It may be time to buy “The U,” writes Canaccord Wealth Management in its Morning Coffee report.
The Vancouver investment firm was referring to a comment made last week by a Bay Street brokerage firm. The comment went as follows: “In anticipation of what we expect to be a strong fall ‘mating’ season between producers and customers of uranium, we suggest that investors consider investing in Uranium Participation Corp. (TSX: T.U, Stock Forum). The U is essentially an ETF on physical uranium, and the seasonal pattern for the price of physical uranium shows a bottom around the end of August.’’
Canaccord said it is noteworthy that Cameco Corp. (TSX: T.CCO, Stock Forum) (NYSE: CCJ, Stock Forum) announced its original offer for Hathor Exploration almost a year ago.
“In addition to the seasonal strength upcoming, it appears as though many of the other ducks are close to being in line and finally pointing in the right direction again. For example:
1.Japan is finally back on line.
2.China is continuing its aggressive build-out (and so is India).
3.Potential M&A has increased.
4.The Russia-U.S. “Megatons to Megawatts” program is coming to an end this year.
5.It’s possible that BHP Billiton Ltd. (NYSE: BHP, Stock Forum) will delay the expansion of its Olympic Dam mine.
6.Declining production and challenges at certain major existing uranium mines.
Separately, late last week, China and Canada signed an agreement that will facilitate the export of Canadian uranium to the world’s second biggest economy.
Cameco’s President and CEO Tim Gitzel welcomed the announcement, stating that, “The ability to export Canadian-sourced uranium to China is incredibly important to our company.’’ “It will mean more jobs, more development and more investment here in Canada by Cameco and other uranium producers hoping to access this huge and growing market for uranium energy.
Meanwhile, after trading at $5.70 on Monday, Uranium Participation has a market cap of $606 million, based on 106.3 million shares outstanding. The 52-week range is $6.42 and $5.