Could Uranium be the Next Boom Resource?

Submitted by Share Trading on 17 April, 2008 - 13:39

The uranium sector and Energy Resources of Australia (ERA). Australian sharemarket analyst, Macquarie Research Equities gives ERA an Outperform rating with a suggested upside of up to 17 percent per share.

Could Uranium Return as the Next Boom Resource?

A crazed chase for profits recently saw Uranium become an investor buzz word, and made many investors considerable returns. After prices recently tumbled, the question is now being asked, are we about to see the Both the metal and related companies boom again? With a world wide shortage in the radioactive energy source and an ever strengthening price, this may well be the case. In its recent first quarter 08 production statistics and recent exploration results, Energy Resources of Australia (ERA) has shown signs that this resurgence may be occurring, albeit in a foetal stage.

With production volumes increasing 32% over the recent quarter the company is now beginning to draw attention. While part of this can be attributed to a production recovery from recent flooding, there is merit in management’s progress. It is clear that last year’s flood has had a longer-lasting impact, with seasonal rains appearing to have hindered access to higher grade ore. Despite this, management feel this issue will be completely rectified, with full production occurring from late June, as access to the high-grade ore is re-established.

Further to the production recovery, the company has shown a strong commitment to exploration and evaluation, which is continuing to produce encouraging results. This acts to highlight the longer dated potential of the company operations which only adds to the value of the stock.

Macquarie Research Equities (MRE) takes a positive view on the stock, rating it an outperform. With a further 17% upside to the current stock price over the next 12 months, MRE feels there is strong enough support for this to continue to rise over the longer term. With the continued production recovery from the flooding, along with exploration success, the company is well placed to capitalise on a strengthening uranium market.