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Physical Uranium Contract for London Metals Exchange!

LME picture 22 March 2008

Another sign of the growing interest in this tiny market sector is the slow, but sure growth of the interest in various vehicles for trading uranium. We have witnessed the birth of the futures market for uranium over at NYMEX and now we another possibility on the cards.

According to David Stellfox, of who wrote: 'According to industry sources, global mining giant BHP Billiton is one of the companies that have approached the LME about setting up a contract. One major issue yet to be addressed is where the product would be stored.' An interesting point given that the possibility of storing uranium anywhere in the UK will become the target of the various environmental groups who are still opposed to nuclear power. The article goes on to say that;

“They believe an LME contract would help jump-start the moribund uranium spot market, but add that if a uranium market is to develop as have other commodity markets, there will need to be a level playing field for all participants.”

A jump start for the spot market! Well, every little bit helps, and why not? But as we have said many times before it is the long term contract price that is important and not so much the spot price. However, we do tend to watch the spot price more avidly.

It also offers an alternative to having to use the conversion facilities for storage, who by their strategic position in this process do have an advantage in terms of knowledgeof the market.

Lets hope that they go for it.

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Bottom Fishers lift Aurora 17.12%!

As all eyes watched gold take a dive, the bottom fishers moved to take advantage of the Aurora's lowly stock price with 424,000 shares traded, the stock gained $0.95 in a day.

Aurora Chart 21 March 2008

It remains to be seen if these opportunists have got a good buy or not. It is certainly risky given the geo-political problems involving the Nunatsiavut Government which is considering a proposed three-year moratorium on uranium mining and milling on Labrador Inuit Lands in coastal Labrador.

We checked a few sources but did not find anything new to report regarding further developments on this issue.

We are of the opinion that the downside is now limited for this sector in general although there could be a little still to go. As the bigger issues of the world banking crises unfold its appears that anything and everything will be sold in order to generate cash to meet margin calls in the dizzy world of derivatives trading. The extent of which we can not measure, however we must be aware of their existence and possible impact on the tiny sector of uranium stocks.

Aurora Energy Resources Incorporated trades on the Toronto Stock Exchange under the symbol of AXU and closed at $6.50.

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Silver, Gold and Uranium Stocks Get Clobbered!

Its difficult not to get carried away with the euphoria when the precious metals, gold and silver are at all time highs and the next stop appears to be the moon.

HUI Chart 20 March 2008

The last couple of days of trading has seen our sector of the market take it on the chin.

Please click here to read our full article.

A Tricky time for Metals Bugs

A number of our readers have informed us that they have recently moved out of uranium stocks and are intent on investing in the more glamorous gold and silver sector. We are long time gold and silver bugs but we question the wisdom of this move.

First of all gold is at an all time high at $1000 plus and its recent progress has been explosive, from $650 in September 2007, truly magnificent gains.

The same pretty much applies to silver which is also basking in the limelight.

Uranium stocks have however been beaten to the ground with falls of 60% in some cases. However, these stocks have shown signs that the worst is over and some have climbed back a little.

So, having suffered a loss in one sector is it a smart move to pull out and reinvest in another sector. Well, if the other sector is gold, then you are investing in a sector that is all ready at record highs. Ask yourself, is now the time to be doing this? Are you going to stay with it until gold reaches say, $2000, $5000? or if it corrects on short term profit taking and you suffer another loss will you be on the move again.

As a strategy we should be buying when there is 'blood in the streets' and not when everyone else is clamouring for the stock that you want. The blood is more or less in Uranium Street but that can not be said for the gold sector.

We don't want to deter you from enjoying the success of the gold and silver sector, where we have a considerable holding, but we do question the timing of such a move. Timing is a vital ingredient to your decision making process.

We are observers at the moment and are concerned that a correction in the precious metals and their associated stocks is imminent. So we are not buyers at this time. As for the long term gold has a long way to go. Uranium stocks could remain shaky for the time being as they have taken a battering and need to stabilise before heading north, which they undoubtedly will.

Try to stay calm and allow your thoughts to thoroughly work through the possibilities that are right for you and read as widely as you can.

Whichever way you play it we wish you every success and if you can find the time, do let us know what your thoughts are and how your investments are working out for you.

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Have a good one.


Uranium Conference in Adelaide

Adelaide now logo 18 March 2008
A snippet that may be of interest to you, yesterday at the Paydirt 2008 Uranium Conference in Adelaide, Warwick Grigor managing director of Far East Capital said;

“the fall in the uranium price from last year's peak of $US135 per pound to $US74 currently was neither something the industry, nor investors, should worry about. The froth has been blown off the top. The price could reasonably trade within the $US60-$US90 pound range for the balance of this year. It would be most surprising to see it fall any lower."

