While the stock market is concerned with rising and falling oil and gas prices, I am concerned about australian uranium stocks, primarily based in uranium-rich Australia. I posted about a great uranium stock newsletter sometime ago, which really opened my eyes to the riches in Uranium stocks. Basically, as the US government and various organizations push towards clean energy initiatives, more people will rely on ethanol, uranium, and other substitutes for oil and gas.
Uranium Dominance in Australia
When looking for clean energy alternatives, like Uranium, Australia is the first place investors should research. Take a look at these statistics on Australia’s world uranium dominance:
- Uranium is part of Australia’s mining heritage, though only three mines are currently operating. Two more are proposed.
- Australia’s uranium reserves are the world’s largest, with 24% of the total. Production and exports exceed 11,000 tonnes of uranium oxide (9300 tU) per year.
- Australia’s uranium is used solely for electricity. It is supplied under arrangements which ensure that none finds its way into nuclear weapons.
- In the five years to mid 2005 Australia exported 46,600 tonnes of uranium oxide concentrate (39,500 tU) with a value of over A$2.1 billion to eleven countries around the world.
(Source: Australia’s Uranium and Who Buys it, 2006)
Australian Uranium Stock Plays
Representing nearly 1/4 of the world’s uranium reserves, Australian uranium stocks are sure to take off in the next 10 years. Of the many uranium miners in Australia, I believe only the biggest miners will land the most profitable contracts. Here’s a list of three Australian uranium mining companies to keep on the radar:
- BHP Billiton (BHP) - Owner’s of the world’s largest uranium deposit. This is my favorite of the uranium stock plays. Don’t forget that BHP landed the multi-billion dollar contract with China to supply them with uranium for their nuclear energy plants.
- Energy Resources of Australia Limited (ASX:ERA) - shares trade on the Australian stock exchange. Visit the ERA website for more information.
- Rio Tinto plc (RTP) - Rio recently appointed a CEO, so we should consider following this stock before buying in. Another good sign: retained earnings have doubled in Q2 2006 to $12 billion from $6 in Q2 2004. Well done, RTP.
My Uranium Stock Pick: BHP
My Overall Australian Stock Pick: I still like BHP because of their uranium contract with China. BHP shares are trading at 11 times earnings, maybe signaling a possible buy opportunity.
Uranium stocks won’t take off for a couple of years until the reality of depleting oil resources kicks in. If we hold uranium stocks before the rest of the market realizes their value, we’ll make some nice stock gains.
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For us to invest in BHP is similar to investing in Cameco just too big to expect a dramatic increase in the stock price. The smaller Aussie stocks would appeal to a wider range of speculators in our humble opinion.
You have greater potential for gains with the small caps, but the risk is a lot higher.
Uranium isn’t a scarce resource on our planet. It’s all over the place, which is why “leverage” won’t boost company profits like oil or natural gas shortages would.
So when investing in an abundant resource like Uranium, I’m very conservative, and rather go with strong, reliable companies rather than smaller start-ups.
Plus the contract with China guarantees profits for BHP. And who is bigger than China?
Just my 2 cents.
What small Aussie stocks are looking at?
ERA is the only pure uranium play of the three. BHP and RTP are two of the largest uranium producers but they are also intergrated basic material producers. What about SXR which just signed a contract with china. Paladin is another Australian company however their newest mine is in Africa.
Thanks
Scarethebear
Bruce Brocker
The Australian company that seems the closest to making money from uranium sales (yellow cake) is Paladin Resources. It trades on the US market as PALAF and on the Toronto Exchange as PDN. They have working mines in Africa using the in situ leaching method (injection of water into well bores on one side of uranium deposits and recovery from well bores on the opposite side). They also have mines of advanced preparation in Australia. They have been acquiring smaller uranium companies to expand their holdings and yet could get gobbled up by a bigger fish such as BHP or RIO.
I am searching for an Australian gold miner that gets uranium as a byproduct. Any guesses who this may be?
IGL on the TSX venture (IGL.V) is a very interesting uranium junior with great potential