ubs rates pdn as buy , page-4

mOST PEOPLE GET SUCKED INTO COMMENTS LIKE THIS AND SELL.

This is how it works.

The moment PDN has to buy say 1 Kg of U on the market for $130 it immediately hedges its position by entering into a forward contract for someone else to buy 1 Kg of U for $130 at a future date. This future date is a date PDN expects to extract 1 Kg of U from the ground. Therefore the risk is neutral.

So in a nut shell it does not matter what price PDN pays for U on the open market.

The only down side is that it misses out on keeping this 1 Kg of U and selling it when say the price hits $200 and gaining a profit of an additional $70. But it does not have to buy too much on the market because it is prodcuing at the correct rate currently.