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A Bet Against The Banks

Aside from our main investments in gold, silver and uranium, we have take a speculative position on the US financial sector.

IYF 130208

The problems of the financial sector begun with the sub-prime crisis but we believe it will spread to all areas of real estate and this will have a massive impact on a myriad of financial sectors, such as bond insurance companies, all across the world.

It is clear to us that this Bernanke led Fed committee is nothing but a one trick pony when it comes to solving economic turmoil. The base rate is already below the rate of inflation and although the Fed can continue to cut interest rates as much as they like, the question is: Will banks lend money below the rate of inflation?

Please click here to read the rest of the this article.

The Cleanliness Of Biofuels Thrown Into Doubt!

The New York Times Logo 13 Feb 08
It is a change to see that not everyone is totally convinced that Biofuels are the solution to a clean environment.

In the mail bag today we were alerted to this article in the Environmental section of The New York Times entitled: “Biofuels Deemed a Greenhouse threat”

The article is well worth a read if you can find the time to read it. Here is a short extract to wet your appetite:

Together the two studies offer sweeping conclusions: It does not matter if it is rain forest or scrub land that is cleared, the greenhouse gas contribution is significant. More important, they discovered that, taken globally, the production of almost all biofuels resulted, directly or indirectly, intentionally or not, in new lands being cleared, either for food or fuel.
“When you take this into account, most of the biofuel that people are using or planning to use would probably increase greenhouse gasses substantially,” said Timothy Searchinger, lead author of one of the studies and a researcher in environment and economics at Princeton University. “Previously there’s been an accounting error: land use change has been left out of prior analysis.

An accounting error! And we thought that accounting errors were the sole domain of the banks.

Have a good one.

Please feel free to comment on the above, the more diverse the opinions the better informed our readership will be and hopefully we will all make better investment decisions.


Denison Mines Corporation: Revisited

DML Logo 12 Feb 08

In response to our mailbag we are taking another look at Denison Mines Corporation, a favourite with many of our readers but one which we have not invested in the past.

What we said about Denison in January 2007:

“Overall we view this coming together of UIC and Denison as a very smart move. Good prospects added to good operational managers and a CEO, Peter Farmer who just oozes confidence all adds up to a ‘must have’ uranium stock.
The question is one of timing. We had UIC on our Watch List for some time and for various reasons we did not make an investment. May be we missed the boat, who knows?”

At the time we wrote this Denison was trading at around $12 and went on to trade as high as $16.00 plus. The stock price has now more than halved along with many in this sector. So has the buying opportunity that we have been waiting for now arrived? We will start with a quick look a he charts:

Chart 1: The last three years:

DML Chart three years 12 Feb 08

At $6 this stock is trading at April 2006 levels when uranium was trading at around $40.00. So at almost double the price of uranium, one would expect this uranium stock to be performing much better than it is. However the perception of which way the price of uranium is headed plays a big part in the criteria for investment.

Chart 2: Recent performance

DML Chart Recent Performance 12 Feb 08

DML looks to be forming a base. The technical indicators are just about on the floor and look to be turning higher. We could assume that they are now going to head higher or we can wait for some sign of confirmation that this is indeed the situation.

Uranium: Chart courtesy of

U3O8 Chart

Having rattled along to $138/lb on the spot market we have experienced a considerable pull back and now have uranium trading at $75/lb. However it should be remembered that the lions share of the trading takes place through privately arranged agreements between the producers and the utilities. Looking at the chart for uranium we can see the fall to $80/lb followed by a small bounce which petered out and the price now looks to be heading lower. This spot price is eagerly watched and reported on, and so has a huge influence on an investors decision making process. Many will see this as the determining factor for them, so all the uranium stocks could still go a little lower. For what it is worth we see it as the damage has already been done and that the downside from here is limited. The fundamentals have not changed although uranium appears to be out of fashion at the moment. As we said in the January article:

As Baron Rothschild once said something a long the lines that he was "only ever happy when he was sure that no one else wanted the stock that he was buying."

