Uranium Holding Up Well Despite Commodity Massacre


It has been a tough time for commodities across the board over the last few weeks, but uranium has been holding its own in the aftermath of the Fukushima meltdown. It appears that the worst case scenario in uranium has already been priced in, meaning that it is hard for uranium stocks to go much lower.

All of the hot money, hedge funds, and other speculators who were all in the uranium trade, got shaken out and have liquidated their positions. This means the weak hands are gone and the only people left in uranium stocks are strong value investors like Rick Rule (of Global Resource Investments). These sophisticated investors see the opportunity in uranium stocks and are currently accumulating shares. (See Here and Here for Rule's view on Uranium)

The thesis for uranium value investors at this point is that despite the nuclear meltdown in Japan, uranium demand will far exceed available supply in the coming years. China, India, Russia and other countries have signaled that they will still build new nuclear power plants because it is clean, efficient, and provides reliable power. No doubt these countries will increase their safety requirements regarding the construction, operation, and maintenance of new plants. But, the main point is that they are still committed to nuclear power.

Below is a chart that shows the price of uranium. You can see that uranium has just made a higher low, important in technical charting because it shows increasing buying pressure at higher price points. After hitting a post-Fukushima meltdown of $50, uranium has rebounded back to $58, even with commodities getting hit across the board.




















Regarding the uranium stocks, they have not been as fortunate as uranium itself. Most of them are trading slightly below their post-Fukushima capitulation lows as uncertainty clouds their outlook. The concern being that it will be much harder for these companies to bring new mines to life. That is why it is probably best to focus on current producers and explorers with advanced stage projects as there is somewhat less risk.

With uranium recovering, uranium stocks should start to perk up soon.

I still own shares in Strathmore Minerals, Dension Mines, Tigris Uranium, Mawson Resources, Bannerman, and Strateco.

Black Swan Insights 

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