tactical trader

For the last couple of months I’ve been tracking several uranium related stocks. For an amazing 25 years uranium was stuck in a bear market caused by oversupply that lead to the destruction of the uranium mining industry (uranium, in various forms, is mined). In the past there has been a large dependency on supply from dismantled strategic warheads thanks to an agreement that will run out in 2012 and is thought to be unlikely to be renewed. With uranium inventories held by utility companies reaching record lows and a reduction in supply, the uranium market is livening up again!

During 2003 and 2004 uranium doubled in price, and continued to rise in 2005. The price has since declined, however the potential for increased demand for nuclear power, the growth of countries such as China and India, and the low inventories held by the utility companies, there is scope for a longer term uranium bull market.

Canada has some of the most valuable uranium deposits in the world and has a very well established mining industry, but Australia has more potential supply as it has one-third of the world’s uranium. However political problems in Australia have slowed the development of mining operations meaning much of this potential supply is left untapped. China has been courting Australia for some time to establish a supply route to fuel some of China’s growth. If this deal is struck then one Australian politician has said that the number of mines would need to double in order to meet demand. Other countries with uranium supplies include South Africa, Russia and Kazakhstan.

Uranium is unusual to other commodity markets I’ve looked at because it does not have a futures market. The problem is that very few traders want to take delivery of a commodity that has such complex storage requirements (lead lined warehouses anyone?). The only way to get access to the uranium market is to trade in mining stocks, most of which will be Canadian due to the size of the industry there. I’m currently tracking eight stocks including:

• Agricola Resources (a rare British entry!)

• Cameco Corporation

• Energy Resources of Australia

• UEX Corporation

At the moment many of the stocks on my list are either in sideways ranges or slight downtrends, which has likely been caused due to a bit of a cool-down after the madness of the past couple of years. I’ll be viewing all of these as longer term investments rather than short term trades, and will let you know how it goes.