Uranium Stocks: Bargain Hunting Takes Patience

While compiling an update to our popular uranium guide, we reviewed more than 150 companies in hopes of finding a handful of undervalued uranium stocks. Bargain hunting is getting harder in light of the spot uranium price reaching a record $85/pound last week. Perhaps, that is why momentum investors today turned to cheaper junior uranium exploration companies for a better deal. Exploration juniors on the TSX-Venture stock exchange exploded higher. But, these weren’t the companies with the better prospects on the horizon. Many of those have yet to discover a whiff of uranium, let alone proceeding through the development stage. They are just mining the market, not uranium.

Several U.S. advanced stage uranium companies, whose projects are actually in the process of being developed for production within the decade, one of which is already producing, have begun breaking out on their stock charts. Four of the companies we examined on the American and Over the Counter Bulletin Board are definitely attracting investors. How do their market caps look, though?

Thirty-year old Uranium Resources (URRE) is again approaching resistance at recent late November highs. The stock chart’s daily Relative Strength [RSI] is rising which is encouraging. Market capitalization stands at $309 million, which remains relatively low compared to many companies in the space which may never produce uranium. Uranium Resources is one of a handful of U.S. uranium producers. In 2006, some of the company’s uranium mining helped contribute to the highest production year in the U.S. since 1999.

While Uranium Resources lagged the group, Uranium Energy Corp (URME.OB) has been making up for lost time. Since early October, investors could get a nosebleed watching the company’s shares soar. The company’s prospects looked dynamic this past April when we interviewed the company’s chief operating officer Harry Anthony about the mechanics of the In Situ Recovery uranium mining operation (“Reversing Mother Nature”) for our uranium guide. It appears the company is moving forward in producing uranium in Texas before the end of this decade. Market capitalization stands at $269 million. The stock chart’s daily Relative Strength appears to mirror three previous overbought peaks, heralding a near-term price decline.

Energy Metals Corp (NYSE: EMU) also reflects previous overbought conditions on the stock chart’s daily Relative Strength. In our previous interview with the Dennis Stover, the company’s engineering guru – a comparable to Harry Anthony and both are buddies, Dr. Stover insisted Energy Metals would be mining Texas uranium in late 2007 or by early 2008. Shareholders have watched this company jump from the TSX-Venture to Toronto’s TSX to the NYSE Arca in about a year. The company has digested a number of smaller companies in ‘business combinations,’ over the past year, and could add more to their acquired list in 2007 or 2008. Energy Metals approaches the US$1 billion level, having previously eclipsed that in Canadian Dollars on the Toronto. And we remember our first meeting with an Energy Metals geologist when the stock traded for less than $1.50 in Canadian dollars. Last was $12.20 in U.S.

Uranerz Energy (Amex: URZ) has the lowest market capitalization in a peer group of likely uranium producers by the end of this decade. The company is running neck-and-neck with Uranium Energy, which is in Texas, on permitting two of its Wyoming properties for production. Both companies have proven engineers and technical staff. Uranerz Energy has chief executive Glenn Catchpole, who was instrumental in bringing Cameco Corp’s Inkai uranium mine in Kazakhstan to the first phase of production, step-by-step over six long years in Central Asia. Kazakhstan may be poised to become the world’s largest uranium producer over the next decade through solution mining similar to the techniques Catchpole will use in Wyoming. Market capitalization is an embarrassing $213 million, but quite a bit higher than it was in mid October, when you could buy shares for well under $2 (albeit briefly). The American Stock Exchange has added derivative trading to Uranerz Energy’s shares where investors can trade put and call options. Until recently, the highest strike price was $5. Now, it’s $10. We guess the Amex specialist appears optimistic on further price appreciation in Uranerz shares.

In reviewing the top three uranium companies versus the bottom three uranium companies, relative to market capitalization, there is a striking anomaly. Those with the highest market capitalization are dual-listed in Toronto. The companies with the lower market capitalizations are only traded in the United States.

This should end the rumor that U.S. investors have caught onto uranium stocks. It does confirm the hockey-loving Canadians are still snapping up shares in their favorite uranium companies. Who would have ever thought that listing on a Canadian stock exchange would benefit the market capitalization of a U.S. listed company? In the case of uranium stocks, the Canadian listing is as precious as the soaring price of yellowcake.

Comparison of U.S. Listed Uranium Companies by Market Capitalization
 

Company                                 Exchange          Symbol Market Capitalization

Uranerz Energy                         American          URZ                 $213 Million

Uranium Energy                        OTC BB          URME             $269 Million

Uranium Resources                   OTC BB          URRE              $309 Million

Fronteer Group                        American          FRG                 $797 Million

Energy Metals  Corp                NYSE (Arca)   EMU               $932 Million

Cameco Corp                          NYSE              CCJ                 $13.93 Billion