Sunday, April 08, 2007
Last week the Uranium Spot Price closed at an all-time high
reaching US$113/lb (not inflation adjusted). The long-term price stayed put at
US$85/lb., which indicates to us that there are some consumers out there getting
squeezed already due to their lack of faith in the ability of this uranium bull
market (or their faith that uranium prices will come down in the near future).
We can see that to take delivery immediately has a high premium attached to it,
but this trend shall continue as more and more utilities are caught off guard.
Do not think that this is not the case because as we have stated before, we know
of a few utility companies betting they can buy yellowcake cheaper down the
road...and these are many of the same companies with plans to build America's
next generation of nuclear plants! It is sad that they seem to only see about
half of the picture, but they will eventually adapt to the market and drive
prices much higher on the long-term side of the equation thus closing the
premium of taking delivery ASAP (but this is at least a couple of years down the
As we write this, both of our Uranium Indexes stand at
all-time highs as well. theinvestar's Canadian Uranium Average finished the past
week at 313.18, up 22.1 points for the week or 7.59%. theinvestar's Australian
Uranium Average finished the week at 74.16, up .825 points for the week or
1.12%. It must be noted that ERA weighted heavily on the index this past week
with negative news out, however a near majority of the stocks within the index
were up strongly to offset those losses. For the year TICUA (Canada) is up
24.79% and TIAUA (Australia) is up 24.76%. Keep in mind that we started our
Australian Index on February 2, 2007, so results are from that date forward.
With U3O8 jumping nearly 19 percent this past week, there
seems to be room to run, however the recent trend of producers and
near-term/soon-to-be producers leading the way shall continue with the explorers
tagging along. The miners in Labrador's Central Mineral Belt should continue to
advance as there is more undiscovered uranium within the area, and hopefully
this will be indicated in the next batch of drilling results. Also pay attention
to the Otish Mountains area in the upcoming months as exploration begins to heat
up there as well.
Australia is an area we are looking at to provide many new
mines in the coming years, and this should be a positive development for the
entire industry. First it will provide hope to the utilities and foreign
countries that more supply is coming just in time to satisfy their fuel needs,
which should allow for the further development of nuclear power plants. Also, it
will allow more companies to become producers, which will have to fill their
pipeline with more projects thus pushing up the stock price for all companies in
the industry. Our point we are trying to stress regarding Australia is that it
should be viewed as an opportunity (for the industry and for investors alike)
and not a signal that the bull market is ending.
Paladin, Laramide, SXR, and even Denison allow investors to
gain exposure to Australian uranium. These are the 'safer' plays as they are
large, diversified companies but one could go further down the food chain and
purchase the PepinNini's and Nova's of the industry.
In other news:
Lundin Petroleum has announced that they will split the
company into two entities, one with the producing North Sea assets (to be called
Viking) and the other to own one share less than 50% of those assets as well as
the exploration assets around the world (most notably Sudan).
Oilsands Quest shares seem to be bottoming out here, but we
expect them to stay flat throughout the rest of the summer. In late summer they
will have news out regarding grades and intercepts from this drill season as
well as a new resource estimate. There is also the possibility that they will
have a JV partner by then, as the company has indicated that they have been
talking to potential partners lately.