We think that we are at or very close to one of those opportunistic buying moments where fortune will favour brave. However for now we will keep a close eye on this stock with the view to cheekily placing a 'stink' bid below the current stock price in the hope of catching a real bargain. Should you want to pick it up now then that strategy should also work out well if you can wait for uranium to play out its downside and the rest of the investment community to recognise the value uranium stocks, such as this one. We remain positive, optimist and bullish on this sector but we have to say that it is a stance not shared by all of readers.

This company describes themselves as:

"A diversified, growth-oriented, intermediate uranium producer. With seven active uranium mines in North America (five in the U.S. and two in Canada), Denison estimates North American production at 5.0 million lbs of U3O8 by 2011." You can read more about them on their web site by clicking here.

Denison Mines Corporation trades as DML on the TSX and DNN on the AMEX, has a market capitalisation of $1.2 billion, a P/E of 37.73 and is trading at around $6.41.

Finally, If you are new to this web site and wish to receive our free newsletter regarding trading opportunities in this sector then please click this link to subscribe to The FREE Uranium Stocks Newsletter.


Cameco Corporation: Port Hope Clean Up Impacts Bottom Line

Cameco logo 07 Feb 08

The world's number one uranium producer reported earnings of 17 Canadian cents a share, for the quarter, up from 11 Canadian cents a share a year earlier, however fell short of analysts expectations.

In a statement Cameco said that the:

Port Hope fuel services production and SFL supply totalled 1.7 million kgU in the fourth quarter of 2007 compared to 5.2 million kgU in the fourth quarter of 2006. Suspension of UF6 production at Port Hope continued in the fourth quarter as work progressed to determine the extent of subsurface contamination, assess possible methods of managing it, and determine how to prevent future contamination”.

Although revenue was down to C$494 million from $512 million, Cameco's results were helped by a 49 percent rise in realized uranium prices, which offset the impact of a 39 percent drop in uranium sales volumes. The sales of uranium dropped to 5.5 million pounds from 9.0 million pounds for the quarter, however sales were at an average price of $38.92 a pound, up from a year-before $22.35.

The news did not do much for the stock price as it closed down $0.13 to $32.19 on a volume of 3.9 million shares traded. Set in the context of a drifting uranium price it is difficult to see a recovery in the near term. However, Cameco is the giant of the uranium industry and could be now approaching levels that are attractive to both investors and fund managers.

Taking a quick look at the chart we can see that it has come off a fair way since the heady days of $50 plus for this stock. But also note that the Technical indicators are at the bottom of their respective ranges and the stock price is a long way below its 200dma, which tells us that a sharp snap back is a possibility. We are not buyers at the moment but this situation will be monitored closely as an entry point would appear to be getting closer.

Cameco Chart 07 Feb 08

Have a good one.

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Sub-Prime Crisis: What If?

By now we are all familiar with the term 'sub-prime' and have observed the ramifications of this problem as it spread across the globe. However it raises another question;

What if
the very same banks and managers of the the sub-prime problem are also the responsible for finance in other areas of industry?

If these people can make an almighty mess of loans for houses, what sort of mess have they made in the financing of projects in other areas such as; pharmacy, retail, autos, property, petro-chemical, oils and gas, etc?

Please click here to read our full article.

The Future US Dollar Carry Trade

Most investors are familiar with the concept of the yen carry trade. It is where a trader will borrow say 1,000,000 yen from a bank in Japan at about a 1% interest rate. The trader then converts these yen into say US dollars and uses the dollars to buy bonds yeilding say 5%. Therefore the trader is looking at making a profit of 4% on his trade (5% - 1% = 4%).


This works well so long as the yen doesn't getter stronger against the dollar. Many professional currency traders would leverage their trade by say 10:1 and so make 40% profit instead of 4%.

The carry trade affects every area of the financial markets, including uranium. Please read the full article by clicking here.

The BBC: A Debate on Nuclear Power Stations

One of our readers has alerted us to this debate on the BBC World Service where three experts in the field of nuclear power generation discuss the reasons for the revival of nuclear power in the UK and elsewhere in the world.

