Investing In Uranium: A Stock Play (FRG)

| About: Newmont Mining (NEM)

With uranium prices up 80% in the last year and 13% since the beginning of the year,'s Sean Brodrick makes a case for investing in uranium:

Why Uranium?

  • Reactor Buildout In China And India: There are currently 441 nuclear power reactors worldwide, and the International Atomic Energy Agency says that 130 more are being built or in planning stages. With nine operational reactors providing 2.3% of China's power consumption, China has said it will build two new 1,000 megawatt reactors each year through 2020 totalling 28 new reactors. Its uranium consumption will grow from 3 million pounds per year to 18 million in 2020. India's requirements are slated to grow from 1 million pounds per year to 4 million by 2020.
  • Declining Russian Production: Russia's mines produced only one fifth of its required consumption last year, and Russia needed to draw on reserves to meet demand. To hit recent targets set by President Putin of 25% nuclear power by 2030, Russia needs to build forty new reactors by then.
  • Skyrocketing Consumption: Current worldwide consumption is approximately 176.3 million pounds, and projected to grow to 212 million pounds by 2015. Only 92.6 million pounds were supplied from mining, so major shortages are on the horizon.
  • Fronteer Development Group Inc. (FRG)

  • Golden Opportunities: Fronteer is a gold, silver and uranium prospector focused on Canada, Turkey and Mexico with two large deposits in western turkey. Indicated gold for the projects is 461,000 ounces and inferred gold 1,606,000 ounces; indicated silver is 2.1 million ounces and inferred silver 8.6 million ounces. Fronteer also acquired an 80% interest in a new copper, gold and uranium district in the Yukon recently.
  • Aurora: Fronteer holds 50.2% in a spin-off, Aurora Energy (traded in Toronto as AXU). Aurora is the developer of a 22 million pound project in Labrador (Michelin Deposit), and owns four additional deposits.
  • Undervalued Stock: Brodrick concludes:

    Sure, Fronteer loses money every quarter -- that's par for the course for an explorer. The important thing is Fronteer is debt-free, has plenty of cash, and has great projects. It has a market cap of a paltry $215 million -- its resources are valued at pennies on the dollar. Now, look at Fronteer's chart: Not only is it trending higher, it is breaking out to the upside! Buzz should continue to build around this stock. It recently traded around $4.50, and I think it's an easy double from current prices.

  • FRG 1-yr Chart