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Gold/Mining/Energy : Uranium Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Malyshek who wrote (13633)	6/30/2008 2:58:51 AM
From: energyplay	Read Replies (2) \| Respond to of 30213

The In-situ recovery process is more complex than heap leaching, it more like a steam flood to produce heavy oil. In-situ can also have various technical problems, URRE has encountered some, for example. One other thing to keep in mind - uranium ore grades vary widely from mine to mine. This can be operational leverage to the U price (if most of the U price upside hasn't been hedged away) for high cost producers, which can sometimes result in explosive stock price moves as earnings grow at some rate X times faster than the U price. There is also a nasty downside with that also. Some mines have very high bonanza type grades (DNN has some mines like that) which makes them more stable in a down turn. In-situ is nice but it is not a magic bullet. It can also have a long development cycle and a low production rate. After looking at operational leverage, consider the financial structure of the company. A company with high mining costs need to have low debt, because a short down turn in U price could push the company to issue more stock or take on more debt. Many companies with high production costs and debt loads have to hedge their production for a year or two ahead to make sure they can handle a down turn in U price. This means the U price can take off and our stock won't move up because all the upside has been hedged away. Even with the long term need for Uranium, we must remember that Uranium is highly politicized. We should consider Uranium miners outside the US and Australia, the two countries that have the most anti-uranium politics. As others have suggested, a basket of stocks with some diversity in geology, location, and financial structure might work best. The a longer term consideration is that as nuclear power returns, every institutional investor will need to have more uranium stocks. For the past few years, that has meant Cameco and or Areva, with a large market cap and multiple mines. As uranium stock rise in price, there will be a new tier of names which will be large enough for institutions to buy, and these stocks will see higher market evaluations, such P/E, P/cash flow, or Price per pound of U. We will also see some M&A activity. Having a basket of a dozen smaller stocks makes this fun, every quarter, one of your stocks get taken out at a premium (this happened in natural gas a few years ago).