Uranium Miners Expected to Benefit from Falling Inventories

While the spot price for uranium continues to sag at $71 per pound, according to Ux Consulting, and long-term prices remain at $95, patient investors are waiting for prices to again rise. Spot prices hit a record $138 per pound in the summer of 2007.

So they’ll be happy to hear that Blackmont Capital analyst George Topping expects that uranium will make gains in the second half of 2008 due to the depletion of inventories built up by nuclear power plants during the panic buying of the second half of 2007.

Permitting problems in Australia, North America, Europe and Asia, with names like Aurora Energy Resources Inc. (AOG), Tournigan Gold Corp.[TVC/TSX-V], Khan Resources Inc. [KRI/TSX] and Laramide Resources Ltd. [LAM/TSX] all affected, will lead to limited growth in new mine supply, he told clients in a note.

Mr. Topping added:

Furthermore, China plans to create strategic stockpiles of other energy sources, not just oil.

He expects Cameco Corp. (CCJ), the world’s largest and most liquid uranium company with more than 600 million pounds of U308 resources, to boost production from 21 million pounds in 2007 to 32 million by 2015.

Cameco currently trades at 0.8 times net asset value [NAV], and 13 times 2008 cash flow per share. Mr. Topping’s target price of C$58.10, which represents upside of more than 65% as of Monday’s close, is based on 1.3x NAV.

Comments

[robert99:]

DNN, FRG, USU...

2008 Apr 09 07:16 AM

[Albert Meyer:]

FP Trading Desk, "Cameco currently trades at 0.8 times net asset value [NAV]" Anybody can make a mistake, so could you fact check this statement, confirm the number or correct it and show us your calculation.? Thanks.

2008 Apr 09 09:26 AM

[misterchan:]

Albert, if this will help you - Cameco, a couple of years ago, was an energized trading vehicle, with a high beta, and a joy to trade. Then it got tired and became a wallflower, and barely moved at all. Subsequently it lost favor more and more. I have been thinking, for about six months, that this company is a bargain. It was a class act once, and I think the time is very ripe for CCJ to become the star of the commodity show. As to the highly technical stuff, I am not that smart. But the bottom line is - Just maybe CCJ is one heck of a bargain now. I have been considering buying some , and I have a feeling that those insiders on Wall Street bought it at the bottom. That's how they get rich.

2008 Apr 09 09:50 PM

[BidEd:]

Albert,
I think you are correct to point that out. CCJ is currently trading at a price/book value of 4.8 not .8. Maybe they meant price to enterprise value which is under 1 but .95 not .8. So I am not sure where they are pulling this number either. I am long CCJ

2008 Apr 12 07:03 AM

[Energy Dive...:]

If there is any renewed interest in uranium in 2008, would we not expect Uranium One and Dennison to be more leveraged to this development?

These are both pure play uranium producers, with fewer hedging issues than CCJ has had. Uranium One has been hammered for other good, fundamental reasons. Perhaps CCJ is the "safe" play, but if you are looking to take a strong view, I would think there are better ways to go.

I don't own any of these but am interested in the logic of going with CCJ.

2008 Apr 14 12:19 PM