Uranium has had a blistering run in recent years, but the metal still looks worth a punt.
Five years ago its concentrated form, uranium oxide, changed hands at $6.70 a pound. Now it's up to $45.
That's a steep increase, but there are plenty of reasons to expect it to rise higher.
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Uranium's chief use is as a fuel for nuclear power stations, and China alone may build 30 plants by 2020, says Nils Pratley in The Guardian. Other countries are also turning back to nuclear, including the UK, while France and South Korea have never lost their enthusiasm.
This means that the supply outlook is tight, which has pushed up prices. Uranium producers are aggressively trying to increase production in response, and the industry could raise output from two to three million pounds to 20 million within five years, says Jon Indall of the Uranium Producers of America on Stockinterview.com.
But this is unlikely to be enough to avert the looming supply shortage. Commodities berbull Jim Rogers expects that it will take more than a decade to bring a big new uranium mine onstream. Meanwhile the supply-demand situation will get tighter. One major source of supply, uranium from decommissioned Cold War weapons, is nearly exhausted.
For investors, the problem with uranium is that it's hard to invest directly in the metal it's not traded freely like most metals and, for obvious reasons, you need a licence to take delivery.
One forthcoming entrant to Aim, Nufcor Uranium (NU), aims to get around this by raising £67m to buy its own uranium stash. MoneyWeek is unconvinced about the idea as a rule, we don't like cash shells. It's a similar story with new listing Geiger Counter (GCL), which plans to invest in uranium explorers and producers good idea, but let's see what it buys first.
So where can uranium bulls put their money? As Asia will be "the core of the global renaissance" in nuclear power, Credit Agricole suggests Australian explorers and producers, such as Paladin Resources (PDN). That looks sensible, but MoneyWeek's favourite play remains Cameco (TSX:CCO), which supplies a fifth of the world's uranium.
by Graham Buck
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