Yellowcake Fever

In what could turn out to be an lively turn of events, the shadow minister for resources, Martin Ferguson, picked today's visit by the Chinese Premier Wen Jiabao to call for an overhaul of the ALP’s uranium mining policy, a move that could see more uranium mines opened and the Labor Party’s existing “three mine policy” rolled back by state governments.
It is the latest of many stars to align for uranium stocks. The Federal Government has signalled that it is ready to reconsider trading the resource with economic powerhouses India and China. In an interview with Alan Kohler on Inside Business this Sunday, Paladin chief executive John Borshoff says it is not inconceivable that uranium could leap from $US40 to US$100.

Meanwhile, the heat generated by the listing of uranium exploration company Toro has made investors painfully aware of just how quickly speculative stocks move. The Oxiana and Minotaur spin-off was offered to the public for 25¢ a share and by day three it was trading for $1.41 before settling around $1 over the past few days.

Apart from Toro, this renewed interest has been of great benefit to established companies such as ERA, which is well on its way to returning to the record highs of last year. Paladin Resources, which has performed strongly for the past two years, has enjoyed an even more significant growth spurt in the past two months. Even Oxiana has enjoyed a surge in its share price, in a kind of honour by association with Toro.

Upcoming uranium IPOs include U308, a $5 million uranium pure play of which Giralia will own 12.2%. It is due to list in May. Additionally, exploration company Gladiator Resources is expected to make its ASX debut sometime soon.

Earlier this month, both Encounter Resources and Primary Resources listed. Encounter is an exploration company devoted to uranium. Primary is also an exploration company but with diversified interests. Encounter debuted on March 27 at 33¢ and was last trading for 64¢. Primary debuted at 23¢ and is now trading at 24¢.

Several stocks other small-cap uranium stocks have slipped underneath the radar and will be worthwhile keeping your eye on. Dynasty Metals Australia is an exploration company with a market cap of around $2.8 million (of which about $2 million is still in the bank). It has underperformed since listing in December and is now rapidly approaching its debut price of 19¢.

Uranium Exploration Australia was another stock that listed late last year, which has soared from 25¢ on March 17 to 43.5¢ on March 30. A1 Minerals, a small-cap gold exploration company, announced yesterday that a geological survey indicated the presence of abnormal amounts of uranium in its Narnoo project. The news brought the stock out of its near record lows.

Despite the frenzied activity in the sector, some analysts remain cautious about the immediate outlook. ANZ resources analyst Andrew Harrington even went so far as to label the hype as “unsustainable”.

Until legislative changes are made that will allow uranium mining to extend beyond the Ranger, Olympic and Beverly Mines, bullish sentiment around exploration companies appears purely speculative. But the moment these restrictions are lifted you can count on this sector coming in for an unprecedented amount of attention.