Investors Chasing Uranium Mining Stocks, Again:
A Favorite Emerges
James Finch

Fifty years ago, uranium fever hit Wall Street. It was then
just a few years after a Navajo shepherd in New Mexico, by the
name of Paddy Martinez, discovered "yellow rocks" on his
property, mistaking them at first for gold. An avalanche of
1950s dollars (more valuable than the ones we have today)
poured into mutual funds and uranium mining stocks, sending
their values to astronomical levels. Get ready for déjà vu all
over again, as Yogi Berra once said. Trend spotter, James
Dines, editor of The Dines Letter, believes uranium mining
stocks could become just as hot, or hotter, than the Internet
stocks of the 1990s. (Editor's note: StockInterview.com
interviewed James Dines on July 20, 2004, when he forecast a
"buying panic in uranium." Since then, spot uranium (U3 08)
prices have nearly doubled. Over the past 35 years, Dines has
successfully predicted mega trends in gold, internet, palladium
and uranium price movements). And now investors are chasing
uranium mining stocks again.

A look at industry leader, Cameco (NYSE: CCJ), which money
manager Robert Mitchell called the "Saudi Arabia of uranium,"
shows a three-year gain of more than 700 percent. Over the past
few years, Australian-traded Paladin Resources, skyrocketed from
under a dime to over $2/share (A$). A recent Forbes magazine
cover story, entitled Going Nuclear, analyzed uranium's recent
price surge, "One reason the price of uranium should keep
escalating is that producers are only starting to ramp up to
meet the strong demand. Utilities globally need 180 million
pounds of uranium annually, but at this point a mere 108
million pounds are coming out of the ground."

Why the sudden jump? A Morgan Stanley institutional report,
published in December 2004, explained that through the 1990s,
uranium oxide prices stayed low because surplus uranium came
into the market from weapons decommissioning. That surplus
inventory worked its way through the market. The Morgan Stanley
analyst forecast a "deep supply-side shortage" of uranium,
citing that new mining production hasn't yet come online to
remedy the deficit. In the year-ago forecast, the uranium
deficit was expected to grow to nearly 20 million pounds this
year (from a surplus of 6 million pounds in 2003), and then
leap to a peak deficit of more than 35 million pounds in 2006.
Deficits in excess of 30 million pounds were also anticipated
for 2007 and 2008. According to the Morgan Stanley analyst,
$50/pound may be possible in the spot price for uranium oxide,
known in the trade as "yellowcake."

Mining Newsletters Favor Strathmore Minerals

What's that mean for uranium stocks? Higher prices should be
anticipated as more investors, mutual funds and hedge funds
search out the best returns. While the lion's share of
investment dollars is likely to chase Cameco's price higher,
the robust percentage gains in that stock may have already
peaked. Generally, new money searches for well-capitalized
junior mining stocks with solid uranium projects in their
portfolio. One of those most frequently recommended among
mining newsletter writers is Strathmore Minerals Corp, trading
on the Toronto Venture Exchange (ticker symbol STM.V).
Prominent among Strathmore's projects are in-situ leach mining
operations proposed for Wyoming and New Mexico, plus an
aggressive exploration program in the world's richest uranium
areas, Saskatchewan's Athabasca Basin (home to uranium mining
giant, Cameco).

In September, letter writer Lawrence Roulston of Resource
Opportunities recommended Canadian-based Strathmore Minerals
(TSX-V: STM), writing, "The company is systematically adding
value to the projects most likely to be significant in the near
term, especially those with near-term production potential."
Also in September, Resource World contributing editor, Alf
Stewart, wrote, "The two deposits Strathmore is developing were
'cherry picked' from the inventory of Kerr McGee, largest
private explorer of uranium prior to that industry grinding to
a halt in the early 1980s. As these properties are largely
drilled off, Strathmore may be considered more of a uranium
development company than an explorer." This past June, money
manager Adrian Day recommended uranium stocks in his research
report, writing, "So I am focusing on four main areas in
uranium, with one or two buys in each… top exploration
companies that have the goods and are likely to bring
properties into production. Strathmore Minerals, with
technically strong management, lots of properties, and a strong
balance sheet, is arguably the best."

New Uranium Discovery in the Athabasca Basin?

Here's one of the stronger reasons why investors might
anticipate a strong rally in Strathmore's share price over the
coming twelve months: In a November 16th news release
(http://biz.yahoo.com/bw/051116/20051116005591.html?.v=1),
Strathmore Minerals announced a discrete conductor, more than
30 miles long, after completing an airborne geophysical survey
on the company's Davy Lake property, in the north central
portion of the Athabasca Basin. According to the company's news
release, "The conductor's profile response indicates a deep and
in places, broad source."

