As Tydec pointed out,not many selling at these levels, let the traders have fun on low volume."When" the buyers come back this thing will fly.
Contrarian Investors: Add This Sector to Your Buy List by Dr. Alex Cowie on 21 September 2011
There cant be many investors that have done it tougher than uranium stock investors this year.
A big reason for the sector-wide fall has been a sliding uranium spot-price in the wake of Fukushima. Uranium buyers stood on the sidelines until the demand picture became clearer. It?s been a rough ride, but it is always darkest before dawn.
For the first time this year, the uranium price has climbed for three weeks running.
Uranium spot price at $53.50 up 10% in three weeks
Three weeks ago the spot-price was $48.85/lb. This crept quietly up to $50.50 the next week. By last week it was $52.50, and is up again this week at $53.50.
So its now up 10% in three weeks -this has happened without much press, but is huge news.
Right or wrong, the spot-price is a big driver of the uranium sectors sentiment. So we may have finally found the floor for the uranium sector. And wed be happy for it to stay above $50 for a while.
But if uranium continues to creep up, then we may see the uranium sector finally turn a corner and start the next leg up.
We like to use Extract Resources (ASX:EXT) as a good barometer for what to expect from Aussie uranium juniors. In the last six weeks it has gained 15%. There have been rumours of a takeover, but nothing has been confirmed.
But we have seen the start of some corporate activity, which is another good sign for the sector. For instance
Korea Electric Power Corporation (Kepco) is the biggest power utility in South Korea, and operates dozens of nuclear plants. It also runs coal-fired plants so is interested in thermal coal as well as uranium.
A few months ago at the Fremantle Uranium Conference, Kepco announced it was looking for acquisitions so its good to see this happening. It has just done a deal with Strathmore Minerals (TSE:STM) to fund exploration of one of its uranium assets.
Another deal involves global uranium leader, Cameco. Its bidding for Canada-based Hathor Exploration (TSE:HAT).
These merger and acquisition deals should be a clear sign that the sector is alive and well.
But thats not all. China is the elephant in the room in this department.
Recently, China National Nuclear Corporation, Guandong Nuclear Power Company, State Nuclear Power Technology Corporation and China International Capital Corporation all said there will be no major slowdown in their nuclear plans.
But the bigger question mark over uranium was figuring out Japans next move.
Less than 12 of its 54 reactors are currently operating. This has caused demand to fall and lots of uncertainty.
But Japans new Prime Minister, Mr Yoshihiko Noda, has just announced plans to switch the reactors back on.
We must bring them back up as best as we can, because if we have a power shortage, it will drag down Japans overall economy.
We like the guy already! And it completes the list of the big uranium users that are publicly backing uranium.
The charts for most uranium stocks may be ugly, but the fundamentals of the uranium market are strong. This is exactly the time the contrarian investor gets the shopping trolley out!
Theres a huge opportunity for investors here with enough patience to stick around a year or two.
Dr. Alex Cowie Editor, Diggers & Drillers
BLR Price at posting:
2.0¢ Sentiment: Buy Disclosure: Held
