The Uranium bull market has been going on now for 4 or 5 years and some people think that it may be long in the tooth. Nothing can be farther from the truth.
During the 1990's, uranium and mining in general was in a global bear market. Low spot prices made mining an unprofitable activity. If you were a large cap mining company you hedged production in order to lock in revenues and kept a close eye on expenses. Breaking even was the name of the game and Greenfield exploration was out of the question. But the awakening of China and India changed everything. Industrialization and manufacturing created needs for commodities across the board and with that prices have soared. Large-cap mining companies, hesitant to remove hedges and explore new Greenfield properties, have largely missed the boat. But who can blame them? After decades of fluctuating prices they had good reason to be cautious.
Filling the gap were new, startup mining companies. Taking a different view of the global economy they went about surveying land, acquiring property, and drilling holes. Property was bought from companies who surveyed and drilled areas decades ago with the hopes of using state of the art technology to better understand the potential mineral resources lying under the surface.
Using current technology, junior mining companies were able to look deeper underground and reassess drill cores to come up with a more accurate indication of a properties value. Computers and software allowed companies to create 3D scaled maps of a resource and better understand the appropriate type of mining.
Junior resource companies raised capital through stock issuance on foreign exchanges and investors rolled the dice hoping that the company would literally and figuratively, strike gold. Gains of 500-5000% are not out of the question. The hope was that if a company struck a major deposit they could either sell the company to a major or bring the mine into production. Junior companies have also merged and created many mid-tier mining companies with the hopes of becoming a new major or a more attractive acquisition candidate.
So where does that leave us with respect to Uranium? Well, many of the junior companies were listed on the Canadian stock exchange which shares a dual listing benefit with the US. Canadian companies are granted Pink Sheet or OTC listings in the US. When people think of the Pink Sheets and OTC companies images of penny stock scams come to mind. But some of the mining companies in Canada have market caps upwards of $500 million and a billion dollars with managements who have over 50 years combined experience in the mining industry.
Being on the Pink Sheets or OTC is off the radar screen from Wall Street so coverage by the major firms is non-existent, but that is changing. Canadian mining companies are shifting their listings to the American Stock Exchange. Two recent companies are Denison Mines (NYSEMKT:DNN) and Crosshair Exploration (CXZ) with more expected to follow suit.
Uranium futures started trading yesterday on the NYMEX. Later this year, Wall Street is expected to start covering the Uranium sector when enough companies have listed to make it worth the time. Ahead of this coverage, if you are looking to invest in Uranium mining companies, you might favor companies who have applications filed with any of the major US exchanges. Watch your technical charts for buying and arbitrage opportunities ahead of the listing date as brokers accumulate stock to push to clients.
Disclosure: Author is long DNN and CXX