Virtually all the significant unconformity uranium deposits
known in the Athabasca Basin are directly associated with fault
structures associated with graphitic conductors. Deposits such
as Key Lake, Cigar Lake and McArthur River were found by
drilling electromagnetic conductors located within magnetic
lows.

In an interview with Jody Dahrouge, of Edmonton-based Dahrouge
Geological Consulting Ltd, he told StockInterview.com, "Early
indications are that this conductor is similar with other known
uranium deposits, graphitic conductors with magnetic lows." On a
scale of one to ten, Dahrouge rated the Davy Lake conductor a
ten. "It is a long conductor, cut by structures, with deep
depth and associated by a late fault," explained Dahrouge. "It
is a high quality conductor that continues to depth, and it is
typical of those occurring that are associated with known
uranium deposits." Dahrouge described how the MegaTem II
airborne geophysical survey was able to pinpoint the conductor
as shallow as 600 meters and running deep to 1200 meters.
Dahrouge made comparisons to other uranium deposits in the
Athabasca Basin. "The Sue Deposit near McLean Lake is
associated with an electromagnetic conductor that is
approximately 2.6 kilometers long," he said. "Based on our work
at Waterbury Lake, we identified an 8 kilometers long conductor
associated with the Midwest Deposit(s). The 'P2' conductor at
McArthur River is approximately 13 kilometers long. This
feature was first identified in 1984, by a ground Deep EM
Survey. The Shea Creek deposits, located south of Cluff Lake,
are associated with an approximately 25 kilometers long
conductor, known as the Saskatoon Lake Conductor." Dahrouge
added, "These deposits are located at depths similar to what we
expect at Davy Lake."

What is probably most significant is Strathmore's gamble, by
exploring away from the eastern parts of the Athabasca Basin,
some 300 kilometers from the eastern Athabasca Basin, where the
major discoveries have been made. "It was virtually unexplored,"
Dahrouge said with excitement in his voice. "It's really virgin
ground." While there is ample evidence suggesting multiple
uranium deposits in the Athabasca Basin, other junior
exploration companies are looking at the shallow parts of the
eastern basin, which may not likely yield economic uranium ore.
One pundit acidly questioned some of the current exploration
activity in the Athabasca region, "Are they really re-flying
old ground that's already been flown a hundred times, or are
they just releasing old data to save money?" Dahrouge pointed
out that the uranium appears to be running deeper for many of
the newer discoveries, as he believes the Davy Lake property
might hold true for Strathmore Minerals in the north central
part of the Athabasca Basin.

Important features in many Athabascan uranium deposits are the
cross-cutting fault zones. Dahrouge confirmed the Davy Lake
conductor has cross-cutting fault zones with a sinistral
(left-sided) fault about halfway along its length. According to
Dahrouge, there is also a "conductor extension which crosses the
fault from west to east and 'flows' out into a small,
sub-circular magnetic low." As with many of the Athabascan
uranium deposits, which tend to be found between overlying
sedimentary units and underlying basement rocks, the Davy Lake
conductor fits the bill. Strathmore Mineral's president, David
Miller, told StockInterview.com, "the 50-plus kilometer
geophysical anomaly appears to indicate a basement conductor."
However, Mr. Miller tempered the exhilaration in the air, "A
geophysical anomaly does not make an ore body. These exciting
initial results will be followed up with infill geophysical
lines, followed by ground geophysics, followed by shallow
drilling, looking for alteration. When we have narrowed the
target to drill, we will pull in the big rigs and test the
conductor at the unconformity." Dahrouge remains excited about
the Davy Lake conductor, and said, "Clearly this represents an
excellent exploration target for unconformity type uranium
deposits.

What does all that mean? It could explain why Strathmore
Minerals might well be on the road to a world-class uranium
discovery as further exploration more clearly defines how
valuable those newly discovered conductors might become.
Meanwhile, Strathmore's New Mexico and Wyoming properties
(amounting to potentially several million pounds of uranium
resource) are in the preparatory phase of the permitting
process. As the spot uranium price inches forward to the widely
accepted short-term target above $40/pound, several of
Strathmore Mineral's properties may become instantly more
valuable to a utility company who will someday need the
company's uranium oxide to fuel their nuclear reactor.


About The Author: James Finch regularly contributes to
StockInterview.com, which is found at
http://www.stockinterview.com. Mr. Finch holds no equity
positions in any of the stocks featured in his articles.