Despite the run up in precious metal and base metal prices, one local research firm believes now may be the time to invest in uranium.
“After being out of favour for some time, recent positive industry developments have started to switch investor interest back into the sector. Uranium prices have increased 20% over the past few months,” Siddharth Rajeev, an analyst with Vancouver’s Fundamental Research Corp., wrote in a research note released Friday.
The report focused on another Vancouver-based company called Terra Ventures Inc. (TSX-V:TAS), which is focused on uranium exploration in northern Saskatchewan. Terra has a 10% stake in the Roughrider uranium project, which contains an indicated resource of 6.58 million pounds of uranium and an inferred resource of 5.47 million pounds.
Hathor Exploration Ltd. (TSX-V:HAT), which is also based in Vancouver, has control over the rest of the project.
Hathor has said Roughrider is its most advanced project, but will continue to drill throughout the winter to further define the ore body.
According to Fundamental, uranium prices have risen to US$48 per pound from US$40 over the last few months, pointing toward a positive long-term outlook for the commodity.
Even though the cost to extract uranium from the ground has increased, Fundamental believes increased demand for clean energy bodes well for the commodity because it is an essential component for nuclear power and has no substitute.
Fundamental also highlighted expectations that China would significantly increase its consumption of uranium.
“These growth estimates imply that uranium primary production has to significantly increase from current levels to keep up with demand in the long term,” the report said.
Still, Fundamental mentions that uranium prices might need to be at least US$58 per pound for today’s exploration and development projects to be viable.
As such, Fundamental rated Terra’s shares “highly speculative”.
At press time, Terra’s shares were valued at $0.25 while Hathor’s were $1.75.