Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
With the spot price for uranium falling below $50 – levels last seen immediately after the nuclear accident at Fukushima – U3O8 producers and explorers dropped across the board on Tuesday.
Not even Hathor Exploration, the subject of a hostile takeover by industry bellwether Cameco, managed to get into in positive territory and the sector as a whole has lost more than 40% its value since the 11 March earthquake off the coast of Japan.
And the near term outlook for the sector is not rosy either with a new study by Resource Capital Research indicating market price expectations looking out 3 to 6 months points to further downside, with a spot price expectation of $45.95/lb.
By midday Canada’s Cameco (TSE:CCO), the world’s number one producer of uranium, was trading off the day’s lows down 1.8%, after opening close to 3% lower in Toronto. In the first deal of what is expected to be widespread consolidation in the industry, Cameco last week offered a 40% premium for Hathor Exploration (TSE:HAT), its Saskatchewan neighbour.
Hathor on Tuesday traded down fractionally at $4.12, 10% above the bid price. Other sector heavyweights including Denison Mines (–4.5% AMEX:DNN), Uranium One (–3.3% TSE:UUU) Australia’s Paladin Energy (–5% ASX:PDN) and London-listed Kalahari Minerals (–1.2% LON:KHA)) all lost ground.
The negative sentiment is despite what RCR says are sound long term uranium market fundamentals thanks to expected strong and increasing demand for new nuclear power reactors, especially from China, USA, Russia, Ukraine and India. Over 84 new nuclear power reactors are expected to be commissioned globally by 2017, with 63 currently under development or construction.
Since March 11 a stock portfolio of the world’s largest uranium mines and significant explorers shows losses of 43.9% compared to a decline in the S&P 500 of 9.3%. While the losses are most dramatic if calculated since the Japanese disaster, uranium stocks have been in prolonged funk. The Merrill Lynch Uranium Equity Index, a global basket of uranium equities, is down 19% over the past month, down 27% over 3 months and down 23% over the past 12 months.
Comments
PeacefulWarrior
Uracan Resources Ltd. (URC.V) is the stock to own while the sector is down, exponential price growth when things go back to normal.