David Cates: Institutional Money is Pouring Into Uranium Stocks
David says there has been a huge amount of interest this week in Denison Mines, as the uranium spot price has moved upwards. They are seeing a much broader group of inquiring investors.
The recent 10% production cutback by KazAtomProm represents a fair percentage of the supply that normally enters the spot market. Instead of just sovereign interest, they may be changing their methods by looking at the market with a higher degree of sophistication, and in a more commercial way, They may be realizing that pounds in the ground are better than selling at current prices. If they get to a position where they can influence the market, like other large companies such as Cameco, this could be beneficial.
Mr. Cates thinks the recent gains are sustainable, he feels the market was oversold and was in total apathy. He expects that there will be some profit taking. Denison has seen a significant increase recently in volume and stock price, as real money is entering the space. While spot is higher, there exists very few mines that could begin production at this level.
Many companies need capital, and will be wanting to take advantage of the market optimism. More investors may be willing to take positions and hold them until significant gains are made. He wants to see more interest from utilities and their entry into the spot market in a meaningful way. There could be more production cutbacks as a result of contracts coming off and no longer being economical. This could help to get the market back on track.