The coming uranium boom!

By Jeb Handwerger A speculator is someone who can look into the future and act now. In early October, I saw a major development in the uranium sector as I began seeing signs of a major breakout of many of the uranium miners, via the Global X Uranium ETF (URA). Uranium stocks have tripled since that time and are now taking their first major breather. During this time we have seen major investors come into the market specifically from China. 

This interest in uranium was highlighted back in June of 2010 when China National Nuclear signed a contract with Cameco (CCJ) to supply 23 million pounds of uranium. This showed how aggressive China has become and took a large amount of the supply off the table. Cameco is on the record looking for additional acquisitions.

Already it has inked a deal with Uranium Resources (URRE) to explore a property in south Texas. Paladin (PDN.TO), an emerging producer, bought the controversial Michelin Property from Fronteer Gold (FRG) for about $250 million in November. Russia's state-owned ARMZ purchased Mantra Resources for almost $10 a pound of uranium in the ground. Mantra controls the Nyota deposit and will be able to produce 5 million pounds of uranium a year. This is proof that the nuclear industry is heading into consolidation. This year expect to hear more news, especially as prices pull back to support, like what is occurring now. 

Market corrections are valuable. Uranium stocks are all pulling back to support and reversing higher. Over the past few months I have highlighted the role nuclear is playing in emerging markets, especially China, Russia, India and South Korea. Even the Middle East, which has vast resources of oil, is looking to expand its nuclear capability. I believe investors will look back at this correction as a great buying opportunity. Acquiring companies may use the next few weeks to make deals as share prices take a breather. Similarly, Fronteer Gold was acquired by Newmont (NEM) specifically during the gold (GLD) consolidation in January. Large companies use profit taking and sell-offs to make offers. 


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