One Sector Where Mergers Could Make You Rich. By Dr. Russell McDougal
Investor’s Daily Edge
July 11, 2007
Extreme profits in the uranium sector have been made by investors over the past five years. While it’s clear that the really easy money has already been booked, you still have an opportunity for mega-profits by selectively positioning yourself.
Uranium prices have gone parabolic – moving from $7 in 2000 to $138 currently! That typically means extreme caution is advised, but recent corporate activities strongly illustrate the games are still very much in process. The uranium phenomenon will continue to play out over the coming decade.
The planets have all aligned themselves perfectly to bring us to the current scenario:
An historic bear market in uranium severely destroyed the infrastructure needed to explore and mine uranium.
Aboveground supplies were massive and massively dumped upon the market for decades.
Sooner or later, uranium will be universally seen as the “green” solution to global energy crunches. Demand is and will remain enormous.
The time factor says this fire won’t be put out any time soon. Supply remains severely constrained.
The parabolic move, as wild as it looks, really puts very few uranium explorers or miners in any degree of jeopardy from frothy prices. Why? Prices don’t need to be nearly this high to successfully explore for or mine uranium. There is a gigantic premium in the spot price. Some companies can make extraordinary profits with uranium priced as low as $30 per pound.
Please pay close attention to the following recent significant activities in the uranium world:
Bayswater Uranium is taking over Kilgore Minerals to create a much larger uranium entity.
Mega Uranium and Titan Uranium have combined their extensive and promising North American assets to create a behemoth uranium company.
Energy Metals Corporation was just bought by SXR Uranium One for $1.6 billion. Energy Metals traded at $2 within the last two years and was bought out at $19.
Denison Mines Corp. recently offered $1.30 per share to buy out Omega Corp. Ltd., an African uranium explorer.
Australian explorers Oxiana Ltd. and Minotaur Exploration just merged their uranium exploration properties into a new company called Toro Energy Ltd.
French company Areva just made a buyout offer to Uramin Inc. valued at $2.5 billion. France is looking for long-term uranium supplies.
What’s it all mean? Why so many uranium conglomerations all of a sudden? Why is bigger supposedly better?
These are key questions. In the world of natural resources, itty-bitty companies are not on the radar screen of the larger players in the aquarium, the “sharks” if you will. They are simply too small for the large amounts of capital controlled by the funds and huge Canadian brokerage accounts to heavily involve themselves. You and I can buy the Canadian companies with tiny market caps (below $20 million), but the sharks have zero chance to do so in sufficient quantity. What an incredible opportunity for us!
These mergers and acquisitions in the uranium sphere are designed to grow companies to the size that institutions and funds will notice. It’s the “bigger is better” philosophy. That is the exact description of the current state of uranium exploration, development, and production companies.
While this spectacle is gratifying, especially if you own a few of the participants, the eventual ramifications of this activity are even more promising. With the long-term uranium bull market fully entrenched, the sharks now being created will soon be on steroids and Pac-Man will be their favorite pastime.
Me? I’m heading way down the food chain for ideal positioning among the plankton that serve as the absolute foundation of this entire ecosystem. Naturally, we’re talking about grassroots exploration – without which your lights will go out sooner or later. Uranium is exceedingly efficient at producing energy, but the pounds in the ground still must find the light of day.
The most efficient uranium explorers are the talented geologists within tiny and aggressive Canadian companies. They couldn’t care less about the current corporate merger and acquisition rage. They simply focus on finding economic assets. When two large companies combine assets, only a corporate activity has transpired. No new uranium pounds are created. Sooner or later all the biggest fish will starve … unless they become sushi enthusiasts.
Yes, uranium prices have performed parabolically during the past few years. Still, many of the smallest exploration companies show next to no price correlation with the uranium chart. The ultimate leverage lies with those who position accordingly in these small explorers.
Dr. Russell McDougal has been an active investor for 25 years, holding everything from stocks, bonds and mutual funds, to options, futures, currencies, limited partnerships, private placements and rare coins. Since 1993, Dr. McDougal has focused almost exclusively on gold, silver and resource investing. He has a particular affinity for silver and has studied virtually everything available on the topic since 1994. Today, Dr. McDougal’s personal portfolio is a virtual mutual fund of natural resource exploration and development companies.Over the years, he has developed an excellent understanding of the risk and reward elements involved and has discovered exactly what it takes to become ultra-successful in this speculators’ paradise. For more information visit Investor's Daily Edge (www.investorsdailyedge.com).
