With the price of uranium standing at $95.00 per pound we take a stroll down Imagination Lane to the offices of the fictional Gigantum Power Corporation and eaves drop on their preparations for the up coming Sealed Bids Auction.

The near term hot topic for this utility company is next weeks auction of 100 thousand pounds of U3O8. Having bid $82.50 in the last auction only to see it go to someone else who bid $85.00 they are now looking at much higher prices.

Chart

The Director of Operations bluntly puts it to the board to take the initiative and table a bold bid as they are desperately close to breaking the law by not having the legally required amount of uranium on site to ensure the continuous running of their plant. The Chief accountant points out that a bid of $100.00 would cost the company 10 million dollars. [That’s why he got the job he’s quick]

The young buck with the chart reminds his colleagues that the last auction was won with a price increase of 13.3% and suggests that a similar increase this time round is not out of the question. [He’s matured a little]

Silence; are they asleep or are they deep in thought? [The art of ‘playing’ a silence is a difficult one to learn; during in a stint working for the World Court I was privileged to observe some of the most talented negotiators in action, a priceless experience.] Hesitantly the young man puts forward a figure of $107.35 based on the previous 13.3 % price increase. His suggestion is greeted with the sound of air rushing through a few sets of clenched teeth.

Do we have to go that high? What if nobody actually bids we will look pretty stupid! Its better than rotational power cuts isn’t it? For once the board appear to be a little animated which is unusual for them after all they have had an easy ride for the last decade or so during in which combative skills were rather frowned upon.

The Chairman calls for calm and relays a story from one of his weekend golf buddies. This friend has suggested to him that there are ‘funds’ that would dearly like to win this auction and become players in this tiny market. The friend also highlights the threat of those funds, which bought earlier, and are now feeling flush with their success. These are the dangerous ones as success has most certainly proved to them that their cavalier attitude was correct and is once again the strategy for success. To them the higher the price goes the more valuable the uranium they already hold. They can afford to bid the price up as it is almost a no lose situation for them.

The Chairman concludes that the meeting most reach a decision, bite the bullet and come up with a winning bid. The debate ebbs and flows limply. The vote comes down in favour of a 10% increase on the current price of $95.00 bringing their final bid to rest at $104.50. Yes they are sure that this is a winning strategy and congratulations loosely flow across the table.

The End

Or is it? Well here at uranium-stocks we are also having a difficult time coming up with what we think will be the winning bid. However at the risk of getting it wrong by a country mile we will give it a go. Now consider the following:

This sector of the market is small but it is attracting more attention on a daily basis as evidenced by the article in the New York Times.

The last auction attracted a record number of buyers and resulted in a record jump in the price of uranium.

The longer-term demand now exceeds 54 million pounds according to the NMR.

It is only a $10 million decision lets face its not a huge figure.

Amongst the bidders there could be one who is desperate and bids high

There could also be a ‘cowboy’ who bids high with the view to flicking it on for a quick profit.

Decision Time: An astonishing headline grabbing $110.00/lb

Enjoy today for next week is sure to be charged with tension.

29 March 2007