The participants are Malcolm Grimston, Professor Robin Grimes and Dr Paul Norman. The debate takes about 26 minutes to listen to and you may find it interesting.

Click this LINK to listen to the show.

Uranium Price Slips on Micro Analysis

The day to day imbalance of uranium supply and demand continues to spook investors as near term supply increases and near term demand remains static. Any movement in the the spot price of uranium can trigger a mini stampede as investors rush to buy or sell uranium stocks depending on whether the news is positive or negative.

Uranium Price Slips on Micro Analysis

On the negative side of this see saw we have news reported by Bloomberg that Uranium oxide concentrate for immediate delivery was offered at $78 a pound today, checking other sources we have Tradetech with uranium at $82/lb and the UX Consulting Company have uranium at $86/lb. Some of these anomalies can accounted for with each organisation having different cut-off and reporting dates which generate slightly different results.

On the positive side of the see saw we could argue that the Futures market has uranium prices ranging from $85- $88/lb, but this is a fledgling market and it will take some time to build credibility as serious market indicator. The major factor in favour of uranium is the constant stream of announcements by various utilities and government departments to push ahead with a programme of nuclear power to meet the escalating demand of both industry and the domestic user. We struggle to find anywhere an announcement regarding a reduction in the requirement for nuclear power. However it does take time to navigate the planning process, raise the finance, design, procure, construct and commission such power plants.

This brings us to the near term imbalance between supply and demand whereby any increase in supply compared to what appears to be a static demand manifests itself in negative headlines for uranium stocks. Given the range of numbers laid out above it is interesting that the most negative figure hits the headlines. Newspaper people tell us that bad news sells newspapers, but fail to explain why their circulation has been dwindling for years. We also need to keep the spot price in perspective as it accounts for only a tiny portion of the trade in uranium where utilities and suppliers enter into long term contracts by mutual agreement, the detail of which is not always available to the public.

The decision to place your hard earned cash into various market sectors is entirely yours to make as its your money. Our decision is to stick with our holding in uranium stocks despite the short term battering we have been through. Why? Well this is a thinly traded market and as witnessed a few days ago some of these stocks jumped by as much as 30% in one day. The fundamentals, when we look a little further ahead, are still in place for future demand to sky rocket. Our financial system is still awash with cash with more being printed every day. Investors are waking up to the fact that paper assets are not as solid as first thought as evidenced by the gradual recognition of the precious metals sector as a place to actually make money. Both gold and silver are transparent in terms of what they are worth on a daily basis, a characteristic let to be bestowed on uranium. As the quality uranium stocks continue to make good progress and start to mature as companies, their value will be recognised and stock prices will move up rapidly. The question is one of patience!

Stay tuned to the uranium sector by subscribing to our FREE Uranium Stocks Newsletter, just click here and enter your email adress to subscribe.

Greenpeace Questions On Nuclear Power Answered

We always try to see both sides of an argument and always listen to what each side is saying in any particular case, even if we strongly disagree. Therefore we subscribe to Greenpeace and other anti-nuclear groups to hear what they have to say and we always treat their points with an open mind as if we are wrong on something, we would rather know sooner than later!

Greenpeace Questions On Nuclear Power Answered

Recently Greenpeace encouraged its supporters to put questions to the UK business secretary John Hutton regarding his stance on nuclear power and the future of Britain's energy and his proposals to build new nuclear and coal-fired power stations. Greenpeace gave some examples of what questions to ask him (as shown below) and we have done our best to answer them in an attempt to persuade Greenpeace that nuclear power is the most viable option for beating climate change.

Why have you given the green light for new nuclear power stations when they will at best only deliver a 4 per cent cut in carbon dioxide emissions sometime after 2021?

