Uranium and the Madness of the Crowds
This week my travels took me to Toronto and to the 75th Annual Prospector's & Developer's Conference. I have been to this event before in years gone by, but this year was different. All previous attendance records were blown right off the map with nearly 20,000 people in attendance this year. It was so frenetic that one had to almost joust and jostle his way along the aisles to get at the various display booths. So, why the big turnout this year? Uranium at $80 per pound. That's why. The average retail investor is absolutely "bonkers" over Uranium. And, why not? The spot price has nearly doubled in the past 14 months and looks set to keep on rising.
It was amusing to watch the madness of the crowd. As people fought their way along the walkways, they would give a cold shoulder to any trade show booth participant with a diamond exploration company. Gold, Silver and Platinum companies received a momentary glance of moderate approval. Copper exploration firms received only a quick look-over. But any company that was advertising Uranium exploration was almost mobbed. I stood by a few of these booths to listen to the conversation as it unfolded. The company representative would start to say a few words about what his company was up to, but people would cut him off in mid sentence and curtly demand any research reports or handout information that he had. They would then move on to the next booth advertising Uranium - like a hoard of ants at a picnic in search of morsels of food. All in all quite amusing. When I was leaving Toronto, I was standing in line at the airport to check my luggage and to receive my boarding pass. The gentleman in front of me was obviously with a Uranium exploration company, judging by the nature of the conversation he was conducting on his cell phone. No sooner had he concluded his call than people ahead of him in line began shouting at him. They had apparently overheard his cell phone conversation and were now demanding to know his ticker symbol and the nature of any recent drill results. I have never seen anything so manic in my life. But if the tech bubble of the late 1990's is any measure of performance, I say we have not yet seen the end of this mania. The madness of crowds can run harder, faster and longer than we all expect. Eventually though, the madness will subside with many retail investors getting hurt. But until I see evidence of that happening, I will be following a number of Uranium exploration stories with an eye to making trading profits. This week in my Commodity Supercycle Report for www.themarkettraders.com, I introduce readers to a few of these exploration companies. However, I also posit a caveat for readers. Just because a company is exploring for Uranium does not mean it will start building a mine next week. This is where the retail crowd has become dis-illusioned. I carefully explain in this week's letter what I look for in terms of drill results to satisfy myself that an exploration company is on the right track. One of the companies I have become quite impressed with is a small Canadian firm called Uranium City Resources (TSXV:UCR). This company has property right adjacent to where Uranium was actually being mined by the Canadian firm Eldorado Nuclear right up until 1982 when falling prices prompted a curtailment of activities. There is an old adage that says the best place to start a new mine is right beside an old one. In this case I think Uranium City Resources will lend credence to this adage.
I plan to follow the Uranium story as it unfolds and I will be looking next at firms that are active in places like Wyoming and New Mexico. Watch future editions of the Commodity Supercycle Report for write ups on these companies.