Uranium Resources Popped: What You Need to Know

• Report this Comment On November 05, 2010, at 10:39 AM, metoo105 wrote:

  It's true that the momentum traders are currently having a go at this name.

  But bear in the mind that the reasons that it was able to run to 12 before were a set of circumstances that are not so different from today:

  1. Rising spot uranium prices are increasing the value of the reserve.

  2. Solid management team that has only improved with the addition of David Clark.

  3. Clarification on the right to extract in the largest domestic resource in New Mexico.

  4. Tailwinds from expanding capacity at existing nuclear plants and newly constructed plants that will start coming online next year and will increase demand dramatically over the next five years. In ten years, it seems quite clear that spot prices of uranium will head significantly higher than where they are today. My own five year estimate is $90.

  There is a temptation to look at mining companies that haven't yet earned a penny as problems. But to evaluate them, you need to do much of the same work. It's all about DCF even if those cash flows are a couple of years away. There is perhaps even more of a junk in junk out problem, but it's quite easy to estimate the value of the resource of the reserve.

  In this case, it's still dramatically undervalued.

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