Seeking Value in Uranium Stocks

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RBC CM analysts believe that the current uranium spot price has been "driven to excessively low levels due to intense selling pressure and lack of buying demand, coupled with the typical illiquidity of the spot market. The long-term price, on the other hand, has not changed since May 2007 and we think this better reflects the market's view of longer-term supply-demand fundamentals".

Uranium One, one of the biggest disappointments among resources stocks over the past year, may still face downside, according to a recent report on value among listed uranium stocks, released by analysts at Royal Bank of Canada Capital Markets.

A majority of listed uranium stocks, especially the newer entries, have been savaged as spot uranium oxide prices have more than halved after peaking around $138/lb in June 2007. Specialist trade consultants Ux Consulting last week reported prices falling $3 week-on-week to $65/lb, while TradeTech reported a $4 slippage to $65/lb.

...For companies in RBC CM's uranium coverage universe, the analysts calculate "the uranium price we believe is being discounted, or implied, in the share price (assuming the uranium price is flat from today forward). The results of this analysis illustrate that the equities we believe to be fully or over-valued in the current market are also implying uranium prices substantially higher than their peers. Further, the uranium prices implied by the share prices of the companies we feel are overvalued are also much higher than the current spot price of uranium".

RBC CM analysts believe that the current uranium spot price has been "driven to excessively low levels due to intense selling pressure and lack of buying demand, coupled with the typical illiquidity of the spot market. The long-term price, on the other hand, has not changed since May 2007 and we think this better reflects the market's view of longer-term supply-demand fundamentals".

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