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uranium glow waning investors warned

  1. noo
    1,462 Posts.
    Uranium's glow waning, investors warned
    Robin Bromby
    October 27, 2006
    URANIUM investors beware: there aren't many bargains left in the sector.

    This is the conclusion reached by Far East Capital's Warwick Grigor after he analysed more than 50 uranium stocks listed on the Australian Stock Exchange. The size of the known resource, the market capitalisation per pound of uranium in the ground and exploration results were all examined.

    Stocks where there is still value to be found at present prices are pretty thin on the ground.

    Top of the pile is Metex Resources, which has a uranium deposit in Italy, although Mr Grigor believes the resource needs to double in size to make it worth developing. But with Metex shares trading at 6.1c on Tuesday (the day on which all price calculations were based), the shares offered good upside.

    "It is a cautiously and competently managed company that would be one of the lower risk ways to play the uranium market," the report says.

    Nova Energy gets a "sound" rating because its projects have real production possibilities once the political opposition in Western Australia is resolved.

    Summit Resources has been one of Far East's preferred uranium plays for some time, having, in Queensland, one of the largest undeveloped uranium resources in Australia.

    Mr Grigor expects Paladin Resources to make a move on Summit, following the latter's successful takeover of Valhalla Uranium, which owns half of Summit's main deposits.

    Mr Grigor has a big stake in uranium. He is chairman of Monaro Mining, which is in Krygyzstan; a director of Peninsula Mining, which is looking in South Australia and South Africa; and a shareholder in Western Metals.

    All three, as would be expected, get a "good" grading at Far East Capital - Monaro because it is seen as one of the cheapest potential producers, Peninsula because of the potential of its grassroots projects, and Western Metals because its ex-WMC Resources management team has picked up uranium ground in Tanzania.

    The report - "What is the value in the Uranium Sector?" - says uranium prices up to $US100/lb (nearly double the present $US56/lb spot) could be reached in a year or two, allowing many marginal projects to come on stream.

    But Mr Grigor says investors should pick out the companies with sizeable deposits with the potential for between 25,000 tonnes and 50,000 tonnes of uranium.

    He warns against placing too much emphasis on a few good intersections or assays.

    "Beware of beat-ups designed to drive the share price," Mr Grigor says.

    Tricks that companies use to get a good headline for a stock exchange release include drilling right beside an old hole that had good grades - which guaranteed a good intercept but doesn't add any new information about the deposit - and reassaying previous drilling as a substitute for getting stuck into detailed drilling programs.

    There are plenty of uranium stocks that don't appeal to Mr Grigor, who charts these and many other resources juniors daily.

    Compass Resources, which has the old Rum Jungle project in the Northern Territory, had been taken to unrealistic levels because US funds bought aggressively.

    Uranium Exploration Australia is another to get the thumbs-down.

    Bannerman Resources has been running since August and its $152 million market cap is looking "a bit heady".

    Toro Energy, while having good projects, has too much expectation built into its 74c share price.

    Aurora Minerals, which is looking for uranium projects, gets dismissed: "There is nothing compelling here."

    http://www.theaustralian.news.com.au/story/0,20867,20651857-643,00.html

 
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