The selling in uranium mining stocks has been nothing short of relentless. Solid, credible and reasonably well financed companies with 43-101 compliant resource estimates have been sold down to a fraction of the values that they commanded last week. Some have lost over 60% of their market capitalization. Let's review the facts then discuss possible action to avoid dangerous emotional behavior.
The world's current demand for uranium is not being met by production. According to Wikipedia the world currently demands 66,500 tonnes from total annual production of 55,500 tonnes. The Russian Megaton to Megawatts program and sovereign state surpluses have made up the difference. The Russian program ends in 2013.
As previously mentioned on this site the Chinese government will open the first 50 reactors in their directive to achieve the goal of 20% non-carbon generated power. This is only the beginning. Unburdened by elections these plans remain intact.
Although China is a resource rich land, they possess a trivial amount of uranium and rely on external sources to meet their supply needs. The spot price of uranium has fallen 10% to $60/lb since our last post on the issue.
We do not want to trivialize the current Japanese condition when pointing out that the 50 year old reactor's backup cooling system failed after being struck by a 9.0 magnitude earthquake and a direct hit from one of the largest tsunamis to ever make landfall. After these two events I am shocked the buildings survived long enough to have time to overheat. This is truly an unfortunate event but this will not stop the expansion of nuclear power as the only solution to the world's energy needs. Any nation that resists this solution will enjoy dirty carbon based energy purchased at twice the price of their competitors in a country with a developed nuclear grid.
Here is some satellite imagery of the Fukushima reactor complex courtesy of Digital Globe:
So, what do you do about your uranium portfolio? Easy, these stocks are on sale. Look to add to your holdings slowly. They could go lower. If we see body bags on television they will fall more. Some well managed assets are already trading down to $20million market cap levels and any lower becomes laughable as someone that needs supply will take out the entire share float. Any guesses on who that might be?
These stocks will have a snap back rally and then re-test the lows so there is really no rush. Try to leg into the additional purchases of solid companies realizing that it might take time for fair value to return.