Jim Letourneau's Blog

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Uranium vs. Stocks

Resource stocks and don't always track the commodities that they explore for or produce. While uranium stocks are dropping like canned hams, the price of uranium is inching ever upwards. Don't kid yourself if you own uranium stocks. Those losses are very real and while it is very nice to have an ever rising uranium price, many shareholders in uranium companies own paper that is down 50% from the peak. Why not own some uranium? Storage might be one issue for those who insist on physical delivery. The next best thing might be the upcoming Canadian IPO in Uranium Participation Corp. Now you can have your yellowcake and eat it to.

Uranium Participation Corp. is an investment holding entity created to invest substantially all of its assets in uranium oxide in concentrates (U3O8 ), or potential resale with the primary investment objective of achieving appreciation in the value of its U3O8 holdings. An investment in the Units provides an investment alternative for investors interested in investing directly in U3O8. Common Shares represent an indirect interest in physical U3O8 owned by Uranium Participation Corp.

The strategy of Uranium Participation Corp. is to invest in holdings of U3O8 and not to actively speculate with regard to short-term changes in uranium prices. This strategy will provide investors with an ability to effectively invest in U3O8 in a manner that does not directly include risks associated with investments in companies that explore for, mine and process uranium.

For the last few weeks owning physical uranium instead of uranium stocks would have been the smart move. For the last year however, the gains in uranium stocks have far exceeded those in the metal. Looking forward, the order of magnitude increase in "uranium" companies has raised the risk level of owning paper considerably. Resource stock speculators should lose sleep at night when their shareholdings fail to track the commodity of interest. Although uranium is in a long term bull market but there will be some casualties amongst the junior uranium companies. Owning uranium outright via this IPO eliminates the risk of company specific failure while allowing unit holders to profit from rising uranium prices.

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