Uranium Stocks

Submitted by Marco on 22 April, 2006 - 21:05

Is there an emerging bubble in Australia’s uranium stocks? Well, the flood of uranium explorer’s listing on the Australian Stock Exchange who aren’t even turning over a cent are seeing their stocks rise in price dramatically. But is it a sound investment fundamentally? Is the demand for uranium going to grow in future? That is the question a lot of people are asking since the growing demand for uranium will be tomorrow’s power supply. One of the barriers that nuclear energy has to overcome is that nuclear = bad because of the nuclear waste it leaves, hence no supply for uranium needed. John Borshoff, chief executive of Paladin a uranium stock said, "So we're looking at a paradigm shift here and that paradigm shift has happened at the speed it's happened because the nuclear reactor utilities were working behind the scenes." (Paladin Resources, which is up five-fold since this time last year and 50-fold in a couple of years.)

The issue has come back on board as the Chernobyl incident hits its 20 years anniversary this week (April 26, 1986). However, right now, after just a few years, uranium has turned into all the rage. "That just shows you how dead uranium was as late as 2002 and that nobody in the world was looking at uranium ever going through the sort of resurgence that it has," John Borshoff, reflects in this interview. Borshoff was reflecting how he got his mines at a very cheap level since Uranium was somewhat a taboo topic just a few years ago.

The price of uranium as a commodity has more than trebled in five years, sparking growing interest in the sector in Australia. John Borshoff says that "I think that the price was $40 in 1978 - or $43 - now we're $42 in long term, and that $43 in 1978 represents about $106 today, and I see that there is room for significant increase in uranium pricing, and I believe." And he doesn’t think it is "not inconceivable" that prices will rise to $100. Hence the rise of uranium stocks.

And nuclear power is increasingly being suggested as a cleaner energy source than coal generators. Companies and investors have cottoned onto the fact that we're seeing a major shift in the debate on uranium, nuclear power, tied up with the greenhouse gasses, Kyoto, all that sort of thing. And we're seeing a major structural change. Companies are out there scrambling to get hold of anything that's go uranium attached to it, just because they want a seat at the table. So it's really all happening in boardrooms and in meetings. Very little is actually happening out in the field of uranium stocks at present.

But of course you must be wary that there's a lot of rubbish uranium stocks out there, and investors need to keep their heads about them. At the moment there's a lot of inexperienced players in mining, racing in to buy anything that's got uranium attached to it. And it's got all the signatures of the crazy buying that we saw in the dot-com boom. Check your charts!