Mr Grigor tabled his analysis of Australia's leading uranium companies which over the last year showed a fall of 65% on average. However he went on to say that;

"I still hold the view the next decade will be a great source of opportunity for anyone involved in the uranium and nuclear power sectors," he said. "We should stick to our guns and back this nuclear bull market to the hilt."

This is pretty much the way we think so we were pleased to hear someone show a little enthusiasm for the uranium sector and for uranium stocks. The article was carried by the just click this link to read it in full.

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The Australian’s view of China.

In the past few months, The Australian has travelled around China to find out what changes have been made and, in an article by Rowan Callick, we get an insight into China's progress in their quest for energy.

With the economy in overdrive and no end in sight China is turning its attention to the reduction of greenhouse gases as the eyes of the world are starting to focus on the Beijing Olympic Games, China's economy, pollution levels, its strategy for the future. With around 80% of China's energy being fuelled by coal, one of the dirtiest forms of energy production, China is increasingly turning to nuclear power to form a larger part of its energy needs going forward.

The State Electricity Regulatory Commissions Gu Jun-yuan, the commission's chief engineer, said
“that from 2001-2007, China had increased its power capacity by 1.5 times Japan's total, growing annually by 18.5 per cent. Some problems have been exposed in the course of this rapid development, for instance in pricing. We must rely on market based reform to solve these problems.”

We draw your attention to growing annually at 18.5% and already bigger then Japan! This article goes on to talk about the various power plants in operation from Hong Kong to the biomass project in Shandong province. But what you want to know about is uranium where this report says:

“Overall, China's plants source 70 per cent of their uranium domestically and import the rest from Russia, Europe and elsewhere.”

We have touched on construction time frames in the past as they have a direct impact on just when the the supply of uranium is required, this article says that:

The first two units at Daya Bay (nuclear power station close to Homg Kong) took six years and nine months to build, by US giant Bechtel, the second two, five years. China National Nuclear Corporation is building the two new units, half of whose components are also being made in China. A five year construction period and getting shorter by the day as the Chinese improve their construction techniques. The US, Britain and France ought to take note, as it looks to us that the days of spending ten years or so in construction, are rapidly coming to an end. Good news for uranium bugs!

Daya Bay 17 Mar 08
Daya Bay power plant

Also worth noting is that China Light and Power, which operates the three power facilities that The Australian visited, also operates in Australia as TRUenergy and has around 1.2 million electricity and gas customers. It owns Victoria's Yallourn power station along with the electricity retail business of Yallourn Energy. Throw in the trillion dollars or so that China has in reserve and it looks like acquisitions could soon be the order of the day, which at the current the price levels for uranium stocks, would be a steal.

Many thanks to Wayne for alerting us to this article.

Have a good one.

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Uranium Update 13 March 2008

U308 Chart 13 March 2008

Chart courtesy of

As we can see from the chart the spot price has moved up a whole dollar to $74/lb which appears to be lacklustre when compared to the gold and silver markets which are currently basking in the limelight.

A quick look at the authoritative web sites and we find the following quote from

“The spot uranium market exhibited signs of strengthening last week. One transaction involving 100 thousand pounds U3O8 is reported and new demand emerged. Several sellers raised their offer prices over the course of the week. Nevertheless, a gap still exists between most willing sellers and willing buyers. Buyers, however, showed a willingness to pay somewhat higher prices than has been witnessed in recent weeks. As a result, TradeTech’s Spot Price Indicator increased $1.00 to $74.00 per pound U3O8”

So there we have it.

Turning to a lighter note regarding seasonal statistical behaviour we take a look at The Motley Fool who had this to say in an article entitled 'The March Mayhem Effect' where we see Uranium Resources Incorporated (URRE on NASDAQ) hitting their charts:

“What drove the stellar March performance of uranium miner Uranium Resources? The surge is most likely an anomaly, just like January's status as the worst month to own the stock; Uranium Resources falls an average of more than 35% during that month -- so get ready to sell. Not!
It happens that May is the best-performing month for rival Cameco (NYSE: CCJ); it returns about 11% in that month.
You can see why we don't recommend using this as a list of stocks to buy or sell -- just a platform for further research. Whatever the reason, Uranium Resources' three-star rating suggests that CAPS investors have a middle-of-the-road opinion about its future performance.”

