Why The Uranium Sector Is Heating Up (URA, CCJ, NLR, DNN, FSSIF, UEXCF, REMX, RIO)
Jeb Handwerger: At the end of 2012 I was interviewed on uranium and indicated to investors to accumulate as the uranium miners and the uranium price hit three year lows. The pullback in uranium miners and price coming into the year end was a potential buying opportunity as they reached important support levels historically indicative of a bullish reversal.
I also warned of an increase in merger and acquisition activity in the undervalued uranium sector as there are many discount opportunities trading at ridiculously low levels. This was at a time of great pessimism. Despite being ridiculed by the popular media, our readers were bullish and in fact they believed that may have been the “Post-Fukushima”bottom. We are witnessing a powerful rebound in the uranium price and the uranium miners (NYSEARCA:URA). Please read the prescient article where we predicted this powerful rebound by clicking here…
This week we hear that Uranium One (TSE:UUU) will be bought by ARMZ its controlling shareholder for $1.3 billion in a friendly deal. This means the Russians will have an increasing presence in the Powder River Basin. Putin is pushing nuclear power not only for Russia but to export technologies to emerging atomic nations. A few months ago we predicted a growing Chinese and Russian role in developing domestic U.S. assets.
In September of 2012 I wrote:
“Cameco (NYSE:CCJ) has announced that they will be actively searching for North American companies on the cusp of production. Do not forget the Russians and Asians are donning cowboy hats in Wyoming looking for their next target.”
This may be just the beginning of an increase in mergers and acquisitions in the undervalued uranium space (NYSEARCA:NLR). This announcement takes a major uranium equity out of the public market. The next major player who is a producer is Paladin (PINK:PALAF). They have two operating mines in Africa.
This acquisition may be a way that Russia can tighten its control on the potential uranium supply as the Russian HEU agreement ends later this year and only sell the uranium on the condition of using their nuclear services. This will squeeze other nations to search for available supplies which are far and few between. I have already positioned my readers for the coming price spike which may occur even as early as 2013.
Although we did see Germany temporarily back away from nuclear following Fukushima, we are seeing a continuation of the trend towards nuclear power globally. Japan has a pro nuclear government turning back on the reactors, China is constructing new reactors. Europe has 160 nuclear reactors and is the largest per capita user of nuclear and only has one operating mine in the Czech Republic despite being the largest per capita consumer of uranium. This means they have very little domestic supply in the continent.
Keep a close eye on multi-commodity assets that have a diversified supply of not only uranium but the critical rare earths (NYSEARCA:REMX). Some of these deposits have great leverage to rising uranium and rare earth prices.
Watch the Athabasca Basin. Most notably Denison’s (NYSEAMEX:DNN) acquisition for Fission Energy (PINK:FSSIF) for approximately $70 million. Fission was the most likely candidate for acquisition after Rio Tinto (NYSE:RIO) bought their next door neighbor Hathor for the Roughrider Deposit. Click here to see our prediction of the Fission takeover where we wrote, “Fission Energy Corp. (FIS:TSX.V; FSSIF:OTCQX), which could attract a major that is looking for exploration plays modeled after Hathor Exploration’s success, using some of the same technical personnel.”
Keep a close eye on UEX Corp. (PINK:UEXCF) as the next potential target. Do not be surprised if Denison is gobbled up as well.
I am like exploration companies with seismic experts who have helped discover the major Athabasca Deposits such as McArthur River, Shea Creek, Key and Moore Lakes and the Hathor’s Roughrider Deposit. Seismic is critical for discoveries in the Athabasca Basin which may be the 21st century Saudi Arabia.
Best wishes for a great 2013 which may turn out to be a great year in the undervalued uranium miners and to the patient uranium investors who followed our lead and believed in the long term viability of this sector.
Disclosure: Long DNN
I started reading charts at eleven years old. One day my father, a market trader and technician found his library of books on technical analysis mysteriously disappearing. He later found the textbooks under my bed. For many years day and night I studied technical analysis and charting, working and learning from my father who has over 50 years of trading experience. Technical analysis is my passion and love. In 2001, I started noticing the junior mining stocks and gold as having a tremendous upside. For the past 9 years I have researched many juniors and have identified the major winners using technical analysis and finding top management. I earned a Bachelors Degree in Mathematics and a Masters Degree. I learned most of my technical analysis from the school of hard knocks, managing real money for myself and for my family. Constantly perfecting my craft, I have traded for two decades of success in many different markets. I have been asked to post ideas to some of my students who have taken my course in charting and technical analysis. I have made an excellent living trading stocks for myself.