Uranium is hot stuff. The price hit a 38-year peak this week at $60.25 an ounce after floods at Cameco's Cigar Lake mine. In Australia, Wild Horses Uranium floated yesterday, and its price more than doubled on day one.
Cameco said this week it will set out a timetable within three months to rebuild Cigar Lake, but in a world where 178 new nuclear power stations are planned, its absence will surely spur prices.
We have tipped some miners recently. Most are based in Canada or Australia and are high-risk even in a buoyant market. How do you spread your risk? Jamie Strauss at stockbroker Har-greave Hale says one way is to invest in two companies, including one close to production, such as SXR Uranium One of Canada.
Its Dominion project in South Africa is due to start producing by March. Strauss also likes Summit Resources, an Aussie group with 'world class' deposits around Mount Isa in Queensland. But at present Queensland will not permit any new uranium projects. Given such risks, the arrival of investment trust Geiger Counter in London is timely.
Guernsey based, it raised £13m in its July float at 50p. It is run by Richard Lockwood, an ex-Hoare Govett stockbroker who set up New City Investment Managers in 2004. It already runs City Natural Resources investment trust.
Lockwood picks smaller firms, but his portfolio, which includes Wild Horses, spreads the risk. Geiger's shares are now 68.3p. Its warrants (18¼) are convertible at 75p a share up to 2010. Lockwood is bullish: 'Demand is strong, and you can't just press a switch and produce more uranium.' If you agree, Geiger is a handy way to play the market.
SMM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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