To read the article in full just click this link.

And finally, after our post about Aurora Energy Resources taking a bath yesterday, she fought back with a 7.17% gain to close at $6.58, an opportunistic purchase for somebody.

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Aurora Energy Resources Incorporated Takes A Bath!

The news that The Nunatsiavut Government is considering a proposed three-year moratorium on uranium mining and milling on Labrador Inuit Lands in coastal Labrador hit the stock price of both Aurora Energy Resources Incorporated and Fronteer Development Group Incorporated hard.

Aurora chart 13 March 08

According to CNN the above mentioned motion has passed a first reading and must now pass a second reading before it can included in the law.
Aurora President and CEO Dr. Mark O'Dea had this to say:

"Aurora recognizes that uranium mining can only proceed on Labrador Inuit Lands with the agreement and trust of the Labrador Inuit, Aurora is committed to making sure that the Nunatsiavut Government and the coastal communities are comfortable with any proposed mining project."

Aurora is optimistic that the process will move ahead. Well as investors in this stock we certainly hope that these issues are resolved to benefit of both parties. It also raises the question of whether to stay or whether to go? If we go now we register a financial loss and if we stay the loss could be much worse or looking the bright side, the stock would jump on news of a reconciliation. The successful outcome in part depends on the ability of the management team to convince the objectors to the scheme that their concerns have been considered and satisfied. This focusses our attention on the company President himself, Dr. Mark O'Dea and just how much confidence we have in him. The answer to that question is that we are very confident that he can resolve this issue and push ahead. So what do we do next? Well, first of all we will hold onto our stock as the bad news is out and the damage is done. Secondly we will monitor the situation with the view to buying more of this stock at these low levels in anticipation of a bounce back.

As you can see looking at Aurora's chart it is not a pretty sight, from a high of $16.00, to yesterdays close at $6.14.
The same situation has also affected FRG which we will also watch carefully.

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Aurora Energy Resources Incorporated trades on the TSX under the symbol of AXU. Fronteer Development Group Incorporated trades on the TSX under the symbol of FRG and on the AMEX under the symbol of FRG.


China: High Speed Construction of Nuclear Power Plants!

China Flag 12 March 08

China power plant 12 March 08

We have all witnessed the speed at which China completed a brand new airport in preparation for the Olympic games. They did it in just four years in contrast to Heathrow Airport, which took six years just to get planning approval. So they have now applied that same speed of construction to the nuclear sector and the result is astounding.

“China is expanding nuclear power construction plans faster than earlier planned, a senior energy official told state media on Saturday, saying installed power capacity by 2020 could be 50 percent above the initial goal” according to Reuters

China's nuclear energy development plan had hoped to achieve an operating power capacity of 40 gigawatts by 2020. To put it into perspective that is the same amount of power that Spain requires and represents approximately 4% of China's energy needs. However, the vice Minister of the National Development and Reform Commission has announced that that this figure will be exceeded by 50% to 60 gigawatts in the very same time frame. This news ties in with what we have been saying on this web site for some time, that in the rush to secure a supply of uranium for the future energy needs. it is better to understate your real needs until you have those supply contracts in place. (27th September 2007 we wrote: we tend to think that China will announce more and more new proposals once it has tied up the supply of uranium) We believe that this is the first of many such announcements that will come out of China on a timely basis. News flow needs to be managed in order to avoid causing a panic in the market and driving up the price, well at least until you have made certain that you can actually feed these new power plants.

It may take a while for this sort of news to sink in, but it does bring forward the delivery dates for uranium and will keep on doing so as China charges ahead with record breaking construction schedules. It is also well known that China is sitting on a mountain of US Dollars and other foreign currencies. The UD Dollar, in particular is falling out of bed, so what better way to unload this fast depreciating paper asset but to swap it for your future power requirements?

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A Get Together with Doug Casey and Rick Rule

Casey Research organised a get together at the Barbebra Café in Auckland on Wednesday night for International Speculators. Around thirty people attended and a very good night it was too!

Doug Casey, Sam Kirtley and Bob Kirtley
Pictured Above: Bob Kirtley, Doug Casey, Sam Kirtley

The subjects covered were wide ranging as each attendee had their own unique area of interest around which debate was built. Doug is a mind of information about everything from property development opportunities in Argentina to the possibility of a sovereign state tying its currency to the gold standard. This is an interesting idea as the global distrust of paper currencies grows, it could happen sooner then we imagine.

To read the full article and see more photos of the get together just click here.