weekend australian article, page-21

The Article ...for those who haven't seen it....I hold the June 08 options...(there are 49m of them)



"ONE hundred and thirty-seven - and counting. That's the number of companies listed on the Australian Securities Exchange that have some exposure to uranium.
How is the average retail investor expected to keep track? More importantly, how is that investor meant to distinguish between the good, the average and the ridiculous?

Bubbles start in many different ways.

But they always end the same - with a loud popping sound, just as they did with Poseidon 36 years ago. Then the investor gets to find out whether their company has a viable project or not.

The task will become increasingly complex as more and more promoters jump on the uranium bandwagon.

Look down the list of upcoming floats on the ASX and there's always a sprinkling of uranium hopefuls, with Territory Uranium Co and Whinnen Resources soon to be added to the existing 137 plays.

Some of the share price gains have been extraordinary.

Nupower Resources, which was spun out of Arafura Resources, saw its stock rise 248 per cent from late January to late March.

In that period, too, Western Metals rocketed up 200 per cent, Yellow Rock rose 165 per cent after its listing, while Heritage Gold accelerated 117 per cent after switching its focus from gold to uranium in the Northern Territory.

And that number of listed companies will just keep on getting bigger as long as the uranium price continues to climb in impressive leaps.

This week, the spot uranium price - and that is the price any new producer not locked into long-term contracts would get - sat at $US95 a pound, up 45 per cent from three months ago and up 78 per cent over six months.

John Wilson, whose Resource Capital Research keeps count of the uranium tribe as part of its quarterly review of the sector, paints a very bullish outlook.

Wilson says all indications are that $US125/lb will be reached this year (that's another 32 per cent) and $US140/lb by September 2008.

There are 48 new nuclear power reactors expected to be commissioned by 2013, including eight in Russia, 13 in China, eight in India, six in South Korea and three in Japan.

In fact, there would probably be more on the drawing boards if it wasn't for the uncertainty over supply. There's no point building a reactor if uranium supplies just aren't going to be there.

In other words, it's going to be a seller's market for a long time to come.

All this and heaven - in the form of the scrapping by the Australian Labor Party of its "three mines" policy - too. (And the sea change is happening elsewhere. This week in the US, legislation was introduced to overturn California's ban on new reactors.)

With the exhaustion of Soviet bloc stockpiles of uranium, the growing nuclear power industry is facing real problems getting its hands on regular supplies of yellowcake.

This quandary has been exacerbated by the fact that, because of the collapse of the uranium price in the 1980s and its persistence through the 1990s, very little exploration was done in that period. Ukraine, for example, has just announced that it plans to triple uranium production from the present 1000 tonnes a year so its nuclear power plants will be self-sufficient.

Expecting to be part of that is Perth-based Uran, which has picked up exploration projects in the former soviet republic.

Wilson has already set up a small, private uranium fund for rich investors.

Among the companies he follows are Berkeley Resources (which is exploring in Spain and has formed an alliance with France's Areva, the world leader in nuclear power development); Energy Metals, which has a high-grade deposit in the Northern Territory and is a possible takeover target; Nova Energy, 57 per cent owned by Oxiana, which has two Western Australian projects that could be out of blocks as soon as state bans on mining are lifted; and Uranex - not for its fashionable Tanzanian exploration so much as much for its Thatcher Soak deposit in Western Australia, once explored by BP and now shaping up as the flagship project for the company.

Wilson's tips for investing in uranium stocks are:

* They should be unhedged, so they get full exposure to the soaring spot price once in production.

* They must have exploration upside. In other words, they will have already found something but can value-add by extending the size of that resource with more drilling.

* Preferably, the projects are advanced and the company has started ticking off the milestones on the road to production. A Joint Oil Reserves Committee (which sets Australian standards for resource findings) resource would be a good start.

* They have the potential to be taken over, particularly if the company is at the grassroots end of the spectrum, realising value for shareholders.

Warwick Grigor wears several hats. He sits on the boards of Monaro Mining and Peninsula Minerals and he analyses the companies through his Far East Capital investment business. He says the biggest trap for new players is being impressed by a company announcing it has "radiometric anomalies". Think geiger counter making that squawky noise.

All that means is that there may be some trace of uranium, a mineral that is pervasive and widespread. The radiometric response is not an indicator that there's an economic amount of uranium underneath.

And investors should look for companies that have done some systematic exploration.

"Isolated assays mean zilch," he says.

"Investors have to stop getting excited by these isolated assays."

Grigor argues that 90 per cent of uranium companies are not yet in a position to say they have a mineable proposition. Only when they have a bank of drill intersections are companies in a position to talk with any certainty.

However, Grigor has shifted ground on the economic threshold of projects.

As he says in his latest uranium review, sent out to clients, he had to recant his view of two years ago (when uranium was only $US30/lb) that a deposit needed to have a minimum average grade of 0.07 per cent.

"Now, with the rise in price, even grades as low as 0.04 per cent could be profitable," he says.

Grigor ranks 23 companies as either being in production or being well on the way to that state. Some of those are - in his view - already fully priced.

These include Summit Resources, Toro Energy, Marathon Resources (which is starting a scoping study on its Mt Gee deposit), Arafura Resources and Berkeley Resources.

The ones he would buy now are: his own Monaro Mining, which he argues has undervalued prospects in Kyrgyzstan; Uranium King, which has projects in Nevada and New Mexico (and the Americans support uranium mining); and Contact Resources, with its project in Peru.

Grant Craighead, an analyst with Stock Resource, says one point investors should keep in mind is whether a company has geologists who know uranium well.

There are not too many of those around, and they are getting on in years, given that we went for more than 20 years without exploration for the mineral.

"There is a limited pool of talent - to be an expert on uranium, you'd have to be at least 55," he says.

Craighead has put his own money into Energy Metals (as well as recommending it to clients).

That company has a high-grade resource at Bigrlyi in the Northern Territory which, with a new drilling program about to start, is likely to get much bigger. More importantly, though, Craighead smells a takeover in the wind.

Canada's Denison Mines is a shareholder and is keen to get a foothold in Australia. It is about to see another of its takeover bids collapse.

All the signs point to Denison then switching its takeover energies to Energy Metals."