Interesting reports on uranium
Comment of the Day

January 20 2012

Commentary by David Fuller

Interesting reports on uranium

My thanks to a subscriber for this interesting item.

David Fuller's view Technical evidence from uranium miners, which I last reviewed in Monday's item: "Stirrings in the uranium sector", indicates that they have bottomed in the proximity of their earlier base formations.

Understandably, the Fukushima problems halted talk of a "nuclear renaissance" and I feared that it could set back the sector by up to a decade. However, that view could also be too pessimistic given an energy-hungry world. A significant recovery in the uranium sector - sooner rather than later - will require, in my view, most of the following:

1) No further accidents with the aging nuclear reactors currently in use; 2) continued high prices for crude oil, although not so high that they induce another recession; 3) an anti-fracking backlash slowing development of shale oil and gas reserves outside of North America; 4) a recovering global economy; 5) a cyclical bull market which takes the S&P 500 Index back to its 2007 highs.

Of these points, 1) is the most important. Points 2), 4) and 5) are interconnected so either all three are likely to occur in the next few years, or none of them will. Technically, I assume that a significant portion of the recent rally in nuclear miners is due to short covering. For clear evidence that bargain hunting has now created a demand-dominated environment, I would like to see the shares retain at least half of their recovery gains during the next setback and consolidation.

One of the uranium mining investments in my personal long-term portfolio is the investment trust Geiger Counter (GCL LN) (weekly & daily) which currently sells at a discount to NAV of at least 23% (BBG says 27.82% but it does not seem to reflect this week's rally). In looking at GCL's top-five holdings, you will see that they are topped by Ausgold (weekly & daily).

I emailed GCL's investment manager, John Wong today to ask about this:

Dear Mr Wong,

I hold Geiger Counter in my personal SIPPS and also family ISA accounts - purchased, unfortunately, shortly before the Fukushima disaster.

Some of the Fullermoney subscribers also hold Geiger. Given the large position in Ausgold, including warrants, I am curious as to the direction you now seem to be taking with a portion of Geiger Counter's portfolio.

Your thoughts on this would be appreciated.

Yours faithfully,

I received this reply:

Dear Mr. Fuller,

Thank you for your enquiry.

We have the ability to invest up to 30 per cent of Geiger Counter's portfolio in non Uranium assets.

The Ausgold position is the result of a successful investment of GBP600k which has gone up some 12 times. Ausgold is the developer of a highly prospective Gold property close to Perth, Western Australia which may be Australia's largest gold discovery for 20 years.

The core of the portfolio is invested in Uranium shares and it has indeed been a most difficult time over the last 10 months. However, Uranium shares are currently enjoying a renaissance with the latest NAV being 71p and we anticipate a higher NAV when we announce again next week.

The fundamentals for Uranium prices remain very good, notwithstanding the negative sentiment.

We are hopeful that 2012 heralds a better time for Uranium shares and Geiger Counter shareholders.

Thank you for your support during a difficult time.

I hope this is helpful to you and your subscribers.

Kind regards

Adam Cooke

Some of our Australian friends may know if Ausgold is worth this interest.

I regard Geiger Counter as highly speculative but it appears to have bottomed and the discount to NAV should narrow further as junior miners recover. Uranium Energy (UEC US) (weekly & daily), GCL's second largest holding, appears to be completing a base formation.

Here is a further report on uranium, just received.

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