'Risk On' Is Back: Why Uranium Stocks Are Poised To Double
by: Matthew Smith October 31, 2011
With Europe finally coming to its senses and doing what it should have done a couple of years ago, it now appears that the 'Risk On' trade is back in vogue. Euope's lenders may be out of game as they rehabilitate their balance sheets, but now the rest of the world's banks and lenders can get back to the business of providing financing for projects, deals and various investments. We also think that it is time to look at the places where we have made some of our 'killings' before, namely the uranium juniors and miners at this time.
All of the bears surrounding the uranium camp will tell you that the industry is dying as Germany walks away from the nuclear experiment and that demand vanishes from the world market over the next decade. They will also tell you that new nuclear plants will be slower coming online now that many are reevaluating their plans to make sure they are constructing safe projects as a result of Fukushima. All of this is true. If one takes a few steps back however, in order to see more of the big picture, one would see the biggest question facing the industry is none of the above, but rather where is all of the uranium going to come from once the 'Megatons to Megawatts' program officially ends in the next couple of years? That is the million dollar question at this point, and there is but one answer; from the ground!
This is not just my thinking but some of the brightest minds in the industry think this as well. I have been waiting to move back into uraniums since we sold out nearly all of our positions shortly before and after the Fukushima disaster. Waiting in the bushes is sometimes the hardest task when hunting as you wait for the most opportune time to pull the trigger, and as we waited for that opportunity with the uraniums we found the big boys moving in on our hunt! We are now faced with the realization that we are in the right place at the right time and that due to the likes of Cameco (CCJ) and Rio Tinto (RIO) joining in alongside the Chinese and Russians, the race is now on.
In the past month or two, some of the world's most exciting uranium discoveries in decades have been put into play. Cameco (CCJ) made a move on Hathor Exploration, a small Canadian outfit that made a discovery (now the Roughrider Deposit) in Canada's prolific Athabasca Basin right next door to Areva and Denison's Millenium Deposit, which saw Rio Tinto ride in at the 11th hour and become Hathor's white knight. We thought Cameco's offer was generous as this deposit will take years to develop, and if developed by itself and not part of a consortium with the other deposits that appear to be contiguous in the area marginal at best. Rio Tinto was the perfect buyer of this company as it has its own issues with their flagship uranium property facing mine life issues (declining) at just the beginning of the true 'Uranium Renaissance.'
The other deposit being eyed by vultures is Extract Resources's Husab Deposit in Namibia. Rio Tinto actually owns over 10% of Extract and Kalahari Minerals (largest shareholder of Extract) each, which makes it all the more interesting that it thought it needed Hathor. The Chinese are actually back for a second attempt at this deposit, and it seems the involved parties are content with the inevitable.
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