Two Uranium Investment Call Options in Anticipation of Price Rally

Mar. 5.09 | About: Uranium Participation (URPTF)

For investors who want to be locked and loaded for the anticipated uranium price rally, Raymond James analyst Bart Jaworski suggests taking a look at Nufcor Uranium Limited and Uranium Participation Corp. (OTCPK:URPTF), the world's only publicly-traded uranium investment vehicles.

"We suggest investors utilize either equity as a call option on potential future strength in uranium price and eventual takeout," he said in a research note, initiating coverage on both stocks.

Mr. Jaworski told clients that Nufcor and Uranium Participation expose investors to uranium prices without the risks inherent in exploring, developing or mining metal.

While spot uranium prices may still dip in the near term, he rates Nufcor a "strong buy" with a 6-12 month target price of C$4.90 per share and Uranium Participation "outperform" with a C$9.50 per share price target, based on his belief that the nuclear renaissance will continue despite the economic recession and drive prices eventually higher.

He predicts a steady rise in uranium prices from its current spot price of $44 per pound to $80 per pound in 2010. Long term, prices are expected to settle at $50.

Forced to choose in the near term, Mr. Jaworski added that Nufcor is preferable to Uranium Participation due to a pricing disparity between the two stocks.

"Nufcor is currently trading at $27.70/lb U3O8 (or 0.6x P/NAV) - a steep discount to UPC at $37.77/lb U3O8 (0.9x P/NAV)," he wrote, adding investors should take advantage now because the price gap will likely close in the near term.