Uranium Stocks: Bear Market's Hot Corner


While the top 100 mining stocks have moved up 30% from recent lows, uranium stocks have gained an average of 51%.

Leave aside for a few minutes crashed out stock markets - the MSCI Barra dollar world equities index is now 50% off its highs - and consider how uranium stocks are performing like something of a bear market darling. Where the world's top 100 mining stocks have surrendered an average of 73% in market value, uranium stocks are down 68%.

But where the top 100 have moved up 30% from recent lows, uranium stocks have gained an average of 51%...

At this juncture, gold stocks offer the best competition for uranium stocks; at 25% off its highs, dollar gold bullion has fallen the least among major commodities. Pricing of uranium oxide, or yellowcake, the underlying commodity for listed uranium stocks, has been a very different story. Where gold and silver prices peaked in March this year, and crude oil in July, uranium oxide peaked, and popped, in June 2007.

There were several reasons for the construction of the uranium price bubble: the end of Russian dumping and lots of liquidity, provided mainly by hedge funds. Uranium prices moved up from record lows of USD 7/lb in 2001 to a peak of USD 136/lb in late June 2007, and fell to recent lows of USD 44/lb, but have moved up in recent weeks to around USD 55/lb.

Much like "gold bugs" that follow gold bullion (and sometimes gold stocks) wherever it goes, uranium is showing increasing indications of a growing fan club. Uranium, with the highest atomic weight among naturally occurring elements, is some 70% more dense than lead and weakly radioactive. Its key use in the civilian sector is to fuel commercial nuclear power stations. By the time it is fully fissioned, one kilogram of uranium-235 can (with the help of a power station) theoretically produce as much electricity as 1,500 tons of coal...

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