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yellow cake rising

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    Uranium names on a flutter
    The recent closure of the Dominion mine in South Africa has restricted supply, allowing uranium oxide prices to firm up. Tables included.

    Author: Barry Sergeant
    Posted: Tuesday , 11 Nov 2008


    Contrary to general trends and price direction, the spot price of uranium oxide, or yellow cake, has been firming in the past two weeks, to current levels around USD 48 a pound, according to specialists TradeTech, and to a little less than that, according to Ux Consulting.

    While resources stocks generally remain deeply in the price doldrums, investors have for some weeks shown an enthusiasm for uranium names, where the choice runs to dozens of stocks, from the big established producers, to a plethora of juniors hoping to make the next big hit.

    The clearest possible contributor to the recent firming in the uranium oxide price was the 22 October 2008 announcement by Uranium One that it was placing its Dominion mine in South Africa on care-and-maintenance. Not only has the event restricted the amount of product going into markets, but Uranium One has halted a cash burn that was running into many millions of dollars a month. It stock price has risen in no time, from the bottom, by more than 100%, although gains were pared by another general wave of selling of equities across the board on Tuesday.

    The price of uranium oxide - "yellow cake" peaked out in June 2007, at USD 136/lb, and drifted down steadily to recent lows of USD 45/lb. While there is little question that the price was driven into bubble territory in 2007, uranium oxide was ahead of most price peak curves, such as precious metals, which peaked in March this year, and crude oil, which peaked in July.

    At this stage, measured on a value-weighed basis, and counting 106 uranium stocks listed across the world, the average loss in market value for a listed uranium stock stands at 70%, much equal to the comparable figure for the world's top 100 mining stocks, measured on the same basis.

    The favoured names during the recent resurge of interest in the sector include First Uranium, Alliance Resources, Forsys, Strathmore Minerals, UR-Energy, Hathor Exploration; even more speculative names such as Xemplar Energy, and JNR Resources, and "penny" stocks such as Pele Mountain, Unor, Uravan Minerals, Purepoint Uranium, Macusani Yellowcake and Contact Uranium.

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