Firstly, please note that Greenpeace have not provided figures for how much other energy sources will reduce carbon emissions. For example, even if every area of Britain that was suitable for windmills was covered in them, it would only provide 10% of electricity demands. Secondly, the reason this figure may appear low is because the government is talking about building nuclear power plants in 2's, 3's and 4's instead of doing what is needed, which is at least 50 more reactors in the UK to combat climate change. This would dramatically decrease UK carbon emissions. They need to have these new nuclear plants built by five years ago and as that is not possible, the second best option is to start right away. Delaying the beginning of British nuclear expansion will only make the situation worse.

Why have you given the green light for new nuclear power stations when the first will come online in 2021 at the very earliest, long after the predicted 'energy gap' is due around 2015?

The reason the nuclear plants are coming online after the energy gap is because they should have been built sooner. Perhaps if there had been less opposition to nuclear power by groups such as Greenpeace, British politicians would have been more willing to update and expand nuclear power. They need to have these new nuclear plants built by five years ago and as that is not possible, the second best option is to start right away. Delaying the beginning of British nuclear expansion will only make the situation worse. This point raised by Greenpeace actually strengthens the case to begin building more nuclear plants ASAP.

Even though the Committee on Radioactive Waste Management said it wouldn't advise on dealing with waste from new nuclear power stations, energy minister Malcolm Wicks said on Newsnight that it would be dealt with by deep geological disposal. If this wasn't advice from CoRWM, where did it come from?

We cannot comment on where the British government takes its advise. However, the best thing to do with the radioactive waste is to follow what the French have done and are still doing today. Store the waste in special containers until we find out how to deal with it. After all, we only discovered nuclear power a generation ago, imagine what the next generation could discover.

How will the government achieve emissions reductions of 80 per cent by 2050, as suggested by Gordon Brown, if new coal-fired power stations are approved?

If Britain builds more coal power plants, we agree, this makes the situation worse. Therefore they need to stop building coal fired power stations and start building nuclear power plants on a large scale, to meet emissions targets.

You said recently on Channel 4 News that "we've got to solve the problem of climate change and energy security with the technology that is currently available". As carbon capture and storage has not been proven commercially, how can any new coal-fired power stations be justified?

It cannot be justified we agree. Therefore the government must turn to nuclear energy, a technology that is viable, available and carbon emission free.

Why does the UK not have a feed-in tariff system similar to that in Germany to help encourage renewable energy, including micro-generation of electricity in homes and businesses?

This sounds like a good idea, however “micro-generation of electricity” is not going to close the energy gap. These measure may help, but it will take nuclear power to fill the coming energy shortage.

Why has your department always seemed so hostile to renewable energy and favoured nuclear power, as demonstrated in leaked documents?

Nuclear power is probably favoured as it works and is a far more viable option to solving Britain's energy shortage and security problems.

How do you hope to meet the UK's share of the EU's proposed renewable energy target in twelve years' time when only Malta and Luxembourg generate less than us?

This problem is not a priority. The first and foremost priority is to supply Britain with a secure, stable and sustainable supply of energy. The government should build many more nuclear power plants to secure the UK with energy, then worry about jumping through hoops for Brussels. After all, is the primary concern of the British government meeting the needs of the British people or is it meeting targets set by the European Union?

If you are a member of Greenpeace or are against nuclear power, please post any questions you have in the comment box below and we will answer them to the best of our ability.

Stick with those uranium stocks, nuclear energy is the power of the future. Stay updated on the nuclear industry, uranium and uranium stocks by subscribing to The Uranium Stocks Newsletter FREE of charge. Simply click here and enter your email to subscribe.

How Far Will The Fed Go?

In the Federal Reserve meeting this week, we will almost certainly see another interest rate cut of at least 25 basis points, with the more likely option being a cut of 50 basis points. This will give stocks across the board another boost and deal another blow to the US dollar.

How Far Will The Fed Go

The majority of investors know that Ben Bernanke intends to continue to cut rates as much as he can to try and prevent a recession in America. However what is not known yet is just how far the Fed will go in their rate cutting policy.

Are rates heading to zero? Is Bernanke going to follow the policy of Japan when times get hard?

The Full Article is on our gold website, , please click here to read.