Uranium Attracting Investment Capital

By Dave Brown – Exclusive to Uranium Investing News

In a recent study by Resource Investing News, over 50 percent of respondents had investment exposure to uranium resources. This study represents almost 600 individuals and was conducted in November to follow up on previous research conducted earlier in May and toward the end of last year. Interest in uranium investing had declined in the first part of this year according to the May survey, indicating that fewer investors had been placing their bets on uranium companies down to 12 percent from 17 percent at the end of 2009.

Underlying Commodity Value

Another web based poll in August, showed that almost 70 percent of respondents believed that the price of uranium would increase by more than 9 percent by the end of the year. The most recent study demonstrates an even greater sentiment for uranium price appreciation, with 69 percent of participants expecting prices to increase to $65.00 per pound by next April, a further gain of almost 10 percent from the current spot market levels around $60.00.

Investment Methods

In an independent web based poll, uranium investors showed a strong preference for investment in mining companies as a method of exposure to the resource. With approximately 73 percent of participants preferring mining companies, only 21 percent of investors opted for ETF exposure followed distantly by closed end fund and uranium futures with 5 percent and 1 percent, respectively. The ETF exposure may be concentrated on mining exploration, development and production companies as with the recently released Global X Uranium (NYSE:URA) or may extend into nuclear energy including utilities, plant construction, and other related industries: Market Vectors Nuclear ETF (NYSE:NLR), PowerShares Global Nuclear Energy (NYSE:PKN), and iShares S&P Global Nuclear Energy (NASDAQ:NUCL).

Mining and Exploration Companies

A number of junior companies have had strong share price performance most recently with success reported from exploration results or good project news, a stronger spot uranium price and a bullish recovery in the overall equity markets. In the case of some of the companies, share prices have even been supported by positive political news developments. A simplified one year share price chart for well capitalized uranium companies such as Hathor Exploration Limited (TSXV:HAT), UEX Corporation (TSX:UEX), Uranium Resources, Inc. (NASDAQ:URRE) and Denison Mines (TSX:DML) show “text book” examples of hockey stick graphs with bullish market sentiment increasing valuations from between 69 percent to over 129 percent in the last 12 months.

Weekly Spot Price Movement

Uranium spot market price increased $0.10 to $60.00 per pound, an unprecedented level in the uranium spot market since August 2008. Relatively light trading volumes and activity was attributed to the China International Nuclear Symposium, as well as the U.S. Thanksgiving holiday. Only two spot transactions were reported for the week with current demand primarily comprised of discretionary buyers in search of bargains. The margin between willing buyers and willing sellers widened this week; however, in spite of the slowdown in market activity, sellers were positively encouraged by announcements this week that China will make further long-term commitments and continue to increase offer prices.

The Chinese appetite was demonstrated last week as the Guangdong Nuclear Power Co announced it had signed a contract with Cameco (TSX:CCO) for the long-term purchase of no less than 29 million pounds of uranium. This year, Chinese deals with Kazakhstan, the world’s biggest supplier of the material, Uzbekistan, and Namibia has taken more than 6 million pounds out of the spot market. With the Chinese importing about 20 to 25 percent of global consumption this year, the country is building inventory stockpiles, as the imports are equivalent to an estimated four times annual domestic Chinese consumption.

Current Events

Market participants came together in Beijing this week to attend the first China International Nuclear Symposium. The conference, sponsored by the World Nuclear Association (WNA) and the China Nuclear Energy Association (CNAA), was a venue for members of the international nuclear power industry to discuss the developing nuclear renaissance, with the spotlight on China, which has already taken over as the world’s largest energy consumer and is committed to extensive longer term nuclear power expansion. The country’s nuclear agency’s vice chairman, Zhao Chenkun, said the target to install 40,000 megawatts of nuclear capacity by 2020 will be increased.