Are Uranium Stocks going to explode as advertised by the Money Morning flyer I received this morning: Uranium Stocks to Explode
There are many compelling reasons to look at the Uranium sector, most of which revolves around the development of land and production that needs to take place. The commodity itself could have a supply issue related to the resources not being mined at a fast enough pace since the drop in price over a year ago.
Nuclear Energy is one of the most effective forms of alternative energy to solve the current energy crisis. However, in many developing countries, technologies such as ones that focus on how to regulate the power grid itself is a likely source of making the current energy systems more effective. There are dams over-flowing in southern African countries where the issue is the infrastructure not the lack there of energy or sources. Albeit, Nuclear energy would be cleaner than burning coal and almost as cheap. Water and coal make up a high percentage of the cheap energy sources globally, the nuclear energy movement has done a very good job to work on fast tracking their entry into the mainstream and possibly bump coal from being the main source of many of these countries. However, what does that do to Uranium Stocks?
The answer inevitably is that none of that should greatly effect the stock price of a Uranium Company, what will effect it is production, orders for the Uranium, and continued partnerships on the properties possibly pre-selling to places such as Japan and Korea. We have seen plenty of undervalued plays of this nature within the Athabasca Basin, such as JNR Resources, who have large property masses with partnerships currently trying to explore or develop properties to reach a feasibility phase. The continued growth of the companies and merging of the lands and development efforts will advance Uranium in Canada to continue to be one of the world’s number one producers.
It is quite disheartening however, having read much on Uranium and standards of mining, that many of the old mines in Countries such as South Africa and its neighboring countries have allowed for the mines to flood and leech Uranium into their water table and streams. The toxic sludge this produces literally destroys the use of otherwise potable water. The US experienced many hazards of this nature in the 70s and 80s, where entire Native Reserves suffered mental and physical illness related to the poor standards. To the best of my knowledge, I have not read reports on this occurring in the South Eastern corner of the Athabasca Basin, but possibly there was remediation in the northern areas such as Uranium City and into Ontario over the years to ensure disasters do not occur.
With strengthening global interests for potable water and usable land, pressure will grow in areas such as Africa, and even in more developed countries such as Australia, but not due to a lack of standard but a preference of the locals not to mine uranium. Therefore, there is likely a time limit on many of the projects that one would see developing in Africa or at least the cost of production will increase making many of the project unfeasible due to forcing standards to exist that requires hiring a larger base of skilled workers and a higher standard.
The interesting overhanging liability of the Uranium sector itself, is that mining Uranium doesn’t have a Workman’s Compensation or Health designation for what it can do to a human mining it. Coal mining does, and this has much to do with tracking the effects of people inhaling the fumes for centuries. Again what does this mean to stocks? Well environmental risks and long term liabilities to the health of minors could be quite damaging and a high risk to take for people investing into the sector. Due to so many of the risks being untraceable until after the contamination has occurred, even decades later, a project can always come back to haunt the investor and the company.
On another note, the idea of remediation companies does appeal to me, the idea of getting paid to clean the old mine sites and contain the toxins at the same time as salvaging as much usable uranium or other related minerals. I am surprised there are not more clean resources company such as these developing in partnership with existing firms. This would definitely be an interesting sector as there is no limits to what they could do for both humanitarian and environmental reasons globally.
The reality is, that where a cluster of mines and service companies exist, such as Saskatchewan, there is a higher possibility of there being value in what a company is doing. The reason is the market is developed, and proven, and there is only so much land where all of the busy bodies are working. It brings to question that maybe production is not all its valued to be, or the only value, but actually staking and acquiring land in cluster based areas and maintaining them for the long-term future of scarcity of land within an area is the right way to go.
Clusters such as those that exist in Canada, Chile, Australia, Peru, China, South Africa, Congo, Mexico, etc. There are many, but if there is a scarcity of a resources and a scarcity of land, than this would be another intriguing way to value the exploration company, or staking company rather. They most likely partner with other players for the actual work on the land.
I suppose however, one would want to be in areas that have good land title office record keeping and possibly even online like they do in Canada and some parts of Australia to the best of our knowledge. The rights to land being the asset, so knowing the laws of the countries is vital. In some Latin American countries the land title has to be held by a local, and is often the source of many mining company horror stories. I believe South Africa to be a good legal jurisdiction, but the claims office is still a Lick and Stamp, and File operation, which requires a major 20th century overhaul to keep up with the likes of North America.
So now that I have given you a little bit of a lesson on thoughts around the mining sector, do I think the Uranium Stocks are going to explode… I think good companies will do well if they have a solid basis of development, properties where they are scarce but a cluster of other companies exist, and where near term production is possible with the balance of new projects and properties for future growth. Those companies should do well given the current global sentiment to produce Uranium. I would almost rather go out and buy mining properties then invest in the stocks in this market, but if this is the bottom, I suppose I might buy into a few like your Cameco’s, JNR Resources, etc.
Hopefully we see more OTC Listings and TSX Listings in the Athabasca Basin, I believe the area to be still very hot with prospects.
Check out Uranium Prices at www.uxc.com
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