At the end of 2012 I was interviewed on uranium and indicated to investors to accumulate as the uranium miners and the uranium price hit three year lows. The pullback in uranium miners and price coming into the year end was a potential buying opportunity as they reached important support levels historically indicative of a bullish reversal.
I also warned of an increase in merger and acquisition activity in the undervalued uranium sector as there are many discount opportunities trading at ridiculously low levels. This was at a time of great pessimism.
Despite being ridiculed by the popular media, our readers were bullish and in fact they believed that may have been the "Post-Fukushima"bottom. We are witnessing a powerful rebound in the uranium price and the uranium miners (NYSE: URA, Stock Forum).
This week we hear that Uranium One Inc. (TSX: T.UUU, Stock Forum) will be bought by ARMZ its controlling shareholder for $1.3 billion in a friendly deal. This means the Russians will have an increasing presence in the Powder River Basin. Putin is pushing nuclear power not only for Russia but to export technologies to emerging atomic nations. A few months ago we predicted a growing Chinese and Russian role in developing domestic U.S. assets.
In September of 2012 I wrote:
"Cameco Corp. (TSX: T.CCO, Stock Forum) and (NYSE: CCJ, Stock Forum), has announced that they will be actively searching for North American companies on the cusp of production. Do not forget the Russians and Asians are donning cowboy hats in Wyoming looking for their next target."
This may be just the beginning of an increase in mergers and acquisitions in the undervalued uranium space (NYSE: NLR, Stock Forum). This announcement takes a major uranium equity out of the public market. The next major player who is a producer is Paladin Energy Ltd. (TSX: T.PDN, Stock Forum). They have two operating mines in Africa.
This acquisition may be a way that Russia can tighten its control on the potential uranium supply as the Russian HEU agreement ends later this year and only sell the uranium on the condition of using their nuclear services. This will squeeze other nations to search for available supplies which are far and few between. I have already positioned my readers for the coming price spike which may occur even as early as 2013.
Although we did see Germany temporarily back away from nuclear following Fukushima, we are seeing a continuation of the trend towards nuclear power globally. Japan has a pro nuclear government turning back on the reactors, China is constructing new reactors. Europe has 160 nuclear reactors and is the largest per capita user of nuclear and only has one operating mine in the Czech Republic despite being the largest per capita consumer of uranium. This means they have very little domestic supply in the continent.
Keep a close eye on multi-commodity assets that have a diversified supply of not only uranium but the critical rare earths (NYSE: REMX, Stock Forum). Some of these deposits have great leverage to rising uranium and rare earth prices.
Watch the Athabasca Basin. Most notably Denison Mines Corp. (TSX: T.DML, Stock Forum) (NYSE: DNN, Stock Forum) acquisition of Fission Energy (FSSIF) for approximately $70 million. Fission was the most likely candidate for acquisition after Rio Tinto PLC (NYSE: RIO, Stock Forum) bought their next door neighbor Hathor for the Roughrider Deposit.
In our previous prediction of the Fission takeover, we wrote, “Fission Energy Corp. (TSX: V.FIS, Stock Forum); which could attract a major that is looking for exploration plays modeled after Hathor Exploration’s success, using some of the same technical personnel.”
Keep a close eye on UEX Corp. (TSX: T.UEX, Stock Forum) as the next potential target. Do not be surprised if Denison is gobbled up as well.
I am like exploration companies with seismic experts who have helped discover the major Athabasca Deposits such as McArthur River, Shea Creek, Key and Moore Lakes and the Hathor's Roughrider Deposit. Seismic is critical for discoveries in the Athabasca Basin which may be the 21st century Saudi Arabia.
Best wishes for a great 2013 which may turn out to be a great year in the undervalued uranium miners and to the patient uranium investors who followed our lead and believed in the long term viability of this sector.
Disclosure: Jeb Handwerger is long DNN