Uranium: Signs That It's Bottoming - Raymond James

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Includes: HTHXF, NLR, SXRZF
by: FP Trading Desk

While Raymond James analyst Bart Jaworski remains cautious about the near term prospects of the uranium market, he does see some encouraging signs that suggest prices may be close to bottoming.

One such sign, according to the analyst, is the news that Lehman Brothers has sold 450,000 pounds of U3O8, possibly to Kazatomprom. Lehman Bros had set a floor price of US$46 per pound, compared to uranium's current spot price of US$47 per pound and Mr. Jaworski says the reports, if true, remove a significant overhang in the market.

He is enthused as well by the proposed DB New York Nuclear Uranium Fund formed by Deutsche Bank and New York Nuclear Corp. An application for an initial public offering is currently in the works and a successful IPO could "provide meaningful buying," the analyst said.

Mr. Jaworski said key political initiatives around the world are also lining up in favour of a uranium recovery.

"Sweden this week reversed its 1980 decision to phase out the country’s ten reactors as part of its new climate plan to cut greenhouse emissions by 40% by 2020," he told clients in a note. "Will Germany follow suit? (a nuclear phase‐out by 2020 is currently planned)."

In addition, he noted that Russia recently signed a contract to supply India with 2,000 tonnes of uranium pellets in a deal worth $780 mln and that Kazakhstan announced last week it will devalue its currency, the Tenge.

"We consider this bullish for Kazakh producers, including [Uranium One], whose operating costs are at least 80% denominated in Tenge," he wrote. With a "outperform" rating and C$2.70 price target, Uranium One Inc. (OTC:SXRZF)(TSE:UUU) is one of Mr. Jaworski's top picks. His other is Hathor Exploration Ltd., (OTC:HTHXF)(CVE:HAT) which is rated a "strong buy" with a C$7.20 price target.

All amounts in U.S. dollars unless otherwise indicated.