Uranium Stocks Popping Off
by Gerardo Del Real
Last week, I explained to you that the move in uranium stocks was just the start.
I also explained the announcement by Sprott Asset Management that it was taking over management of Uranium Participation Corp. (TSX: U)(OTC: URPTF) would serve as a catalyst that would light a fire in the space, expedite the bull run, and magnify it to levels I don’t think many can appreciate right now.
Fast forward a whole week later... and Uranium Participation has announced a C$50 million bought deal financing to help fund uranium purchases.
The cynics in the space have pointed to a flat to slowly rising spot price (good argument to be made that uranium speculators are more forward-looking than gold speculators but I’ll leave that for another time) as a reason that uranium stocks aren’t quite ready for primetime.
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The percent moves the uranium stocks have put in the past few months should put that thesis to rest.
The second argument made (there’s a third I’ll share in a bit) is the lack of mergers and acquisitions. Less than a day after the C$50 million bought deal came news that Denison Mines (NYSE: DNN)(TSX: DML) sent a binding offer to Overseas Uranium Resources Development Co. to acquire its wholly-owned subsidiary, JCU (Canada) Exploration. The same JCU that UEX (TSX: UEX) offered to buy a few weeks ago. Denison said it would pay C$40.5-million in cash for JCU and assume the company’s outstanding liabilities owed to the Japan Atomic Energy Agency. UEX had said it would acquire JCU from Overseas Uranium for up to C$12.5-million in cash and the assumption of existing liabilities. From C$12.5 million to C$40 million in a few weeks is a healthy re-rating. Which brings me to the third argument uranium bull cynics like to make: The utilities have to step back in before a sustained rise in the uranium price. |
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While there is zero doubt that the single largest consumer — and a major catalyst — will be the utilities stepping back in, by then the early gains will have been missed.
The utilities have less of an incentive to buy cheap and can afford to wait until prices are materially higher because the total input the uranium price presents to the bottom line is minimal. Yes, the utilities coming back to the table will send the market ripping to new levels... But you’re not a utility and waiting is going to be a lot more consequential to you than it will be for them. I have several uranium stock recommendations at Junior Resource Monthly. Let's get it!
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Gerardo Del Real
Editor, Daily Profit Cycle
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Daily Profit Cycle, Junior Resource Monthly, and Junior Resource Trader. For more about Gerardo, check out his editor page.
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