How Low Can Yellow Cake Go?

Canaccord Genuity's Morning Coffee (02/24/2010)
"How low can yellow cake go? The price of spot uranium fell US$0.50 this week to US$42.00/lb U3O8, while the long-term price remained at US$62.00/lb U3O8. According to Ux Consulting, the market remains soft, but demand is expected to begin to pick up in H2/10 as it did during the same period the year before, also considering that at US$42.00/lb the uranium price is at an important support level. Aside from this, the sector appears poised to go nuclear with M&A activity. A number of senior uranium producers have significant cash balances and have expressed their desire to make acquisitions. Casting about for industry-leading companies that could easily be takeout candidates, Canaccord Adams came up with four names: Deep Yellow (DYL : ASX)—with a cornucopia of uranium deposits of different styles south of Extract Resources' (EXT) Rössing South and west of Paladin Energy's (PDN) Langer Heinrich; Extract—now that the company's share price has backed off dramatically; Mantra Resources (MRL)—continuing to grow its excellent Mkuju River project in Tanzania; and Ur-Energy (URE)—getting closer and closer to successful permitting of its Lost Creek in situ uranium mine in Wyoming. Given the future demand building in China, India, Japan, South Korea and the Middle East, these countries and their utilities, miners, traders and sovereign funds must also be viewed as potential buyers. Stay tuned."

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