The Resource Investing News survey suggests that despite challenges in the uranium market in early 2011, uranium has displayed an improving sentiment. Following the earthquake and tsunami in March, uranium investment has gained interest with takeover bids for junior explorer Hathor by Cameco and Rio Tinto.
A network audience survey conducted by Resource Investing News indicates that 24.7 percent of respondents have a focus on uranium as an investment. The research, conducted in early fall builds upon prior studies conducted toward the end of 2009, as well as last May and November.
The current research highlights a decline in the focus for uranium investment from a high of 50.2 percent of respondents last November; however, uranium interest has appreciated significantly since the beginning of these investigations when only 16.9 percent of respondents demonstrated a focus on uranium. Of the respondents with a focus on uranium, 81.4 percent are planning to invest in exploration and resource mining companies in the next six months and as many as 60.5 percent consider energy to offer the greatest potential for investment.
Interestingly, the survey indicates that while only 64.9 percent of total respondents are planning to invest in the next 6 months, as many as 81.4 percent of those who have an investment focus on uranium are planning activity over the same time period. Also of note for investors was that with over 40 percent of total respondents indicating that energy offered the greatest potential for investment; approximately 34.3 percent were focused on uranium.
Challenging investment climate
As energy demand has been surging in developing nations, the wake of the March 11 earthquake and tsunami have resulted in ongoing national energy policy changes and created dynamic regulatory framework impediments. These challenges have been manifested to impact stakeholders in the nuclear industry including all uranium production, development and exploration companies.
Faced with the reality of energy shortages, Japanese utilities introduced rolling blackouts, and former Prime Minister Naoto Kan indicated a new direction for the nuclear industry forcing the country’s only conservation strategy since the 1970s.
Nuclear energy provided about 30 percent of Japan’s electricity before the crisis. As of August, current Prime Minister, Yoshihiko Noda committed to rethinking energy policy within a year with the expectation to increase the use of renewable energy. Mr. Noda has not made a definitive posture toward nuclear power over the long term indicating in a policy speech, “it is not productive to see things in simple black and white, and talk in either anti-nuclear or pro-nuclear terms.”
With the recent competing offers for Hathor Exploration Ltd. (TSX:HAT) currently entertaining a friendly $572-million bid, following a previous hostile bid by Cameco (TSX:CCO,NYSE:CCJ), the sentiment appears to show a resurgence of interest from the market. The interest in the property has taken the share price for Hathor higher as the market may be demonstrating that it is not content with either offer. While the share price for Hathor has now escalated to a 10.6 percent premium over the current bid from Rio Tinto PLC (LSE:RIO,NYSE:RIO,ASX:RIO), share prices of the potential runner up Cameco have traded slightly lower since the initial bid, declining 2.2 percent. Cameco has extended the previous offer for Hathor until November 14, but it has not increased the size of the bid. The original offer was set to lapse at the end of October.
Most industry observers and stakeholders were anticipating some additional interest from Cameco and potentially other suitors. Last week, Dundee Capital Markets analyst David Talbot issued a price target on Hathor of $5.20 per share, which implies a significant 25.3 percent premium to Rio Tinto’s offer and a 13.3 percent premium to the current trading valuation. As one explanation why he believes a counter offer will be announced in the near future, Mr. Talbot suggested the Roughrider deposit is “too good an asset to pass up” particularly in its geographic proximity to Cameco’s extensive operations. Of interest to investors is also the fact that this deal represents the first important issue for the new Chief Executive Officer for Cameco,Tim Gitzel who was recently appointed to the post in June.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.