Uranium stocks

[Mark Donovan]

Some articles on investing in uranium as also in gold, silver, coalbed mining stocks, etc.:

http://www.finista.com/

 

[empireMG]

Hi all, thought I would add my opinion in here, there has been no real talk about BMN, this stock has continued to climb, while it pauses from time to time and trades within a .10c range overall it continues to climb. On the bannerman thread it indicates a announcement is due within days! Take a look and make up your own minds but this stock is another PDN in my opinion.

Note I am no expert at all, this is my opinion from hour spent browsing online.

My other mid to long term preference would be EXT..


Cheers

 

[reece55]

Is it just me, or does everyone have a sense of dejavu in the stock market at the moment. It seems that any company stating that their objective in life is to search for Uranium, the thing skyrockets. Now I understand that ERA and PDN are actual producers, so that is ok (most unhedged and therefore benefit from the huge price rise in spot Uranium). But the smaller explorers are what get me. Some of these company's are soaring on absolutely nothing. I mean look at GSE Goldsearch Ltd - all the company stated was that they had commenced the project and shortly thereafter, the things up some 300% in a day - I mean they only have $1.5 Mil in the bank, but thanks to some greedy punters, the thing is worth $26.3 Mil via market capital on a close of $0.096. Um........ have we all gone mad here....... I mean, they will burn through that cash in a second evaluating the project area before we know if it's even worth pursuing........ There are many others, which I won't even mention here - my point is that by the mere fact that you are searching for uranium mean that a company should be capitalised in excess of 10x their cash backing on nothing - I remember a similar situation happened when internet stocks were all the rage in the 90's - it was about getting the idea and putting it on cyberspace. Don't worry about how we make money out of it. I ask the question - is not the same thing happening with our small Uranium companies????? Plus, all we are really doing is making the brokers and sophisticated investors rich - they have already made their money whilst the punting community (ma and pa investors) are left with the scrip - I think the whole small cap Uranium sector is going to leave some investors very burnt - they just see Paladin and think every junior can repeat that success. Thoughts anyone????????

Cheers
Reece

 

[Wysiwyg]

Hi Reece55......From what I`ve read there `Might` be a few more mines allowed in Australia `If` the policies are relaxed.That means most of the `Explorers` of uranium will drop off with no hope of future production.Which ones get the nod....well y`all gotta do some readin`.

Ma & Pa shouldn`t be punting in my view or at least know better.

 

[Fab]

Hi Reece55......From what I`ve read there `Might` be a few more mines allowed in Australia `If` the policies are relaxed.That means most of the `Explorers` of uranium will drop off with no hope of future production.Which ones get the nod....well y`all gotta do some readin`.

Ma & Pa shouldn`t be punting in my view or at least know better.

Then only look at the U producer. I just bought more PDN today. I believe U stocks at least the ones which are producing can only go up. There is and will be a huge demand of U for a long time even though Australia does not decide to go nuclear. The decision that will make these stocks go crazy is when the ALP decides to lift the ban on mine limitation in June 2007 then if you think this will happen you better buy now because it will be too late then.

 

[lancer]

I have to agree with that!

 

[reece55]

"I believe U stocks at least the ones which are producing can only go up...."

Fab, this statement typifies investor responses at the moment - what you lack here is an understanding of a practical way to value a Company. I suggest you do some reading on a net present value model of valuing cash flows - inevitably, a company is only worth its future cash flows in perpetuity adjusted for the risk free interest rate (say the cash rate), plus a risk factor. Now I am not saying that PDN is overvalued, but to say that every producer will just keep going up in value is stupid.......

Take good ole ERA at the moment..... in 2005, EPS was 21.3 cents based on Uranium at $16 US per pound. At the moment, that means the stock is trading at 98 x 05 earnings. Even at spot now at $72 US per pound and assuming that EPS growth is 100% correlated to increase in Uranium price, they would still be trading at 22x earnings in 06. This is without hedging, assuming no price increase in extraction, etc, etc......... You have all gone mad if you ask me!

Cheers
Reece

 

[michael_selway]

"I believe U stocks at least the ones which are producing can only go up...."

Fab, this statement typifies investor responses at the moment - what you lack here is an understanding of a practical way to value a Company. I suggest you do some reading on a net present value model of valuing cash flows - inevitably, a company is only worth its future cash flows in perpetuity adjusted for the risk free interest rate (say the cash rate), plus a risk factor. Now I am not saying that PDN is overvalued, but to say that every producer will just keep going up in value is stupid.......

Take good ole ERA at the moment..... in 2005, EPS was 21.3 cents based on Uranium at $16 US per pound. At the moment, that means the stock is trading at 98 x 05 earnings. Even at spot now at $72 US per pound and assuming that EPS growth is 100% correlated to increase in Uranium price, they would still be trading at 22x earnings in 06. This is without hedging, assuming no price increase in extraction, etc, etc......... You have all gone mad if you ask me!

