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More mergers expected in uranium sector

July 25, 2007 - 6:05PM

 

Australia's undervalued uranium companies, including miner Paladin Resources Ltd, will continue to be hunted by their North American peers looking for cheap acquisitions.

 

Haywood Securities senior mining analyst Jim Mustard told AAP Australia's undervalued uranium companies would continue to feature highly on the shopping list on international predators.

 

Canadian outfit's Mega Uranium Ltd and Denison Corp have been active in the sector over the past 18 months, snapping up stakes in a number of companies along with the acquisition of a couple of junior explorers.

 

"I think it will continue to happen because those companies, certainly Mega and Denison are an aggressor in M&A (merger and acquisition) activity," he said on the sidelines of a uranium conference in Fremantle.

 

"They are shopping the globe looking for undervalued assets and when they look at Australia ... they compare them to their peer groups in North America and they say these companies are undervalued.

 

"That's typically what's happening to those companies when you look at the Australian market."

 

Mr Mustard said uranium miner Paladin Resources was also likely to feature on the shopping list.

 

Paladin "emphatically" denied earlier this month it been approached following media speculation the world's largest uranium miner Cameco was running the rule over the company.

 

"Cameco I think will be on the takeover hunt on a go forward basis," Mr Mustard said.

 

"I think any company of the size and scale that Cameco has must look at opportunities outside its own backyard in Saskatchewan (Canada), simply because they are a long term player.

 

"They are going to look at the guys that have a long list of development stage projects, such as Paladin, and they will become attractive over time."

 

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Uranium Bulls Will Find This Article Interesting. http://www.sharescene.com/html/emoticons/smile.gif

__________________________________________________________

 

*** VOLUMES SEEN PICKING UP ON NYMEX URANIUM CONTRACTS ***

 

Fri Jul 27, 2007 1:00 PM

LONDON, July 27 (Reuters)

 

The New York Mercantile Exchange's uranium futures contract has only attracted scant attention since its launch in May, but most traders and analysts believe volumes should eventually pick up.

 

By meeting investor interest in the hazardous mineral which has seen its price nearly double since the start of the year, time may help to lift volumes.

 

"It will take years for it to become more popular -- it is just a timing thing," said uranium fund manager Andrew Ferguson at New City Investment Managers Ltd in London.

 

The senior director of NYMEX, Patricia H. Cauley, said that so far more than 70,000 pounds of uranium, used to fuel the world's nuclear power stations, had been traded on the global electronic platform CME Globex.

 

"We are expecting a lot more volume to go through," New York-based Cauley told Reuters this week.

 

The slow start of the NYMEX uranium contract is not surprising as it will take time to educate users, Cauley said.

 

The exchange, a subsidiary of NYMEX Holdings (NMX.N: Quote, Profile , Research), and UxC, a top publisher of uranium prices and price forecasts, launched the uranium futures contract on May 7.

 

"I saw a full run of prices a couple of days ago that ran out all the way down into December 2008," a London-based broker said. Most positions are in forward dated contracts, mainly in December '07 and but also in January '08.

 

"TOO SMALL"

 

Trading uranium on the exchange can be attractive because the NYMEX guarantees the credit-worthiness of both parties, lowering credit risk, he said.

 

"It is really useful if you have a small hedge fund no one has heard of and there is a utility on the other side," he said.

 

But others were sceptical and said volumes could decline.

 

Steve Kidd, Director of Strategy and Research of the World Nuclear Association in London, said the 250-pounds contract (113 kg) was too small for utilities and with the price seen peaking, speculative investors would reduce their exposure to the market.

 

"A fuel manager needs 200 tonnes for a reload of his reactor each year -- so he needs nearly 2,000 of these contracts."

 

 

NYMEX's Cauley said they had considered changing the amount.

 

"For the moment we are leaving it as it is as we believe the size enables most of the industries to come in," she said, adding that price volatility would only increase trading.

 

The price of spot uranium rose to an all-time high of $136 per pound at the end of June, but the price has since come off to trade at $120 this week.

 

The price has risen from $7 in 2000 on strong demand from the nuclear industry given high oil prices and a global effort to clamp down on carbon emissions blamed for climate change.

 

Once volumes picked up NYMEX would consider American-style option trading, Cauley said.

 

American-style options are contracts that may be exercised at any time before expiry. They differ from European-style options, which may be exercised only on the expiry date.

 

"We certainly hope it will go ahead ... we have been talking to the broker side of the industry and there seems to be a lot of interest," she said.

 

The contract is listed for 36 consecutive months, and is settled on the spot month-end U3O8 price published by the UxC.

