Why is DNN (DML.TO) not listed in your ibox...
They seem in a good position to take advantage of Uranium price increases. Had a great Q report (profitable) but it came out at bad market timing. If your looking for the "low dollar" action then you can buy options cheap right now.
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Uranium Explorers Fared The Worst In Recent Correction: Haywood
Last update: 8/23/2007 11:32:49 AM
TORONTO (Dow Jones)--Haywood Securities Inc. issued a research report on the uranium sector Thursday, projecting a rebound in spot prices by the end of the year following their recent slide.
Analyst Jim Mustard said a sharp increase in the spot price for uranium from April to June was caused by speculative discretionary buying from hedge funds, market traders and producers, rather than fundamental demand from utility companies.
In mid-June, the spot price hit a high of $136 a pound, and has since tumbled about 34%, Mustard said. However, he noted that the long-term contract price for uranium has resisted the fluctuations of the spot price, remaining in a narrow band of $85 to $95 since early March.
Mustard said utilities "seem to have taken a collective summer break," which, when combined with a lack of discretionary buying this summer, has put negative pressure on spot prices recently.
However, he believes primary mine/supply demand fundamentals haven't changed over the past few months, and that reports from India even point to a supply crunch.
"Thus, while the spot market has weakened and could weaken a tad more, by the end of the year prices could regain much of the lost ground, setting the stage for a robust 2008 and beyond," Mustard said.
His report highlighted the weakness in uranium stocks, which reflects the drop in the spot price as well as the recent overall market correction.
Mustard said companies already producing uranium have fared better than development- and exploration-oriented companies in this environment. From the beginning of July to Tuesday's close, producer Cameco Corp.'s (CCJ) stock dropped 29% in Toronto, while Denison Mines Corp. (DMM) fell 33%. Uranium One Inc. (UUU.T) was among the best-performing producers, but it still lost 20% over the same period.
Mustard said exploration-stage companies, which participated most in the upside caused by the rapid spot-price escalation, have seen their stocks decline more steeply. Aurora Energy Resources Inc. (AXU.T) lost 32% in the July 1-Aug. 21 period. Mega Uranium Ltd. (MGA.T) tumbled 44%. Development-stage uranium companies also took a big hit. Laramide Resources Ltd. (LAM.T) and Forsys Metals Corp. (FSY.T) tumbled 50% and 41%, respectively. New producer Paladin Resources Ltd. (PDN.T), which is ramping up production, sold off 30%. Overall, Mustard said producers registered an average 22% drop in equity value in the period covered by his report, versus 32% for explorers and 37% for developers.
He said the key to stabilizing the market will be a return of utility buyers seeking to fill inventory needs - "a signal to re-enter the market for discretionary buyers, who would once again add to an upward pricing bias."
Haywood or an affiliate has managed or co-managed a public offering of securities for Laramide in the past 12 months. It doesn't have an investment-banking relationship with the other companies cited here, nor does Mustard own shares of any of these companies.
-Carolyn King; 416-306-2100; AskNewswires@dowjones.com (END)
Dow Jones NewswiresAugust 23, 2007 11:32 ET (15:32 GMT)Copyright © 2007 MarketWatch, Inc. All rights reserved. Please see our Terms of Use.
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Everything I state is just my own opinion so do your own DD.
Buying great stocks is important but buying great stocks at a great price is even more important.
