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Uranium mania: Yellowcake Fever |
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Page 1 of 11 I was recently reading a book on manias in the stock market. One chapter began with the opening line about a uranium mania and I honestly thought they were talking about today. Actually they were describing the mania that took place 30 years ago in the 1970’s, the last time uranium was overly popular. Today I was speaking with a uranium expert who told me that the average cost of production for uranium is around $30-40 a pound. The current price of uranium is well over $100/lb and we have seen over the past few years a mania in uranium equity prices as prices have risen from below $10. We have also had the advent of the Uranium participation shares and their impact on the market over the past few years but more is to come. On May 7th, Nynex is about to launch futures on the Uranium price due to demand from hedge funds in NY, it is my understanding, who want to hedge their uranium equity positions. However, Uranium as well as not being traded or delivered, is priced in a most peculiar way. It is done by a survey of interested parties who quote prices with little backup data required. Uranium is a very secretive business and has been so for many years. Nynex has never had a futures contract on a commodity priced in this manner and who knows what level of speculation/manipulation may occur. I hope that Nynex are looking carefully into this. "Otherwise, we could see $250/lb Uranium" said one participant. In my experience, commodity prices generally stay pretty close to the marginal cost of production in the long run but illiquidity can cause incredible price moves and overvaluation in the short run. Watch out for one wild ride over the next few months.
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