Cheers
Reece

Does ERA have a short mine life?

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2009
EPS 21.3 23.0 61.4 93.2
DPS 17.0 17.0 43.0 65.1

EPS(c) PE Growth
Year Ending 30-12-06 23.0 91.5 7.8%
Year Ending 30-12-07 61.4 34.3 167.0%

thx

MS

 

[rederob]

Reece
You are right.
But when people can tell me what the future cash flow will be - because they have accurately worked out costs and revenues 5 years or more down the track - please let me know.
Given that uranium only starts to look expensive against convential energy sources after it hits about US$500/lb there is a bit of blue sky ahead, possibly?

 

[lancer]

I take it reece55 is not in U. There can be exceptions to everything and this is no usual investment. If you have been following U for more than a week you will realize this. I have been watching this myself and heard too many professional investors saying this is perhaps the biggest investment opportunity they have seen in the last 50 years. So with a usual stock I believe most of these stocks are overvalued according to their pe ratios, but if you consider that nuclear power very well is in the process of going from an average 20% output (80% coal at the moment causing global warming) to possibly 100% nuclear in a lot of countries with a serious shortage of Uranium? NOT OVERVALUED! Not to mention their is no VIABLE alternative. solar, wind...etc at the moment (that can safely produce enough power to meet the shortage. Also not to mention India and other countriesare growing at an incredible rate demanding more power.

Thats just my opinion though....Of course there will be the usual pullbacks and corrections going up but whens the last time you have seen a chart that looks like pdn in that short of time? Not to mention majority of the good juniors look similar?

 

[reece55]

Rederob
Well, this is the big question isn't it...... How does one accurately estimate future cash flows..... It is a little complicated and open to manipulation...... as an accountant, I will certainly admit that!

My point here guys is to work with the information in front of you - if the price of a single resource goes up 4x in price (like Uranium) in 3 years, surely you risk weight the earnings. I mean BHP is sitting on a PE of about 10x earnings when its key commodity drivers are only 2x or 3x in price in 3 years. ERA is about on 35x 07 earnings......... see the problem here!!!! I understand the drivers fueling the Nuclear debate.... but this is going to take decades to resolve, not months. And I think that whilst there is definitely blue sky to the sector, don't count your dollars yet! The price ain't going to $500 tomorrow, I assure you....

Do you have any documentary proof that Uranium is only expensive when compared to other fossil fuels at $500 US. I would be very interested in having a look at any such cost comparisons. Post it for all of us to see, it would certainly be worth a look.

Cheers
Reece

 

[Fab]

Rederob
Well, this is the big question isn't it...... How does one accurately estimate future cash flows..... It is a little complicated and open to manipulation...... as an accountant, I will certainly admit that!

My point here guys is to work with the information in front of you - if the price of a single resource goes up 4x in price (like Uranium) in 3 years, surely you risk weight the earnings. I mean BHP is sitting on a PE of about 10x earnings when its key commodity drivers are only 2x or 3x in price in 3 years. ERA is about on 35x 07 earnings......... see the problem here!!!! I understand the drivers fueling the Nuclear debate.... but this is going to take decades to resolve, not months. And I think that whilst there is definitely blue sky to the sector, don't count your dollars yet! The price ain't going to $500 tomorrow, I assure you....

Do you have any documentary proof that Uranium is only expensive when compared to other fossil fuels at $500 US. I would be very interested in having a look at any such cost comparisons. Post it for all of us to see, it would certainly be worth a look.

Cheers
Reece

Nuclear can't be that expensive if country like France can produce something like 70% of their electricity using nuclear and still be able to afford reasonable electricity price.

 

[reece55]

"but whens the last time you have seen a chart that looks like pdn in that short of time?"

Lancer
Do a google search on Poseidon - this one makes PDN look like a mouse - plus this chart illustrates my point. In the 70's it was Nickel......

Anyone else here been around to remember this one!!!!

Cheers
Reece

 

[michael_selway]

"but whens the last time you have seen a chart that looks like pdn in that short of time?"

Lancer
Do a google search on Poseidon - this one makes PDN look like a mouse - plus this chart illustrates my point. In the 70's it was Nickel......

Anyone else here been around to remember this one!!!!

Cheers
Reece

i wasnt, can you please post a chart

thx

MS

 

[reece55]

Michael
I can't find the chart, but Poseidon shares rose from 80 cents in July 1969 to $280 in February 1970 - as I said, this share makes PDN look like a minor. The reason I point this out is because a similar situation occurred in the 70's with Nickel that has now happened with Uranium. I am not saying this will happen to our market now, but I just say be wary.......

