I haven't been very bullish at all about the prospects for uranium
miners, as I believe investors have overestimated the near-term impact
of Japan's plans to restart its nuclear reactors and China's intentions
to add nuclear power. I'm not surprised, then, that uranium spot prices
have broken through $30/lb, nor that Paladin Energy (OTCPK:PALAY)(PDN.TO) shares have fallen another 15% or so since my last article.
Like Ur-Energy (NYSEMKT:URG),
I believe Paladin remains a very highly leveraged play on virtually any
good news in the uranium sector. Paladin is going to have to get
creative about its financing/liquidity options if spot prices don't
increase into the $50's/lb, but the company does at least have a quality
operating asset and good exploration assets if prices do recover. I do
think uranium prices should find a bottom fairly soon and that the risk
is to the upside, but investors considering Paladin Energy need to
appreciate that outsized exposure to uranium price appreciation comes
with outsized operating risk should prices stay below $50/lb
indefinitely.
Follow this link to the full article:
Paladin Energy Increasingly Leveraged To A Uranium Price Recovery
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