Wednesday, June 6, 2007

Grandich also sees $200 an Oz Uranium

Peter Grandich sees uranium climbing to US$200, financial players yet to take profits
With the spot price for uranium rising further in the wake of two auctions last week, and another major deal with sxr Uranium One Inc.’s $1.6-billion friendly bid for Energy Metals Corp., surging investor interest in the sector continues unabated.

But is the end of this bull market for the nuclear fuel near?

Not if you ask Peter Grandich, author of The Grandich Letter, who attributes rising prices to tight uranium supplies.

Although he thinks we’re past the halfway point for uranium equities, he thinks uranium prices will rise to US$200 per pound. Market monitors Ux Consulting and TradeTech recently raised their spot prices to US$135 per pound and US$138 respectively, while long-term prices are at US$95 for both groups.

Mr. Grandich expected that a hedge fund or Uranium Participation Corp., which buys physical uranium, might have taken some profits by now and actually sold some uranium. But they haven’t.

“By them not doing that yet, it convinces me that the US$200 target is more reasonable than we could even have imagined just six months ago,” he said, adding that some of these players got into the uranium play early at US$30 or US$40 or less.

“It’s very hard to pass up on 300% and 400% gains, and they are doing that at the moment.”

What about the suggestion that uranium speculators may be driving up spot prices to boost the value of their mining stocks?

While the amount of institutional money out there makes these sort of manipulations relatively easy, Mr. Grandich thinks this was more likely a year or two ago because shares had not yet risen dramatically. He also pointed out that since the beginning of 2007, uranium prices have climbed, but many uranium stocks have corrected.

Not only does Mr. Grandich expect there will be more consolidation in the uranium sector among current producers, he thinks advanced-stage exploration companies will also be acquired in the next stage of deals as prices continue to rise.

As far as the ‘nuclear renaissaince’ sxr Uranium One chief executive Neal Froneman expects in the U.S., Mr. Grandich thinks the recognition of an acute need for energy both globally and in the U.S., has opened the door again for nuclear energy to become a viable energy source there.

“If someone were to have told me as late as three or four year ago that anywhere in the continental United States we would have been speaking about a nuclear plant again, I would have told them ‘not in my lifetime’ and I’m 51 year old.”

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