VIEWS: 6 PAGES: 3 CATEGORY: Financial Models POSTED ON: 1/22/2013
With all of the volatility in the commodity space, the uranium sector has seen prices decline for some time, but it appears the market might be near a bottom.
Encouraging Drill Results from this Uranium Junior Miner With all of the volatility in the commodity space, the uranium sector has seen prices decline for some time, but it appears the market might be near a bottom. Obviously, it is extremely difficult to predict the price of any commodity, including uranium, but what we can do is focus on mining stocks that show strong potential in terms of having good management and ample reserves. Of the uranium mining stocks out there, an interesting one is Denison Mines Corp. (NYSE/DNN, TSX/DML). This company explores for and extracts uranium, mainly in Canada. Unlike some of the smaller mining stocks, Denison also has some exploration properties in Mongolia and Zambia. The more exploration properties a firm has, the better the potential upside when looking at uranium mining stocks. The company has recently released its results from a drilling program on a property called the Wheeler River. From the results, the company has concluded that it has expanded several deposits, and the firm is encouraged by these drill results. The company did not release full estimated mineral resources at this time, stating that it will release that information later this year. The company drilled 58 holes on this property, for a total of 27,263 meters. The key to investing in uranium mining stocks is looking for companies with large upside potential in expanding their mineral reserves. Obviously, this uranium property is still in the early exploratory stages, and one must be cautious when investing any such mining stocks. Chart courtesy of www.StockCharts.com This uranium miner has had a volatile year. When looking at mining stocks in such an early phase, you will encounter extreme volatility. What has been interesting is that heavy volume has occurred on the days of buying and not selling. It’s strange to see such violent moves when a good trader could simply accumulate the same number of shares for much better price over a longer period of time. Why these events occur, as denoted by the circled areas, I’m not sure, but it’s certainly better than if heavy selling were taking place. One way to look at uranium mining stocks that are in an exploratory phase, when volume explodes as well as price, is to use that opportunity to book profits. The firm will come out with detailed information later this year in terms of estimates for reserves; at that point, expect a very high level of volatility. Overall, the area within which the firm is exploring for uranium has shown a history of containing high levels of the commodity. While no one can predict ahead of time what level of reserves mining stocks will issue, so far, the drill results are quite positive. I will surely keep my eye out on this uranium miner, and look forward to seeing more information regarding this property in the near future.
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