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Wednesday
Feb202008

Khan Resources Incorporated: Up 25% in a Day!

Khan logo 21 Feb 08

On turnover of 655,000 shares Khan Resources Incorporated gained $0.35 or 25% to close at $1.75, as the uranium stocks generally had a pretty good day.

Khan Chart 21 Feb 08

Well just maybe the uranium cat is not so dead after all. Yesterday we reviewed the situation posing the question of whether this sector is undergoing a Dead Cat Bounce or a Trend Reversal, it would appear that the progress north continues. For example other stocks involved in moves higher today were:

Blue Sky Uranium Corporation Up 28.21%
Bitterroot Resources Ltd. Up 19.30%
Uranium City Resources Incorporated. Up 15.0%
Waseco Resources Incorporated Up 25.71%
Mega Uranium Ltd. Up 5.26%
Laramide Resources Up 4.37%

Not too shabby to say the least, these increases must have have brought a little smile back to the faces of those who have decided to stick with it, including us.

Back to Khan, there does not appear to be any breaking news here that would affect the stocks price other then a week ago they announced an addition to the board as follows:

"The appointment of Stephen Harapiak to its Board of Directors. Steve brings a rich background in mining, project management, and engineering to the Board. Beginning with a mechanical engineering degree from the University of Manitoba in 1959, Mr. Harapiak embarked on an impressive career that led to leadership positions at companies including Noranda, Davy International (now Kvaerner) and Potash Corporation. More recently, Mr. Harapiak has been involved in international resource industry projects at a senior level including operations in Russia, ranging from a General Director position at a $230 million gold mining operation to recent work with the International Finance Corporation of the World Bank, dealing with small and medium enterprises supplying the resource industries in that region. Mr. Harapiak will bring valued industry experience and expertise to the Board. This looks to be a good appointment as Mr. Harapiak brings with him engineering disciplines and procedures.

This could be a cheap entry point for those who have Khan on their watch list and have previously been put off by higher prices.

Have a good one.

For those of you who are new to this web site and would like to receive our free newsletter regarding investing in uranium stocks and uranium generally please click this link.












Tuesday
Feb192008

Dead Cat Bounce or Trend Reversal?

Dead Cat Bounce 19 Feb 08


Our readers have asked is this a Dead Cat Bounce or Trend Reversal? So we took a quick look. Whilst pouring over the charts of a number of uranium stocks we were frankly amazed at some of the lows that these stocks have touched. Is it safe to buy now?

With very few exceptions the charts for most uranium stocks follow a similar pattern of racing ahead of themselves on the back of a rising uranium price and then falling back to earth as uranium was shunned during the scramble for cash. Trying to discern a trend at this micro level based on such a short period of 'levelling out' is a sure way to embarrass ourselves, but we will give it a shot. Individual stocks will of course behave according to their own criteria so the question is more general in that can we see this sector turning upwards or is this another false dawn.

The three charts below illustrate the rise and fall of this sector reasonably well as you can see. The first is CCJ, followed URE and then AXU.

CCJ Chart 19 Feb 08

URE Chart 19 Feb 08

AXU Chart 19 Feb 08

We can see that these sample uranium stocks are trading below their own 50dma lines (blue) and a long below their own 200dma line (red) unlike gold stocks for instance which are mostly trading well above their moving average lines. The technical indicators for these uranium stocks have been muddling along at the bottom of their respective ranges, in the buy zone for some time now. Recently they have come back to life and are mostly heading or pointing north. As with most declines or rises they have not been formed on a straight line go to basis, there have been minor rallies along the way. These rallies have served to offer some investors a suitable entry point and other investors the opportunity to limit their loses by selling into them. The activity of the latter has to some extent minimised previous rallies but the over-riding negative factor must be the falling spot price of uranium which is there for all to see unlike the private sales between the producers and the utilities that go on unseen. And so the spot price does to some extent take centre stage and when it drifts lifelessly it casts a long shadow over this sector spooking investors. This is a very thin market with some of these companies trading less then $1.0 million worth of shares in one day. That's a large amount of money to us but its small change to the bigger players. The point being that some of these thinly traded stocks can be moved up or down by a small amount of dollars. Since November 2007 we have seen investors steadily withdraw their cash and hence we arrive at today's stock prices.

Our view, for what its worth, is that we would like to see the price of uranium stabilise and then start to rise if this mini rally in uranium stocks is to continue. If you cant wait any longer or you think that they are great value now then by all means re-enter the market gently and start building a position. We will watch for another week or so.

If you are new to this web site and would like to receive our free news letter then please click this link.

Good luck.

Thursday
Feb142008

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.
Wednesday
Feb132008

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.





Monday
Feb112008

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 U308.com

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.




Wednesday
Feb062008

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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Sunday
Feb032008

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.
Saturday
Feb022008

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%).

USD COLLAPSE

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.
Wednesday
Jan302008

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.
Tuesday
Jan292008

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!

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