With the current climate changes and alternatives for energy news that you hear of in the media now days, do not be surprised to see another surge in interest in Uranium stocks in the very near future. With that in mind I thought it would be a good idea to see what to look for when choosing an Uranium stock.
The Nine Tips Traders Should Know When Choosing an Uranium Stock.
1. One of the best indicators of a company’s potential success could be past ownership.
It’s best to try to buy any mining stock early in the cycle. Try to pick up properties that were worked by majors during the last bull market but which eventually dropped during the lows of the last bear market.
2.Do your research and find out the value of ore body with reference to its value per tonne, or its recoverable metal.
Avoid pure exploration plays unless the company’s management is excellent, they have a large prospective land package, and the company is well financed. Particularly look at their cash burn rate. For once the money runs out they have to do more capital raising to keep on going.
3. I like to.look for good proven management, which has been successful in the past.
If they are also on the board of other companies, what is their performance history there? I have found that if they are poor performers in one company then they are usually no better anywhere else either.
4. Be on the look out for substantial shareholders.
It is always very reassuring to see that the management has a large stake in the company.Also I will check to see if other successful fund managers have large holdings. Again it is reassuring to see that a major company in a related industry has also taken an interest in the company.
5. Take a look at the company’s infrastructure.
Research what the electricity and water costs required for exploration, development and production will be. Also find out about roads, rail, trucking, access and proximity to a mill. All these costs have to be factored in, particularly if the company is starting up from scratch.
6.Keep an eye open for hidden value in the company.
I always consider the value of existing infrastructure. From time to time I have been able to buy stocks where the existing facilities, perhaps a mill or shafts more than justify the entire market cap of the company. Past drilling for uranium will save money.
7. Buy emerging stocks.
It is great to find a company before it has any analyst coverage or has even covered by the media.
8. Find out if the property is in a pro-mining environment.
It’s best to have a property in a location where government is pro-mining. Some countries are so hungry for investment they will offer favorable tax rates and other incentives. Permitting can be costly and take a long time so this is very important. Also if the company is in Australia check to see in there are any Native title issues.
9. Study the capital costs for the project and the currency in the country where the company is located.
Typically, the lower the capital costs, the less risk in the project. The less a company risks, in time and money, to find out if the mine is economic, the greater its chance of success.
All of the above tips will give you an idea what to be on the look out for when choosing an uranium stock. Even if the company is well established and possibly producing it is still a good idea to know what you are getting into.
There are quite a few uranium exploration companies in Australia at present. The vast majority will not get to the mining stage, let alone finding it. Plus at the moment the goverment has only approved a few companies to export. So perhaps until the rules change you might be better of investing in established uranium mining stocks.
Chris Strudwick is a successful share trader on the Australian Stock Market Visit his weblogs at both http://www.asxnewbie.com AND http://www.aussie-retiree.com/ for more free articles and useful information about the stock market.
