for confirmation that this is close to the bottom, if not the bottom of this cycle. Over at NYMEX the futures prices are as follows, December 2008, $53/lb, December 2009, $60/lb, March 2010, $65/lb, so not a great deal of change there, but never the less a positive one. The Obama factor has yet to show itself as the president-elect prepares to take office. Whether or not his policies will be pro-nuclear will be determined by his actions, which we need to see.

Have a good one.

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stocks, silver stocks and uranium stocks, just click on the links.


Tuesday
Nov112008

Cameco Corporation nearing a bottom?

Cameco Chart 12nov08






We’ll start with a quote from Jerry Grandey, Cameco's president and CEO:

"Cameco is blessed with high quality customers whose requirements for uranium are independent of the state of the global economy. Since nuclear is among the lowest cost generators of electricity our customers will continue to operate their plants to meet base load electricity requirements,"


However these fine words did little for Cameco’s stock price, which fell 5.22% today to close at $18.71. The third quarter net earnings were 46% lower than in the third quarter of 2007. Interesting to note that revenue was 18% higher than in the second quarter of 2008 at $729 million in this quarter of 2008. This was largely due to increased volumes in the uranium albeit at lower prices, fuel services, electricity and gold businesses. To read the report in full please click this link.

The question we wrestle with is; is it at or at least close to the bottom yet?

The above chart shows that Cameco has traded as high as $59.90 to a low of $14.33, followed by a short rally to $22.50 and now back to $18.61. The technical indicators have been at both ends of their respective ranges in what has been a roller coaster ride for investors.

The long-term price for uranium is holding at $70/lb and the spot price is $46/lb, which is up ever so slightly. Should uranium prices start to rise we could witness a rush back into this sector, however we think it is too early to discern an upward trend. Cameco should benefit, however, the shadow of Cigar Lake with its water ingress problems still hangs over the company which puts a bit of a damper on the stocks progress. Not for us just yet.

Cameco Corporation has a market capitalisation of $6.45 billion, a P/E ratio of 15.52 with 344.47 million shares outstanding.

Cameco Corporation trades on the Toronto Stock Exchange under the symbol of CCO and the New York Stock Exchange under the symbol of CCJ.

Have a good one.

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stocks, silver stocks and uranium stocks, just click on the links.




Wednesday
Oct292008

Uranium Stocks: A nice jump across the board!

Uranium Chart 28oct08

Uranium One impressed with a gain of 34.38% closing at $0.86 with Crosshair adding 25% and Strathmore Minerals adding an astonishing 63.16%. With one or two exceptions this tiny sector moved higher on the back of the Ben Bernanke rate cut taking rates for the US Dollar down to 1%!

We are not getting too excited at the moment as this sector has been decimated and it will take a lot more days like these to get back to where we once were. However once we do get through this turmoil and the nuclear story gets some air time we could see these stocks move in leaps and bounds to higher ground. We will continue to wait and watch and see just how things unfold for now.

As we can see from the chart above uranium remains steady at $46.50/lb.

Got any comments? Fire them in!

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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.

Got any comments? Fire them in!

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Wednesday
Oct152008

Uranium One Incorporated: A Damaging Strike

UUU Chart 16oct08


As if things were not tough enough Uranium One now have to wrestle with unions as workers have gone on strike at their Dominion Mine in South Africa. The mine was shut down about a week ago as management/worker relationships worsened.

Raymond James analyst Bart Jaworski had this to say:

"We expect the strike may be protracted, adding that the labor upheaval could allow the company to declare 'force majeure' on the unproduced portion of contracted deliveries this year.

This is a kick in teeth for the investors who must be wondering just what else can go wrong, as this stock has fallen heavily to close yesterday at $0.89. We do feel for the investors as we are in a similar position with some of our stocks.

As investors these situations raise the question of ‘Is this the buying opportunity of a lifetime or will it get worse’. Well, uranium is still drifting lower and the dash for cash appears to be intact despite the trillion dollar financial injection into the markets so the ‘bottom’ has yet to make an appearance. We’ll wait and watch and look for signs that this tiny market sector has turned north before we deploy any more cash. However, when the price of uranium stabilises and begins its next rally these uranium stocks will rocket and it’s a rocket that will bring considerable relief to most of us.

Uranium One Incorporated trades on the Toronto Stock Exchange under the symbol of UUU, has a market capitalisation of $416.93 million with 468 million shares outstanding.

The above chart is a sorry sight as we can see.

Try and have a good one.

Got any comments? Fire them in!

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Tuesday
Oct072008

Uranium stocks: The beating continues!

Uranium Chart 08oct08

Another murderous day for the markets with the DOW losing 508 points and the uranium sector taking another pounding. Anything with a ‘U’ in the title was dumped faster than hot cakes. The equities market in general needs to find a bottom before we can expect to see the uranium sector form a base. So long as the flight to cash continues then there isn’t a ‘safe’ stock out there, in our humble opinion.

To see Cameco close at $18.44, Denison at $1.87, Uranium One at $1.21, Laramide at $0.90 is something that we thought we would never witness. When this bull market starts again, those who have any cash left will make a fortune. We can only hope that it is not too long in coming as we decided to sit through this upheaval and remain in position.

As above chart shows the spot price stands at $53/lb and according to Ux Consulting the long-term price fell US$5 to US$75 a pound U3O8. We had hoped that the long-term price would remain stable but it has now softened.

Once this bout of selling recedes it will be interesting see just how the investment community reacts to a move to the upside in the spot price of uranium.

Got any comments? Fire them in!

Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.

If you are new to this web site and wish to receive our free newsletter regarding investment in uranium stocks and updates regarding uranium, then please click here to subscribe.

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