Wednesday, March 2, 2011
Longtime Growth Stock Wire readers began following the uranium bull market early. We trade it with the Uranium Participation (a uranium hoarder). As you can see in the chart below, the bull market is ripping right along.
And it's still one of the best places to make huge gains this year.
You see, as this bull market gains momentum, we'll see mergers in the best areas. Companies in the right geographic locales, with quality assets, could soar several hundred percent from a strong takeover offer.
The key to this is knowing where the best uranium deposits can be found. Last week, I discussed Canada's Athabasca Basin. Today, we're going to talk about the 8,000-square-mile Macusani district of southern Peru.
Peru is best known for its copper and gold mines. It's never produced uranium, but that's likely to change soon.
Peru has a central, state-run nuclear research facility: Instituto Peruano de Energia Nuclear (IPEN). IPEN promotes Peru as a great place to mine uranium... with cause.
According to the Nuclear Energy Agency's 2009 Red Book (the uranium bible), the Macusani district holds 3.9 million pounds of discovered uranium resources and another 43.4 million pounds waiting for the drill bit. And it's likely the Red Book's estimate will be woefully low. (One junior uranium explorer already claims 16.6 million pounds of resources.)
That uranium occurs thanks to a lucky combination of environmental factors. The Macusani plateau is built up of volcanic rocks. The volcanoes brought tiny amounts of uranium to the surface in lava. Over time, rainwater flowing through the rocks absorbed the uranium and concentrated it in ancient lakebeds.
Those lakes are long gone now, but the uranium in those ancient lakes is mineable. While it's much lower grade than the uranium ore we see in Athabasca, it's far easier (i.e. cheaper) to mine and produce.
Major uranium miner Cameco partnered with tiny Vena Resources to explore the region. Mining giant Rio Tinto is also in the area. However, those two companies' Peruvian assets are a rounding error on their businesses. For a pure play, you must own a junior.
There is a small group of high-risk junior miners working down here. These are worth speculating on... but only by experienced investors. The potential upside is hundreds of percent. But the downside is steep.
You have both company risk (because these are tiny companies) and political risk (because no companies in Peru have produced uranium before). However, as we discussed in Athabasca, some of these juniors hold the key to triple-digit gains in the next year or so.
Here's a short list...
Some consolidation has already occurred in the area. Homeland Uranium acquired Solex Resources a year ago. Then in December 2010, Southern Andes acquired Homeland. It wouldn't surprise me to see more mergers this year.
Uranium has been in a roaring bull market since last summer... with no end in sight. "In this kind of environment," Matt says, "we often see mining companies start to buy each other out. Companies with quality assets can hand their shareholders 100%-200% practically overnight." Matt shows us where to find such quality assets here: Put These Tiny Mining Stocks on Your Watch List Today.
Catch up on more of Matt's best uranium ideas here: