Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Thursday, November 02, 2006

Uranium Price Target Raised

UBS is raising its price target on uranium.

From Bloomberg (not on the web yet): Uranium will rise to $71 a pound next year, compared with the previous forecast of $58, Zurich-based UBS said in an e-mailed statement dated Oct. 31. It also forecast the metal at $75 in 2008, from an earlier estimate of $60.

"We have upgraded our price forecasts for uranium given stronger-than-expected markets and supply issues,'' UBS, Europe'sbiggest bank by assets, said in the statement.

My view: Still not high enough. Cameco's disaster at Cigar Lake is looking worse.

Remember, Cigar Lake was supposed to start with production of 7 million pounds of uranium in 2008 and crank up to 18 million pounds of production at full-throttle.

The latest bad news from Cameco is that the company may downgrade reserves at Cigar Lake. Cameco said the flooding may prompt it to reclassify the mine's reserves to “probable” from “proven” because of uncertainty about the project's future. A London-based analyst quoted in Bloomberg said the flooding “could in theory be disastrous as the high-pressure water may affect the structural stability of the rock that the mine is constructed in, leading to further failures.”'

Right after the flood, Cameco was originally calling for the opening of Cigar Lake to be pushed back from 2008 to 2009. Now, some analysts I talk to say 2010 would be a quick turnaround, and it might be longer than that.

When I wrote about Cameco for an article in last week, I made the point that people shouldn’t buy Cameco because we just didn’t know how bad the damage at Cigar Lake was. You know what -- and I'll get hate mail for writing this -- the news could still get worse. Stay away!

As for the stocks recommended in my uranium report -- it's almost embarrassing how well they're doing. Luck and timing should get the credit, not me. But looking forward, I think these stocks will continue to be market leaders. Their big moves aren't over ... they're just beginning.

If you haven't read my uranium report, CLICK HERE to find out more about it.
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