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Okay, I got some questions for you, and I hope that you won't include me in your list of haters, because actually, I am quite the fan.

 

But, weren't the small/microcap uranium plays already popping up on the Reg SHO weeks before your article was written? Perhaps I am wrong here but this to me indicated a sustained short selling focus on the part of such traders.

 

And in the background -- and just before publication of your article -- there were a couple of noteworthy events happening. Once is that Kyoto signatories met in Africa and renewed their commitments to its terms and discussed proposals for extending its application to emerging economies. The other was the flood at Cameco's Cigar Lake mine that was expected to and did drive up the price of yellowcake. While the companies that you mentioned explicitly should have had nothing to gain or lose by the second event, since nearly all of their production at this point is entirely speculative, it was likely to be along with the first a monkey wrench in the short sellers focus on this sector.

 

The real counterpoint that your article neglected to discuss, however was that many of these companies have real assets with real value. As you probably already know, many of the big oil companies got into uranium years back in an attempt to touch upon all things energy and then got out at firesale prices when the price of all of things energy tanked. Some of these uranium assets have not only mining rights attached but also various studies relating to core samples or seismic data and regulatory approvals that would take years to acquire from scratch. So while the assets are, as you suggest, nonproducing, they are assets just the same. Moreover, they are assets that are rising in value as the projected demands for nuclear fuel climb with each projected new nuclear reactor project, with each uptick in the price of yellowcake, and/or with each acquisition of one of these small cos. by a larger miner such as BHP or CCJ.

 

Without a doubt these kinds of investments are not for the novice, and URZ and FRG might be total duds for all I know, but stocks without revenues for the person who knows how to evaluate such things can be profitable, and it strikes me that the truth here, as it usually is elsewhere, probably lies somewhere nearer the middle, no? It strikes me that this entire space is likely to be one that will see a whole lot of consolidation sooner rather than later given the level of expertise required not only to get these mines into production but then to market and sell the product. (For instance, not being captice to USEC seems like it must be quite a feat unto itself.) But that's just an aside.

 

The bull case for uranium stocks (that didn't start this fall -- note CCJ's meteoric rise last year btw) is based on the many new reactors that are scheduled to be built over the next 20 years that will increase demand for yellocake sharply. My understanding is that the price for uranium was somewhat out of balance in prior years because there was a lot of extra supply coming from decomissioned nuclear bombs. Nuclear reactors obviously take a really long time to build, but then uranium mines take a really long time to get online, given the long lead times to get regulatory approval and the likelihood of nimby suits even if approval is or was achieved. Many of the new reactors to be built might be cancelled, but this looks increasingly unlikely as the price of carbon credits continues its ascent. All I am trying to say is that there is some kind of there there that wasn't at all captured in your article. These small cap uranium stocks might have gotten a little ahead of themselves, but as for valueless as your article seems to convey, I respectfully disagree. And if it's just a matter of lumpy, to quote: "I'll take a lumpy 15% over a smooth 10%."

 

 

 

 

 

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