Cheers
Reece

 

[Fab]

Michael
I can't find the chart, but Poseidon shares rose from 80 cents in July 1969 to $280 in February 1970 - as I said, this share makes PDN look like a minor. The reason I point this out is because a similar situation occurred in the 70's with Nickel that has now happened with Uranium. I am not saying this will happen to our market now, but I just say be wary.......

Cheers
Reece

Reece,

I feel that you are stating the obvious here , any shares that has gone from 1 cents to $9 in less than 3 years you would have to worry about . I guess it all depends when you get on the "boat" weather or not you feel confortable with it.
I feel it mike correct in the short time but will be over the $10 mark very soon

 

[champ2003]

Rederob
Well, this is the big question isn't it...... How does one accurately estimate future cash flows..... It is a little complicated and open to manipulation...... as an accountant, I will certainly admit that!

My point here guys is to work with the information in front of you - if the price of a single resource goes up 4x in price (like Uranium) in 3 years, surely you risk weight the earnings. I mean BHP is sitting on a PE of about 10x earnings when its key commodity drivers are only 2x or 3x in price in 3 years. ERA is about on 35x 07 earnings......... see the problem here!!!! I understand the drivers fueling the Nuclear debate.... but this is going to take decades to resolve, not months. And I think that whilst there is definitely blue sky to the sector, don't count your dollars yet! The price ain't going to $500 tomorrow, I assure you....

Do you have any documentary proof that Uranium is only expensive when compared to other fossil fuels at $500 US. I would be very interested in having a look at any such cost comparisons. Post it for all of us to see, it would certainly be worth a look.

Cheers
Reece

LOL Reece are you one of those people who waits until the commodity has peaked before you jump on the boat and therefore gets burn't as the price drops??

I can see some correlation with what you are saying here. The price of Uranium isn't going to shoot to $500 overnight and no-one knows just how high it will go (maybe even higher) driven by demand but the one thing we all know is that the price of uranium is going to rise much higher than its present value. I also know that their are many people currently getting huge sums of money from U stocks at the moment so i'm not so sure that your statement telling everyone not to count their dollars yet is that accurate.

IMO it would be extremely unwise to not consider uranium as an investment under the current conditions.

All the best with your decision.

Champ2003

DYOR

 

[lancer]

The Poseidon bubble was a stock market bubble in which the price of Australian mining shares soared in late 1969, then crashed in early 1970. It was triggered by the Poseidon NL company's discovery of a promising site for nickel mining in September 1969.

In the late 1960s, nickel was in high demand due to the Vietnam War, but there was a shortage of supply due to industrial action against the major Canadian supplier Inco. These factors pushed the price of nickel to record levels, peaking at around £7,000 on the London market early in November 1969. In September 1969, the mining company Poseidon NL made a major nickel discovery at Windarra in the Shire of Laverton, Western Australia. In early September their shares had been trading at $0.80, but as information about the discovery was released, the price rose until it was trading at $12.30 on October 1. After this, very little further information came to light, but the price continued to climb due to speculation; at one point, a UK broker suggested a value of up to $382 a share.

The price of Poseidon shares quickly became too high for many investors, so some investors turned to other nickel stocks, stocks in other mines near Windarra, and eventually other mining stocks in general. As the price of mining shares grew, numerous new companies were listed by promoters looking to cash in. Some of these new listings did not even have any mining leases, let alone viable mines. Many investors lost money on these shady listings, and this attracted substantial negative press. Thus the image of mining stocks was tainted, and the prices began to fall. Mining stocks peaked in January 1970, then immediately crashed. Poseidon shares peaked in February 1970, and fell rapidly thereafter.

Reece I see your point, but the difference I see here with Uranium is that Uranium will be essential to having lights in your house once many governments wont allow coal to ruin the environment any longer. Poseidon was based solely on speculation with no real value behind it. (at least no value to warrant $382 a share)

But it is good to be cautious

 

[insider]

Look let's face reality here... Australia just doesn't need to go Nuclear!!! But guess who does? The rest of the world... Unfortunately some governments spent money on getting man off the planet and onto the moon before even attempting to save it by using renewable energy... Australia is positioned to become a self sufficient country... we really are at a fork in the road...

However the world needs to accept Nuclear power and Australia needs to supply it... and quite frankly Johnny Howard is only pushing Nuclear Energy so that the 3 mines policy will be easily lifted... Which is what you really want...

So howabout those Nick's?

 

[Fab]

Look let's face reality here... Australia just doesn't need to go Nuclear!!! But guess who does? The rest of the world... Unfortunately some governments spent money on getting man off the planet and onto the moon before even attempting to save it by using renewable energy... Australia is positioned to become a self sufficient country... we really are at a fork in the road...

However the world needs to accept Nuclear power and Australia needs to supply it... and quite frankly Johnny Howard is only pushing Nuclear Energy so that the 3 mines policy will be easily lifted... Which is what you really want...

So howabout those Nick's?

Yep that is exactly what I think too