There have been some big moves in the uranium space this week, as the predictions by several analysts and close watchers of the space have begun to come true. It starts with two high-profile deals that were announced this week:
- ARMZ is buying the remaining 49% of Uranium One for $1.3B. While the purchase price, announced on Monday Jan 14th, of $1.3B translates to a roughly 20% premium for minority shareholders, several industry observers (including myself) feel the offer price is too low. ARMZ (which is controlled by ROSATOM, the Russian state organization) appears to be trying to gobble up the rest of Uranium One at a very cheap price – just as the fundamentals for Uranium are beginning to turn around. Analysts have recommended that minority shareholders vote down the deal. Some good reading here: http://www.mining.com/uranium-one-being-taken-private-for-1-3-b-by-russian-firm-75587/
- Denison is buying Fission Energy. In the second uranium deal announced this week, Denison is buying most of the assets of Fission Energy. Both Denison and Fission are developing projects that are intended to become mines one day. As Fission Energy’s keystone asset is next-door to Hathor Exploration’s old assets (Recall, Hathor was taken over by Rio Tinto last year after winning a bidding war with Cameco) most suspect that Dension is attempting to build itself into an entity that can one day be sold to a major producer – possibly Rio.
In my view, these takeovers underscore the strong fundamentals of the Uranium Market. Takeovers can signal the bottom of the market as so called ‘smart money’ sees opportunity. There has recently been a positive shift in sentiment towards uranium – with the Japanese election of a pro-nuclear party acting as the trigger (http://www.mining.com/uranium-set-to-get-a-boost-from-japanese-election-outcome-71924/). This is only the beginning.
I have documented the fundamentals of the uranium market for sometime. This includes the upcoming expected supply shortfall, expected demand increase and global need for nuclear power. In the event you need to refresh your knowledge of the fundamentals some links below are included for those interested:
- Uranium Outlook 2013: Rebound on the Horizon – http://uraniuminvestingnews.com/13407/uranium-outlook-2013-rebound-demand-supply-price-market.html
- Uranium Supply Crunch and Critical Catalysts on the Horizon: David Sadowski of Raymond James outlines the prospects and gives a great overview of the industry in a July 2012 research report: http://edg1.precisionir.com/companyspotlight/NA017122/RaymondJamesJuly262012.pdf
- US is more dependent on foreign Uranium than foreign oil – Interveiw with Uranium Energy Corporation CEO, Amir Adnani: http://www.youtube.com/watch?v=6ZfVELhllrg&feature=youtu.be
While my favourite company, Uranium One, has now been taken out of play (unless shareholders reject the deal), keep an eye on Uranium Energy Corporation (UEC), Paladin Energy (PDN), Uranez Energy (URZ), U308 Corp (UWE). Cameco, the major, (CCO) has also moved up smartly and is worth a look.
Visit to BNN
Last night, I went to Business News Network studios with Benj Gallander, President, Contra the Head Investment Letter. In my view, Benj is one of the brightest minds in the markets and boasts some of the highest returns in North America (30% last year). Benj was on marketcall from 6:00PM – 7:00PM.
Here is the link to the show – it is worth watching for anyone looking at different investment ideas: http://watch.bnn.ca/#clip847116
That’s all for now,
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Disclaimer: These are personal opinions and not investment or trade advice. Always do your own due diligence and talk to a licensed investment advisor before buying or selling any security.