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The uranium boom that is sending the price of
related stocks through the roof should be viewed with utmost caution,
analysts warn. Keen investors in the boom should be prepared to lose money
on what are clearly speculative stocks, they say. Nevertheless, fortunes have and are being made in a
relatively short-time trading uranium stocks. But how long can soaring
share prices be sustained given the political hurdles surrounding the
nuclear resource also known as yellowcake?
Uranium stocks are
soaring on the back of a uranium price that has risen from about $US22 a
kilogram three years ago to almost $US45 today. Demand for the mineral has
exceeded mine supply, there have been barriers to production and uranium is
a growing alternative source of power -- not to mention the price keeping
pace with hype surrounding the material. The stand-out uranium investment on the Australian Stock
Exchange has been Paladin Resources, which has mines in Namibia, Africa,
and prospective projects in SA and WA. Paladin has 44,000 tonnes of uranium oxide at its Langer
Heinrich project in Namibia and it is expected to start producing within a
year, according to State One Stockbroking's mining analyst, Brendan
Fogarty. Mr Fogarty seriously
questions whether Paladin's commercial resource can justify its share price
rising from 5c on January 1, 2004, to $1.15 on March 10 last year and $3.66
on Friday. Simply, he says, a $2000 investment in Paladin when the stock
was worth 5c is now worth $146,400 -- a return of 7220 per cent. But what
favours Paladin over Australian-based explorers is having a mine approved
for commercial development in Africa, Mr Fogarty says.
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