Jim Letourneau's Blog

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Do You Think Uranium is a Good Buy Right Now?

I get lots of emails from my newsletter subscribers - here is my response to the question "Do you think uranium is a good buy right now?"

I believe uranium prices will increase and that should be good for the higher quality uranium stocks. Cameco is having lots of delays in getting its Cigar Lake Mine de-watered and it was on track to be producing 10% of the world's uranium. Between rising construction costs and the "normal" unforeseen challenges of building mines it looks like most uranium supply estimates are optimistic as very few projects are completed on time and very few operating mines operate at nameplate capacity. Also the current spot price of uranium is close to the cost of production which diminishes the efforts of companies to bring new projects online.

Uranium demand is projected to rise based on the number of nuclear power plants scheduled for construction. This link shows the long term uranium spot price. If it starts to move up there will be more interest in the sector. Uranium prices corrected back in July, 2007 so there isn't any froth in the current uranium price.

Right now, Hathor Exploration Ltd. (HAT.V) is one of the few movers and shakers in the uranium space as they are drilling up an interesting discovery in the Athabasca Basin. For every Hathor-like success story there are a few hundred failures as the quick run-up in uranium prices led to the formation of 100's of public uranium companies, most being run by people who were getting lucrative "on the job training" as there were very few experienced uranium geologists around.

An investment vehicle that approximates movement in the price of uranium is the Uranium Participation Corporation (TSX:U) which is an investment holding company which invests substantially all of its assets in uranium, either in the form of uranium oxide in concentrates ("U3O8") or uranium hexafluoride ("UF6"), with the primary investment objective of achieving appreciation in the value of its uranium holdings. The objective of the Corporation is to provide an investment alternative for investors interested in holding uranium.