 

I WOULD SUGGEST THE CALM BEFORE THE STORM

________________________________________________

 

MY PREDICTION ON THE TSX TONIGHT WILL SEE PALADIN BOUNCE STRONGLY FROM ITS OVERNIGHT LOW OF $6.95Can, 5% Gains Expected Tonight.

 

Cheers To All PDN Holders ** OUR NEXT BIG RUN IS NEAR:)

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QUOTE
MY PREDICTION ON THE TSX TONIGHT WILL SEE PALADIN BOUNCE STRONGLY FROM ITS OVERNIGHT LOW OF $6.95Can, 5% Gains Expected Tonight.

 

I wish your optimism were coming true, but unfortunately PDN is down another 10c on the TSX as I write this. Intraday low of 6.75 (down 0.20), currently 6.85 (down 0.10)

 

And the DOW is also well down again.

 

Not looking too bright for Monday....... http://www.sharescene.com/html/emoticons/sad.gif

 

 

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NIGHTSTALKER.

 

 

Actually IT Was An Interesting Night On The TSX, With 26 stocks from my current TOP 140 TSX Uranium Companys Rising 5%+ On Overnight Trading. A Very Comforting Situation considering to Current Market.

 

I Will Post A Complete list of The Movers, On My next Post.

 

Cheers.

 

NEXT URANIUM BULL CYCLE TO BEGIN V/SOON. http://www.sharescene.com/html/emoticons/smile.gif

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Thanks Grant, for all the work you put into those posts of yours with the lists. Much appreciated, and saves a lot of work by the rest of us http://www.sharescene.com/html/emoticons/smile.gif

 

Interesting for all the TA charties out there, like me, to note that a vast majority of the uranium stocks have demonstrated bullish divergences between the price action and the MACD Histogram over the last 2 or 3 months. Elder calls this one of the strongest signals in all of Technical Analysis, and the odds are that many of the U stocks will start to rally over the next few weeks.

 

 

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In reply to: NightStalker on Saturday 28/07/07 03:29pm

Hi NS,

 

Long time no speak, i hope everythings well.

 

Just one (or two) questions: Were you concerned when PDN closed below its 200dma?

 

How far will you let her drop before chopping a few?

 

Cheers.

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G'Day Nizar http://www.sharescene.com/html/emoticons/smile.gif

 

PDN is one of my long-term holds, with no stoplosses set. I removed the stops the day they got their mining licence approved for Langer-Heinrich, and that was a conscious decision to convert it from a trend-ride into a buy-and-hold.

 

Given the price I paid for them (7 cents up to about 50 cents) I'm still in clover, although it IS a bit painful to watch the slide.

 

However, one whiff of a takeover bid, and the SP will shoot back up. And if it turns into a bidding war, then the sky's the limit.

 

And if there is NO takeover bid, then I'm happy just to sit on my large-ish stack of PDN shares for the next 5 - 10 years and earn the dividends or whatever. Or sell them for $20 a share.... or more...... http://www.sharescene.com/html/emoticons/wink.gif

 

The other stock that is in the same situation for me is TOX - also in my buy-and-hold portfolio, not the trading portfolio. I started buying them at under 2 cents.

 

Having said that, most of the time I'm a TA chartie who trades short to medium term. But not with PDN http://www.sharescene.com/html/emoticons/smile.gif

 

Hope you're handling the pullback happily, Niz - keep some cash in the pocket for the bargain hunting once this correction bottoms out.

 

Happy trading.

 

 

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In reply to: NightStalker on Saturday 28/07/07 05:27pm

My thanks to the PDN posters for the well-argued comments.

 

I do not have a lot of faith in the MACD (despite my respect for Dr. Elder) but will be delighted to have it restored..

 

I have broken every principle of money management imaginable with PDN. I allowed my position to become a ridicuolously disproportionate part of my portfolio, and then failed to act on my trailing stop. I think my excuse was that the SMM affair had muddied the waters.

 

My consolation is that not taking part-profits on the way up has left me ahead of where I would have been had I followed my usual plan, but if I get away with it it will be through good luck rather than disciplined trading.

 

I am very optimistic about this one, although I prefer not to allow hope play a part in my trading tactics. It is difficult to remain objective and I have been wrong enough times to know that the direction of the price is far more relevant than my opinion. Either way I have no intention of selling now. I shall let the market take it's course, for better or worse, and if PDN tanks I shall regard it as a sharp and expensive reminder to follow my plan.

 

This is not a crtiticism of anybody else's trade management. There are as many ways of approaching the markets as there are traders and so long as we are having fun, making enough for our own needs, and sleeping well, we are a success.

 

Monetverdi

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