uranium

Yellowcake bonanza

19mar06

THE uranium boom sending the price of related stocks through the roof should be viewed with utmost caution, analysts warn.

Keen investors in the boom should be prepared to lose money on what are clearly speculative stocks, they say.

Nevertheless, fortunes have and are being made in a relatively short time trading uranium stocks.

But how long can soaring share prices be sustained, given the political hurdles surrounding the nuclear resource also known as yellowcake?

Uranium stocks are soaring on the back of its price rising from about $US22/kg three years ago to almost $US45 today.






Demand has exceeded mine supply, there have been barriers to production, and uranium is a growing alternative power source.

The stand-out uranium investment on the Australian Stock Exchange is Paladin Resources, which has mines in Namibia, Africa, and prospective projects in South Australia and WA.

State One Stockbroking mining analyst Brendan Fogarty said Paladin had 44,000 tonnes of uranium oxide at its Langer Heinrich project in Namibia and was expected to start producing in a year.

He queried whether Paladin's commercial resource could justify its share price rising from 5c on January 1, 2004, to $1.15 on March 10 last year and $3.80 on Friday.

Mr Fogarty said a $2000 investment in Paladin when the stock was 5c was now worth $146,400 – a return of 7220 per cent.

But what favoured Paladin was having a mine approved for commercial development in Africa, he said.

Australian explorers are subject to state governments dictating uranium-mining policy, with the exception of the Northern Territory, which falls under Federal Government control.

The Labor Party's "no new mines policy" restricts mining to the Olympic Dam in SA, now owned by BHP Billiton; the Ranger mine in the Northern Territory, owned by Energy Resources of Australia, in which Rio Tinto has a majority shareholding; and the Beverley mine in SA, owned by US-based company Heathgate Resources. Rio Tinto also owns the Rossing uranium project in Namibia.

Mr Fogarty said BHP Billiton was planning a major expansion at Olympic Dam, and upgraded reserves at ERA's Ranger mine should extend uranium production to 2014.

Australia has 30 per cent of the world's known uranium reserves, and 16 per cent of the world's electricity supply is now nuclear-powered.

Ian Hore-Lacy, of the Uranium Information Centre, said Australia exported 12,360 tonnes of uranium oxide last year, earning $573 million. The US and Europe were our biggest customers, followed by Japan.

Mr Fogarty said Alliance Resources, Summit Resources and Deep Yellow were riding the uranium wave and rewarding investors.