A new record US$72 per pound for spot uranium, announced by TradeTech for the week of December 15th, has made analysts more bullish before the holidays.
According to the December 21st Commodity Price Outlook, published by Scotiabank, and authored by Patricia M. Mohr, VP of Commodity Research for one of Canada’s leading banks, uranium is one of the bank’s two top minerals picks for 2007. “Uranium and zinc are our ‘top picks’ for investors in 2007,” Mohr wrote. She added, “The current upswing in uranium prices represents a ‘secular’, transformational change in global energy markets – related partly to a shift by utilities from high-priced fossil fuels – rather than a cyclical upswing.”
Ms. Mohr noted that uranium was the third-best performing commodity in 2006 and will likely be the top performer in 2007. She forecast, “Spot uranium prices are expected to average US$80 in 2007 (ending the year close to US$90.”
Jan van Uchelen of National Bank Financial (Geneva, Switzerland) remains bullish on the uranium sector. In a desk note, he wrote before the Christmas holiday, “With the TradeTech uranium price jumping to US$72 per pound U3O8 (up $7.00), we anticipate an increased interest in the uranium space. Uranium stocks (with ratings and targets) in our coverage universe are:
(All dollar amounts in Canadian $)
Paladin (PDN), Outperform, $7.40
Aurora (AXU), Outperform, $16.50
Denison (DML), Outperform, $12.00
Strathmore Minerals (STM), Sector Perform, $3.70
Western Prospector (WNP), Under Review
Strathmore Minerals reportedly has the lowest market capitalization of any exploration or development company relative to its reported ‘per pound of uranium’ holdings.
NBF International SA is a 100-percent owned subsidiary of National Bank Financial, which is owned by the National Bank of Canada (NBC). NBC is a public company listed on the Canadian stock exchanges.
Raymond James analyst Bart Jaworksi forecast uranium could hit US$90 per pound during 2007. Among Jaworski’s favorites are SXR Uranium One (SXR), Energy Metals (EMC), UR-Energy (URE) and Strathmore Minerals (STM). Many of the significant uranium exploration and development companies primarily trade on the Canadian stock exchanges. Canada was the world’s top uranium producer in 2005 with 30.23 million pounds mined.
Hedge funds have been seen a significant driving force behind uranium’s spectacular price rise in 2006. Over the past two years, speculative funds are said to have purchased up to 25 million pounds, now warehoused in licensed storage facilities. Over the past twelve months, the spot uranium price, also known as U3O8 or uranium oxide, jumped by more than 95 percent.
Analysts and market commentators have offered speculative estimates of between $80 and $120 per pound for uranium’s performance in 2007. Few are calling for a retreat in the spot price, at least through the first half of next year.
COPYRIGHT(C) 2006 by StockInterview.com ALL RIGHTS RESERVED. James Finch contributes to StockInterview.com and other publications. His archived articles on uranium can be found at http://www.stockinterview.com
