Uranium bull overheated?

http://www.resourceinvestor.com/pebble.asp?relid=30805

LAS VEGAS (ResourceInvestor.com) -- Doug Casey, chairman of Casey Research, told listeners at the Uranium Stock Summit that there are three stages of a bull market: Stealth mode, worry mode and mania mode. He said the uranium bull market is entering the mania mode.

Although the bull cycle is nearing and end, Casey said a lot of money can still be made. He said that mania stage in the dotcom era lasted about 2 to 3 years, and some of the best profits came out of it.

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Rick Rule of Global Resource Investments today told listeners that we are already in the midst of a uranium mania, “an insane mania.” He recommended selling.

Casey introduced Rule as one who perpetually sells early. Rule agreed.

“I always buy too early, I always sell too early,” he said. “My yearly return is 60%, so I’m going to continue to sell early.”

As you can guess from the previous posts, I actually agree with Casey on this one. The mania phase seems to be starting. I think that Rule is getting out too soon. We are dealing here with energy, the lifeblood of our economic model.

The second peak oil shock will probably be delivered soon. Together with a blow-off move in the price of uranium itself, this could well provide the perfect storm for uranium investments.

FWIW, I also believe that the top in the uranium market will not be set within the next two years. I am in favor of a scenario that will set a temporary top within the next 2 years (probably within a year), followed by a decline and basing period after which a renewed top will be made several years further down the road.

A failure to get out at the first top will probably cause years of agonizing and waiting. As usual the period between the tops will still provide plenty of opportunity for a few selected stocks.

With estimated production and the planned construction of nuclear sites we must have a shortage in uranium for the next ten years. This means the outlook for the commodity itself remains outright bullish.

For over a year now however I do have my doubts on the valuations of many non-producing or not-near-to-production Ux-companies. It takes a lot of efforts, skill and an awful lot of money to evolve from exploration to (clean) production.

And for these companies I believe that Rule is correct in stating that we're in the midst of an insane mania, not at the end though because the price of the commodity itself will fuel the existing boom (aided or not by the fluctuations of oil). It looks like the speculators are considering exploration companies as pure uranium commodity plays that excludes the costs and risks of the mining.

At a specific moment in time the long term Ux bull will be translated in a surge of the prices of the producing companies. Therefore I switched to Areva, Cameco and Paladin and I'll keep them. veg.

Hi Veg, as far as the metal itself is concerned "mania" describes it well. However as you said we are dealing with a structural deficit that will last quite some time. Thus even if the price of the metal itself will correct, I expect the bull in the mining stocks not to be over yet.

I agree on buying producers, or near-term producers. But keep an eye open for explorers, as on a fall-back in the metal itself there could be an excellent buying opportunity.

http://biz.yahoo.com/ccn/070412/200704120383719001.html?.v=1

PERTH, WESTERN AUSTRALIA--(CCNMatthews - April 12, 2007) - Paladin Resources Ltd. ("Paladin")(TSX:PDN - News; ASX:PDN - News; "Paladin") today announced that it intends to increase the consideration offered under its unconditional scrip takeover bid for Summit Resources Limited ("Summit").

Under the increased Offer, Summit shareholders will receive 1 Paladin share for every 1.67 Summit shares. As required by the Corporations Act, Summit shareholders who have already accepted the Offer will automatically be entitled to the increased consideration, and the offer period will automatically be extended by 14 days to 27th April 2007

....

"The cost to Areva of the Placement Shares is actually A$6.20 less the value of the options and rights granted to Areva. Our valuation of the Share Option alone is A$0.26 per Placement Share(3), implying a value per Summit share of approximately A$5.94, which is supported by the Summit trading prices after announcement of the proposal. The values of the pre-emptive rights and uranium marketing rights are more difficult to quantify but clearly they are of material value."

Summit Shareholders Should Accept the Revised Paladin Offer

The involvement of Areva is a positive development for Paladin as a Joint Venture Partner at Mt Isa. The discipline, uranium marketing experience and technical skills Areva bring will go some way to bridging the capability gaps and nuclear industry inexperience that exist within Summit. Accordingly, Paladin will be voting its shares in favour of the Areva transaction in late May.

However, the Areva deal alone is not the best outcome for Summit shareholders. Paladin remains the only company which has brought a new conventional uranium mine into production in the past decade and will have brought its second mine into production next year. Unlike Summit, Paladin offers direct exposure to uranium price upside today and during the critical shortage period to 2012.

Thanks

Only a bit odd that Paladin first critisized the Areva deal and now welcomes it. And Areva also has enough mining experiences through its ex-Cogema subsidiary

I guess some details aren't made public.

veg

There is a new video out of Rick Rule's speech, given at the Rim of Fire Conference in Vancouver (07/07)...

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<a href=http://www.youtube.com/watch?v=wfYxL8gI39M> YouTube: Rick Rule Speech </a>