Uranium prices have gone parabolic – moving from $7 in 2000 to $138 currently! That typically means extreme caution is advised, but recent corporate activities strongly illustrate the games are still very much in process. The uranium phenomenon will continue to play out over the coming decade.
The planets have all aligned themselves perfectly to bring us to the current scenario:
An historic bear market in uranium severely destroyed the infrastructure needed to explore and mine uranium.
Aboveground supplies were massive and massively dumped upon the market for decades.
Sooner or later, uranium will be universally seen as the “green” solution to global energy crunches. Demand is and will remain enormous.
The time factor says this fire won’t be put out any time soon. Supply remains severely constrained.
The parabolic move, as wild as it looks, really puts very few uranium explorers or miners in any degree of jeopardy from frothy prices. Why? Prices don’t need to be nearly this high to successfully explore for or mine uranium. There is a gigantic premium in the spot price. Some companies can make extraordinary profits with uranium priced as low as $30 per pound.
Please pay close attention to the following recent significant activities in the uranium world:
Bayswater Uranium is taking over Kilgore Minerals to create a much larger uranium entity.
Mega Uranium and Titan Uranium have combined their extensive and promising North American assets to create a behemoth uranium company.
Energy Metals Corporation was just bought by SXR Uranium One for $1.6 billion. Energy Metals traded at $2 within the last two years and was bought out at $19.
Denison Mines Corp. recently offered $1.30 per share to buy out Omega Corp. Ltd., an African uranium explorer.
Australian explorers Oxiana Ltd. and Minotaur Exploration just merged their uranium exploration properties into a new company called Toro Energy Ltd.
French company Areva just made a buyout offer to Uramin Inc. valued at $2.5 billion. France is looking for long-term uranium supplies.
What’s it all mean? Why so many uranium conglomerations all of a sudden? Why is bigger supposedly better?
These are key questions. In the world of natural resources, itty-bitty companies are not on the radar screen of the larger players in the aquarium, the “sharks” if you will. They are simply too small for the large amounts of capital controlled by the funds and huge Canadian brokerage accounts to heavily involve themselves. You and I can buy the Canadian companies with tiny market caps (below $20 million), but the sharks have zero chance to do so in sufficient quantity. What an incredible opportunity for us!
These mergers and acquisitions in the uranium sphere are designed to grow companies to the size that institutions and funds will notice. It’s the “bigger is better” philosophy. That is the exact description of the current state of uranium exploration, development, and production companies.
While this spectacle is gratifying, especially if you own a few of the participants, the eventual ramifications of this activity are even more promising. With the long-term uranium bull market fully entrenched, the sharks now being created will soon be on steroids and Pac-Man will be their favorite pastime.
Me? I’m heading way down the food chain for ideal positioning among the plankton that serve as the absolute foundation of this entire ecosystem. Naturally, we’re talking about grassroots exploration – without which your lights will go out sooner or later. Uranium is exceedingly efficient at producing energy, but the pounds in the ground still must find the light of day.
The most efficient uranium explorers are the talented geologists within tiny and aggressive Canadian companies. They couldn’t care less about the current corporate merger and acquisition rage. They simply focus on finding economic assets. When two large companies combine assets, only a corporate activity has transpired. No new uranium pounds are created. Sooner or later all the biggest fish will starve … unless they become sushi enthusiasts.
Yes, uranium prices have performed parabolically during the past few years. Still, many of the smallest exploration companies show next to no price correlation with the uranium chart. The ultimate leverage lies with those who position accordingly in these small explorers.
Dr. Russell McDougal has been an active investor for 25 years, holding everything from stocks, bonds and mutual funds, to options, futures, currencies, limited partnerships, private placements and rare coins. Since 1993, Dr. McDougal has focused almost exclusively on gold, silver and resource investing. He has a particular affinity for silver and has studied virtually everything available on the topic since 1994. Today, Dr. McDougal’s personal portfolio is a virtual mutual fund of natural resource exploration and development companies.Over the years, he has developed an excellent understanding of the risk and reward elements involved and has discovered exactly what it takes to become ultra-successful in this speculators’ paradise. For more information visit Investor's Daily Edge (www.investorsdailyedge.com).
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