| ||February 29, 2008|
Uranium fund activity suggests spot price bottom
Author: Luke Brocki
| ||Thursday saw more evidence of the uranium price cycle nearing the|
bottom, when Canada's Uranium Participation Corp sold $65 million
worth of stock to fund the purchase of 900,000 pounds of yellowcake.
Reuters reported the fund---which already holds roughly 4.5 million
pounds of U3O8---would issue 6,375,000 common shares on the TSX, priced
at $10.20 a share.
And, given that the fund wants to complete the sale by the end of
March, analysts feel a surge in spot prices could be just around the
bend. Banks and hedge funds have since shadowed the fund's moves;
after all, it has bought and held uranium while waiting for a surge
for the last six years.
According to Reuters, the fund's planned acquisition would be huge. It
would boost its U3O8 holdings by about 20 per cent and equal about
five per cent of the entire uranium spot market activity in 2007.
The spot price of uranium is sitting around $75 a pound U3O8 this week
according to industry indicator Tradetech. Meanwhile, rival indicator
Ux Consulting lowered its price $2 to $73 a pound.
Uranium's long-term price remains unchanged at $95 per pound U3O8 at
least until the end of March, marking the ninth straight month without
change. The term market continues to enjoy moderate activity and most
participants are comfortable with current prices.
Tradetech stated on its website it left its indicator unchanged
largely because of Uranium One's troubles. On February 21, Uranium One
announced massive production cuts for 2008 and 2009 due to slower than
expected development at its Dominion mine in Africa. Uranium One's
stock suffered massive losses and sellers immediately raised their
Tradetech said buyers then responded with a willingness to pay
slightly higher prices to secure yellowcake, which closed the
lingering gap between willing buyers and willing sellers. And, in a
classic case of Schadenfreude, Uranium One's troubles spelled good
news for the rest of the miners, bumping up equity prices for many
Uranium One, meanwhile, has broken its streak of share price losses to
close higher for the second straight day on Thursday. A week has
passed since the announcement that production forecasts from Dominion
had been reduced from 2 million pounds of uranium this year to 590,000
pounds; the miner gained 44 cents on Wednesday and climbed another six
cents Thursday to $5.38.
According to insider trading reports, Uranium One's newly minted
interim CEO Jean Nortier bought more than 60,000 company shares on
Monday, at prices between $4.84 and $4.89.
According to the weekly uranium update from Toll Cross Securities, the
disparity between the metal's spot price and share prices of uranium
companies may be closing. The Toll Cross index shows junior explorers
gained 13 per cent this week, while advanced explorers gained three
per cent and producers gained eight per cent. The Toll Cross junior
uranium index gained more than seven per cent to 489.61.
As far as trading on the TSX goes, there were about as many winners as
there were losers, but some winners posted remarkable gains: Hathor
Exploration stockholders are an especially happy bunch at the moment,
given the company's recent price spike.
Hathor halted trading on Tuesday and near the end of that day
announced it had hit anomalous uranium mineralization at its Midwest
Northeast project drill program. When the company resumed trading on
Wednesday morning, investors went bananas: the company gained 64
cents, or 128 per cent, to close at $1.14. On Thursday, it climbed
another 16 cents, or 14 per cent, to $1.30.
Elsewhere, Powertech Uranium gained 23 cents, or 18.9 per cent, to
$1.45, after announcing the completion of a 10-hole coring program at
its Dewey-Burdock projects in southwestern South Dakota and Azimut
Exploration gained 64 cents, or 17.1 per cent, to $4.38 after
announcing encouraging results from its exploration program at the
South Rae property in Nunavik, Northern Quebec.
Blue Sky Uranium gained five cents, or 10 per cent, to 55 cents, after
buying Argentina Uranium and its 500,000-hectare land package and thus
becoming one of the largest uranium explorers in that country.
NWT Uranium was up seven cents, or 22.6 per cent, to 38 cents, after
announcing progress from one of its subsidiaries: Niger Uranium, of
which NWT owns 38.5 per cent, is expected to begin phase 2 drilling at
Irhazer and In Gall in April.
Stock of Canalaska Uranium gained seven cents, or 20.6 per cent, to 41
cents, after that company announced extensive uranium mineralization
at the NE Wollaston project in Manitoba and JNR Resources gained 16
cents, or 13.6 per cent, to $1.34 after releasing an update on a
number of uranium projects jointly held with and operated by Denison
Speaking of Denison Mines, that company is on a real roll of late.
Thursday's gain of 62 cents, or seven per cent, was the eighth
consecutive higher close for Denison, which is now worth $9.50. That's
quite a move from a low of $6.19 in early February.
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