Uranium Mania's Postmortem

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It may be difficult to believe, but there are a number of emerging uranium producers with stories that are likely to bring rewards to investors. Until then, the good news for investors is that the Bank Credit Analyst recently asked whether (general) commodity mania had entered the dangerous terminal phase, and, pointing to five of its favorite signposts, found that none were yet worrisome...

A year ago, uranium oxide (U3O8) prices were riding the last few weeks on the crescent of a wonderful, benevolent tsunami, something that would hit something akin to the base of Everest. Since then, the world has fallen out of the bottom of dozens of listed explorer and developer uranium stocks, leaving a trail of investor mayhem.

Today, the world's long-established uranium producers continue marching on as if nothing really happened; precious little new uranium oxide - "yellowcake" - has come to the market. Uranium mania set in earlier in the decade, with increasing recognition that world energy demands would pressure not only oil, gas and coal, but also uranium, the raw energy material for nuclear power stations. In some respects, the role of uranium in power generation counters growing concerns over global emissions and associated evils.

In due course, uranium prices started moving from around $10/lb, a level known to producers for some years. The spot price eventually went into exponential development areas, and peaked around $138/lb in June 2007. Specialist trade consultants Ux Consulting and TradeTech have recently reported spot prices at around $60/lb. Thinly traded uranium futures prices are also falling, according to industry sources...

It was also about a year ago that Metal Bulletin sketched out the reasons that uranium fulfilled the three preconditions for a mania. There were fundamentally bullish displacements on both the supply side (end of Russian dumping) and demand sides (led, of course, by China); plentiful liquidity via hedge funds (the hyenas and marabou storks of the investment world) and participation certificates, and third, difficulty in valuing uranium assets and companies...

It may be difficult to believe, but there are a number of emerging uranium producers with stories that are likely to bring rewards to investors. Until then, the good news for investors is that the Bank Credit Analyst recently asked whether (general) commodity mania had entered the dangerous terminal phase, and, pointing to five of its favorite signposts, found that none were yet worrisome. It added, however, that "the ingredients are in place for a full fledged commodity mania throughout the remainder of this decade".

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