Fifty years ago, uranium fever hit Wall Street. It was then just a few years after a Navajo shepherd in New Mexico, by the name of Paddy Martinez, discovered “yellow rocks” on his property, mistaking them at first for gold. An avalanche of 1950s dollars (more valuable than the ones we have today) poured into mutual funds and uranium https://outletminers.com/products/iceriver-ks3l stocks, sending their values to astronomical levels.
Get ready for déjà vu all over again, as Yogi Berra once said. Trend spotter, James Dines, editor of The Dines Letter, believes uranium mining stocks could become just as hot, or hotter, than the Internet stocks of the 1990s. (Editor’s note: StockInterview.com interviewed James Dines on July 20, 2004, when he forecast a “buying panic in uranium.” Since then, spot uranium (U3 08) prices have nearly doubled. Over the past 35 years, Dines has successfully predicted mega trends in gold, internet, palladium and uranium price movements). And now investors are chasing uranium mining stocks again.
A look at industry leader, Cameco (NYSE: CCJ), which money manager Robert Mitchell called the “Saudi Arabia of uranium,” shows a three-year gain of more than 700 percent. Over the past few years, Australian-traded Paladin Resources, skyrocketed from under a dime to over $2/share (A$). A recent Forbes magazine cover story, entitled Going Nuclear, analyzed uranium’s recent price surge, “One reason the price of uranium should keep escalating is that producers are only starting to ramp up to meet the strong demand. Utilities globally need 180 million pounds of uranium annually, but at this point a mere 108 million pounds are coming out of the ground.”
Why the sudden jump? A Morgan Stanley institutional report, published in December 2004, explained that through the 1990s, uranium oxide prices stayed low because surplus uranium came into the market from weapons decommissioning. That surplus inventory worked its way through the market. The Morgan Stanley analyst forecast a “deep supply-side shortage” of uranium, citing that new mining production hasn’t yet come online to remedy the deficit. In the year-ago forecast, the uranium deficit was expected to grow to nearly 20 million pounds this year (from a surplus of 6 million pounds in 2003), and then leap to a peak deficit of more than 35 million pounds in 2006. Deficits in excess of 30 million pounds were also anticipated for 2007 and 2008. According to the Morgan Stanley analyst, $50/pound may be possible in the spot price for uranium oxide, known in the trade as “yellowcake.”
What’s that mean for uranium stocks? Higher prices should be anticipated as more investors, mutual funds and hedge funds search out the best returns. While the lion’s share of investment dollars is likely to chase Cameco’s price higher, the robust percentage gains in that stock may have already peaked. Generally, new money searches for well-capitalized junior mining stocks with solid uranium projects in their portfolio. One of those most frequently recommended among mining newsletter writers is Strathmore Minerals Corp, trading on the Toronto Venture Exchange (ticker symbol STM.V). Prominent among Strathmore’s projects are in-situ leach mining operations proposed for Wyoming and New Mexico, plus an aggressive exploration program in the world’s richest uranium areas, Saskatchewan’s Athabasca Basin (home to uranium mining giant, Cameco).
