As market momentum builds, juniors edge into spotlight
Like celebrity gossip burying financial news under the fold, the most significant players in the uranium market are rarely the ones making headlines. And the current Bernankes to uranium’s Kardashians are, without a doubt, the juniors.
The 2012 global uranium discussion reached a fever pitch before the ball had finished dropping; combined with what could become an avalanche of lifted moratoriums, many are not only calling for the predicted bullish bounce of the uranium price but bracing for its impact. “[2012] will be a year of recovery,” Encompass Fund manager Marshall Berol told Bloomberg this morning, calling for a rally up to $75, “as people recognize that the nuclear energy industry is not going away, that it’s not fading into the sunset.”
But at the root of the horizon, the larger machinations of the market are even more significant for smaller companies. When the Nunatsiavut Government of Newfoundland and Labrador unanimously voted in December to end its moratorium on uranium mining activities, Paladin Energy’s Michelin project garnered the lion’s share of ledes. But the resulting bolstered market value for companies in the region could carry a far greater impact for juniors like sector sweetheart Crosshair Energy (NYSE Amex: CXZ, TSX: CXX), currently poised to increase the uranium and vanadium resource at its CMB project in Labrador. History has taught us that even the most perfect-on-paper exploration companies can be hampered by irritatingly persistent external influences—just ask any gold junior that’s unwittingly staked claims just before the dawn of massive political unrest. And when these hindering factors dissolve, it is the juniors that often see the most dramatic turn.
Beneath the surface of stock price, however, such rallies are not as sudden as they seem—and this is because, simply put, any uranium junior that has survived the past several years has done so by meticulously following exploration strategies that stand beyond reproach. There is no margin for error in a pre-recovery market. There has been little tolerance for overly bloated project portfolios, abandoned irons in the fire, or hollowly overambitious projections. And the result is a fitter, leaner junior sector, pre-sorted for strength and balanced carefully on the precipice of the coming recovery.
Kivalliq Energy Corporation (TSX-V: KIV), a junior currently developing Nunavut’s Lac Cinquante uranium deposit—one of the world’s highest-grade uranium deposits outside of Athabasca—is one example of this new breed. The company was given Speculative Buy recommendations by both Rob Chang of Versant Partners and David A. Talbot of Dundee Securities this week, spurred by results from a 2011 prospecting program that, as Talbot put it, “[confirmed] management’s approach—find new showings with effective prospecting, prudently drill these to define exploration, and then expand them further to size.” Kivalliq’s results demonstrated polymetallic potential, heightening the district scale potential of the property and outlining drill targets for 2012.
And while uranium’s more downtrodden years have been much-bemoaned, this is, in many ways, an ideal set of circumstances—companies that prove their worth before the market is there to reflect it, building foundations that will not only be there to support their own value in the subsequent rally, but that ultimately support the nuclear energy industry itself as well.
