Uranium Investing News

By Luke Brocki - Exclusive to Uranium Investing News and U3O8.biz

After what seemed like an eternity in freefall, the spot uranium price finally held firm at $45 a pound U3O8 this week, according to price publisher Tradetech. In fact, rival publisher Ux Consulting even bumped its price up $1 to match Tradetech’s estimate. According to Tradetech, the massive sell-off was fuelled by - surprise, surprise - the global credit crisis. Investors and hedge funds have been major buyers in the spot uranium market in recent years, but tough financial times forced them to clear out their inventories on a quest for liquidity.

And their exit from the market forced other sellers to cut prices, in order to remain competitive. The good news, says the price publisher, is that most of this bargain supply has now changed hands and traditional sellers remaining in the market have had it with slashing prices. And while uncertainty lingers in the market, bulls are making noise that this is a good time to buy. Tradetech says five buyers are already seeking offers and a number of utilities look to enter the market in coming months. Already, transactions being negotiated this week have been priced near today’s spot prices.

And the buying opportunities don’t stop there. According to the System for Electronic Disclosure by Insiders (SEDI), Canada’s on-line, browser-based service for the filing and viewing of insider reports as required by various provincial securities rules and regulations, Uranium One insiders are buying shares of the beleaguered miner.

The National Post newspaper reported Uranium One executive vice president John Sibley bought 25,000 company common shares at 79 cents each last week, bringing these holdings to 35,000 shares. Around the same time, Uranium One director Kenneth Williamson bought 50,000 company common shares at 80 cents each, bringing these holdings to more than 125,000 shares. The share price of Uranium One jumped 22 cents, or 34 per cent, to 86 cents on the TSX on Wednesday.

Some analysts and investors have been snubbing Canada’s Cameco Corp. in recent days because of the company’s substantial debt load. The National Post reported Blackmont Capital analyst George Topping told clients Cameco now has $550-million in short-term debt and $750-million of long-term debt, with the bulk of its cash held by one of its subsidiaries. That’s after the miner financed in August a $347-million Kintyre uranium deposit acquisition with short-term debt due mid 2009.

The concern is that the company’s debt load could constrain capital spending. Still, just last week, Cameco was declared a safe haven by TD Newcrest analyst Greg Barnes, who felt the company was protected by long-term sales contracts relatively stable demand for uranium. Cameco stock is down by more than half since the end of June, but was up 71 cents, or nearly 4 per cent to $19.04 on Wednesday.

The nuclear sector as a whole is regaining lost momentum, if statements by giants Exelon and Areva are any indication. Both companies posted results last week, stating the financial crisis shouldn’t have a significant effect on their fortunes, given strong fundamentals of the nuclear industry. According to World Nuclear News, Exelon, the largest nuclear power generation company in the United States, said it had been affected by the collapse of Lehman Brothers, but its relationships with 24 other banks prevented the credit crunch from crippling its operations.

French nuclear giant Areva, the world’s largest nuclear technology and services company, announced it has not been affected by the solvency and liquidity crisis of the banking system. The company admits uranium trading operations have been drastically affected by the dramatic drop in spot uranium prices, but feels sound fundamentals will continue to fuel a global nuclear revival.

Finally, the Toronto Stock Exchange saw a number of big winners on Wednesday: Western Uranium Corp. was up 20 cents, or 33 per cent, to 80 cents, after drilling significant gold intercepts at its Kings Valley property in Nevada; and Aurora Energy Resources Inc. jumped 18 cents, or 17.5 per cent, to $1.21, a few days after announcing some big uranium finds at its Michelin deposit in coastal Labrador; Hathor Exploration Limited. was up 30 cents, or 21 per cent, to $1.69; and Paladin Energy Ltd. was up 28 cents, or 17 per cent, to $1.96.