Saturday, March 19, 2011

The Disaster in Japan and Uranium Mergers & Acquisitions (KAH.L; GCL.L; NLR; URA: CCJ)

I included the Geiger Counter fund symbol for those stout of heart. We've been using URA as the proxy for uranium, NLR includes electricity producers with larger nuclear fleets such as Exelon.
From Bloomberg:

Japan’s worst crisis since World War II is making takeovers of uranium miners the most likely to fail, and that has enabled some traders to anticipate returns approaching 40 percent.

Kalahari Minerals Plc (KAH) traded 28 percent below the offer of 290 pence a share that China Guangdong Nuclear Power Group Co., the nation’s second-largest reactor builder, made last week, implying a 39 percent gain, according to data compiled by Bloomberg. Australia’s Mantra Resources Ltd. (MRU) fell 28 percent yesterday as Rosatom Corp., Russia’s state nuclear company, sought to renegotiate its bid after Japan’s biggest earthquake on record caused the worst nuclear accident since Chernobyl. Analysts still project uranium stocks will rise more than 80 percent on average in the coming year, the data show.

Radiation leaks from the damaged nuclear plant in Japan have prompted China, which is building more reactors than any other nation, to halt its atomic-power expansion plans and led to an almost 30 percent drop through yesterday in uranium producers since the magnitude-9 earthquake struck Japan on March 11. While the disaster has fed speculation investment in nuclear energy will decrease, shares of companies that produce uranium, used as fuel in reactors, have now fallen so far traders have a chance to lock in the biggest profits from betting on takeovers in the industry, data compiled by Bloomberg show.

‘Overcome the Headwinds’

“You’re offered fundamental upside if you believe the sell-off in the uranium stocks is overdone,” said Andrew Ross, partner and global equity trader at First New York Securities LLC, a New York-based proprietary trading firm that bets on stocks, commodities and derivatives. “The Chinese are taking a very long-term view of their energy needs and they have to incorporate some element of nuclear power into their plans. You just have to overcome the headwinds of the Japanese issues.”...MORE