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Saturday, June 02, 2007

Uranium update

TradeTech's spot price of uranium jumped another 11.5% this week to $138.
“We issued a conservative increase to US$138 because Friday’s bids have not yet been announced,” Clark told StockInterview.com. “Our sources provided us with guidance of $138, but we believe the final sale could reach well over US$140/pound.” Clark cautioned, “Each auction has taken the spot uranium price higher, and we anticipate this could again occur at the June 12th auction.”
That could be jumping the gun. It's UxC's prices that control the futures market and they'll announce on Monday night (but it doesn't show up until typically Tuesday night).

There's another auction that just finished on Friday for even more uranium and a third one on June 12 for 125K pounds of U3O8.

The news has been the usual steady stream of raising capital, exploration progress, and M&A stuff. All this activity may put off investors, thinking that it will produce a glut in the future.

My opinion is that there are too many bottlenecks (mining engineers, equipment, exploration knowledge, and so forth) that the ramp up of production will be slower than expected. It will be as if parts of the industry will be operating with 50 years of cumulative uranium mining experience while most of the new activity will be back in the dark ages. I've seen first hand examples of the slow progress of an organization inexperienced in the technology they're pursuing. They can obviously succeed since someone had to pioneer it the first time, but it's slow and with all sorts of unexpected things as the people involved slowly "re-invent the wheel." So much of the knowledge of an industry exists only within the heads of the people running it.

I also think that demand will increase faster than expected, but it will also be affected by bottlenecks in nuclear plant infrastructure construction (that was in an article not long ago). The general news industry reports that the uranium price increase is due to some sudden increase in demand, which is obviously not true.

I've stayed invested in Strathmore Minerals for the past 2+ years. I'd like to go back and check the stock increases of the past year vs some other respectable stocks. Note that these charts will change over time so the text below will go out of date fairly soon.

1 Year Comparison
Cameco: loses to Strathmore by a huge margin.
Denison Mining: better than Strathmore, but that difference disappears entirely if you started measuring 2 weeks later. The two year comparison shows them about the same.
Energy Metals: roughly the same until a few weeks ago when they jumped well ahead of Strathmore, possibly due to their recent first sales agreement. The two year chart has EMC way, way ahead of Strathmore.
Fronteer: about the same, but two year chart has them way better
Paladin: roughly the same, until a few weeks ago when the stock fell presumably related to the attempted takeover of Summit. Two years they're way better.
SXR Uranium One: Strathmore has done significantly better in the past year. Looking at two years, SXR was up over 1,500%. D'oh!
Uranerz Energy: About the same. And similar 2 year story.
Uranium Participation: Strathmore wins.
USEC: Strathmore wins.

These weren't cherry picked, they were simply the stocks I would have been most likely to buy as an alternative to Strathmore. Let me pick a few more at random.
Forsys: even though the stock is dropping a lot, it's done way better than Strathmore
Laramide: no Yahoo chart, but the stock has underperformed Strathmore in 1 year
Mawson: no Yahoo chart, but the stock did worse overall (big jump in the middle, however)

Looking back to one year ago, Strathmore was one of the best choices. Looking back two years, there were lots of better choices but I wouldn't have been able to know that very easily at the time (which is probably a good part of why those other stocks were better choices).

Going forward, I'm very confident in Strathmore as an investment. All those recent joint venture announcements are very similar to the ones I've looked at with Yellowcake Mining. I think the big surprise with Strathmore will be in lots of unexpected increases in uranium resources that will be the result of their long industry knowledge in cherry picking properties. There will no doubt be better performers among the pure exploration companies, but good luck knowing which ones.

Hey Bruce, what do you think of BIOLARGO INC

Found this in their filings

javascript:opennew('http://www.sec.gov/Archives/edgar/data/880242/000119312507102934/dex1014.htm','BIOLARGO INC','');
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