Stumbling Giant
Tuesday, October 24, 2006

It seems that lightning has struck again (3 times total for those of you counting and 2 times in the last 6 months at Cigar Lake) with another flood at Cameco's Cigar Lake. This will delay for another year now the opening of the mine until what the company is saying will be the year 2008. Supposedly their contracts have safety clauses and such language to protect CCJ, but this is lost business. It is impossible to justify a 35 p/e and ever increasing stock price when you cannot experience upswings in commodity prices because you have sold forward your production in long-term contracts as well as lose your future added capacity.

Just as we have predicted, there would be a day when SXR would rise to the top and become a Blue Chip for the uranium industry. Today may have been that day as the company should have 2 mines opened by the time Cameco gets Cigar Lake in operation, assuming they fix all the problems and do not experience anymore. Cameco stock should stagnate at these levels for a while, quite possibly until the end of the year...and should this happen the stock could even fall another 10% as funds will be 'window dressing' by dumping the past quarter's market laggards. Keep in mind that we believe a Tech Rally is about to grace us this Christmas season as we have recently stated and since we have experienced new highs on the Dow as well as the advancement past 12,000. There could be an exodus out of CCJ and into Techs for the short-term until it becomes apparent what the situation is going to look like for the mid to long-term future of the company.

If some of those funds also rotate out of CCJ and into SXR, watch out because that will get the stock rocking and rolling, which will allow management to use their rich currency to do deals. Ur-Energy which also had a nice day today will have mines operational in 2008 would be a nice target, as we have said in the past, for SXR to pursue. Keep in mind that SXR did raise nearly $200 million during the recent sideways movement in uranium stocks for “strategic purposes.”

Now regarding the spot price of uranium for this upcoming week, we believe that it should be up at least $1.50 to $57.50. This would not at all surprise us, and in fact makes us believe that the spot price shall rise to $65 by year's end. The rally has extended over into Australia (at least into the uranium stocks we follow over there) and could very well continue into today in the states. We believe that profits will be taken today as many stocks added nearly a fifth of their value to their share prices. It is interesting to note however that a few stocks hit all-time highs on the news as well as others breaking out through resistance levels that had contained them for this past summer. Maybe this is the coming out party for the near producers and respectable juniors that many have been waiting for as there was strong volume across the board to accompany the dramatic increases in share price. This rally could extend itself through the end of the year with a few well timed acquisitions and good market conditions.

Updates: 

ASXSF: We had stated that the trade is over at $1.70 area and the other day it actually hit $1.69 early and then late never advancing past it, only to decline back down until eventually settling at $1.50. We believe that now under current market conditions that the upper range can be moved to $1.80.

BQI: Company expects to be fully operational by January and the news flow should begin to accelerate as drilling season kicks off. We fully believe that this season will match last season's and quite possibly even exceed those results. We bless any buying below $5 before December as we believe that the stock will appreciate above that area around that time.