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Uranium Investment

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PostPosted: Fri Aug 18, 2006 1:48 am    Post subject: Uranium Investment Reply with quote

Uranium Investment

Excerpted from the Economist

The price of uranium oxide, from which fuel for nuclear power plants is made, has risen from $7.25 a pound in 2001 to $47.25—a record in nominal terms. In the same period, the shares of Cameco, the Canadian firm that is the world's biggest producer of uranium, have risen from less than $3 to over $38

Unearthing more uranium is expensive and time-consuming. Equipment and engineers are in desperately short supply for all mining projects at the moment. In many countries planning restrictions have become more onerous since uranium's heyday in the 1970s. Australia, for one, has the world's biggest reserves, but only three mines. The country's federal government recently decided to drop its long-standing ban on new mines, but state governments have yet to follow suit.

Those obstacles have not deterred several new firms that hope to strike it rich with uranium. Andrew Ferguson, who manages Geiger Counter, a nuclear investment fund, reckons that more than 200 uranium-mining firms have listed on stockmarkets around the world in the past 18 months. Geiger Counter itself listed on the London Stock Exchange (LSE) last month. A Canadian-based firm with mines in Kazakhstan, UrAsia Energy, will join the LSE's Alternative Investment Market (AIM) later this month. Unlike other commodities, uranium itself does not trade on any exchanges. But earlier this year, Nufcor Uranium, a firm that simply stockpiles uranium, also listed on AIM, allowing investors to bet on the price, rather than on specific mining projects. Shares in another such firm, Uranium Participation Corporation, have risen by more than half since their listing in Toronto last year.

Most of these start-ups, however, do not have any uranium in hand—just plans to look for it. John Wilson, of Resource Capital Research, says it takes at least five years to develop new mines once the stuff is found. By then, analysts guess, the price will have fallen back a bit, along with some of the wilder share valuations.
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