Uranium prices have jumped from around $40 U.S. a pound in March 2010 to a recent high of around $58.50. That’s still well below uranium’s peak of $140 a pound in 2007. But conditions look favourable for higher long-term uranium demand.
(In a Stock Pickers Digest [1] hotline, we updated our buy/sell/hold advice on a Canadian uranium explorer whose shares have jumped since early October — and it could go higher. See below for further details on this uranium stock’s prospects.)
China and many other emerging countries, such as India and Russia, are increasing their nuclear-power use as they switch from power plants that run on coal and oil. This expansion has sharply pushed up China’s uranium imports to as much as three times last year’s levels. In addition, China recently increased its nuclear-power targets by 60% over the next decade.
Rising uranium demand is pushing up the share price of CanAlaska Uranium [2] (symbol CVV on Toronto), one of the aggressive Canadian uranium stocks we cover in our Stock Pickers Digest [1] newsletter.
Joint ventures with stable partners help fund this uranium stock’s exploration program
CanAlaska and its joint-venture partners continue to explore on the uranium stock’s twenty 100%-owned uranium properties in Saskatchewan’s Athabasca Basin region.
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The uranium stock’s partners include Japan’s giant Mitsubishi Corp., Chinese mining firm East Resources Inc. and a consortium of Korean companies that consists of Hanwha Corporation, Korea Electric Power, Korea Resources and SK Energy. CanAlaska holds cash of $11.3 million.
The company owns a large amount of land that contains lots of drilling prospects. Moreover, it has workers with exploration and mine-building expertise, specifically in the Athabasca Basin. It has budgeted for a $15-million exploration program this year, which will be largely financed by its joint-venture partners.
Share consolidation had little impact on CanAlaska
On November 8, CanAlaska began trading on a consolidated basis. The company consolidated its shares on a 1-for-10 basis. That lowered the uranium stock’s shares outstanding from about 171.9 million to 17.2 million.
Consolidations, or reverse stock splits, sometimes hurt investor confidence. They can undermine the value of a given holding by as much as 25%, at least temporarily, even though there is no change in the company’s business or assets. Other times, however, they have little, if any, effect.
In CanAlaska’s case, the consolidation has had little effect. That’s mainly because, as we mentioned, the shares have risen along with uranium prices.
If you buy aggressive stocks, you really should have a subscription to Stock Pickers Digest [1]. The latest issue gives you our full analysis, including clear buy/sell/hold advice, on CanAlaska and 18 other stocks that may be suitable for the part of your portfolio you devote to aggressive investing. What’s more, you can get this issue free. Click here to learn how [3].