Following article from Mineweb.net is interesting. ( http://www.mineweb.net/sections/energy/267478.htm )
A report puts PDN at about A$5.50 and Neal Froneman, Uranium One’s chief executive says he has read credible reports of $300 a pound for the spot price in the future!!
JOHANNESBURG (Mineweb.com) -- The astounding value gain over the last few years in junior uranium stocks has been phenomenal as shares have tracked a booming uranium price. Now, a research report out from brokerage Hargreaves-Hale in the UK suggests there is more upside.
For example South Africa’s, sxr Uranium One, formerly Aflease, has risen from a low of about R0.90 a share back in the middle of 2004, to the equivalent of R10.44 a share now, an increase of 1,060%.
As part of its merger with Southern Cross in Canada last year, Aflease shares were consolidated at 0.18 Uranium One share for each Aflease share owned. Now, the current price is about C$10.56 a share, or R58 apiece in Johannesburg.
Hargreave-Hale calls the share a BUY, with a target price of C$16.77 a share (R88.88 each). The firm calculates a forward P/E of 21.6 in 2007 and 9.2 in 2008, using the current share price.
Uranium One is one of the closer to production explorers along with Paladin Resources, which is building a mine in Namibia. The company is currently trading at about C$4.31 a share; Hargreave sees upside to about C$4.67 a share.
The uranium price, according to the Ux Consulting website (http://www.uxc.com/review/uxc_prices.html), has gone up from just over $6/lb in five years ago, to its current $41/lb.
With the main driver being the growth in nuclear energy power expected to increase over the next few decades, and supply struggling to keep up.
The supply/demand fundamentals are so much in the producer’s favour that even consumers of uranium are calling for higher prices. According to Jaco Kriek, head of The Pebble Bed Modular Reactor (PBMR) the utility industry could absorb higher prices.
“If you look at the price of uranium or the uranium fuel itself, it actually has a very small impact on the ultimate cost of electricity that’s generated by a nuclear plant,” said Kriek on Mineweb radio (http://www.mineweb.net/radio/mineweb_radio/263149.htm) on Friday, “So you can even double the price of uranium and the cost of electricity will only go up by about 5%. Obviously in future with the huge demand that we foresee for uranium, there will hopefully not be a huge increase, and it will hopefully recover when people find more viable mines for uranium – in other words, when they start to explore for uranium, because that’s up to now not really been done.”
Speaking in the same interview, Neal Froneman, Uranium One’s chief executive says the selling price could already be higher. “And I dare say that the uranium industry, being as small and as tight as it is, they are responsibly managing that spot price. I certainly believe the actual price of uranium is significantly higher. There is certainly a lot of indication of longer-term contracts being placed well in the $50s now.”
Froneman even talks of reports pointing at prices of over seven times higher than they are now. “We are not quite sure where it will overshoot to. We read reports of $50 a pound by the end of the year. As I say, I think we are already there it is just a bit masked. I have read credible reports of $300 a pound.”
While all commodities are reaching multi-decade highs at the moment, some feel uranium will be one of those that will keep going the longest. Wayne McCurrie, managing director of Advantage Asset Managers, says: “I truly believe that this uranium thing – this time around it's different, and I think the oil price at $70-plus, the environmental damage – nuclear energy is clean and it's comparatively cheap. And I think this is literally the next one of these long-cycle things.”
Other notable mentions in Hargreave-Hale’s report include Australian listed OmegaCorp and Berkeley Resources. In Canada the brokerage expects companies like Aurora Energy, and International Uranium Corporation to still have upside.
Happy Trading
PDN Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)