BALTIMORE, MD — Uranium stocks are looking hotter than ever and are poised for a new speculative burst as demand is set to outstrip production.

The spot price for uranium is now trading at a two-decade high of $72 per pound. Current spot prices, which are up nearly 800% over the past ten years, have nearly doubled from $36.25 a pound last January as hedge funds and other financial investors have snapped up the commodity in anticipation of supply shortages amid increasing demand from energy producers.

Worries over future supplies are growing among the investment community as 251 new nuclear reactors either being built or planned compared with the 442 in production.

In fact, from what we hear, it will take 20 to 30 years to ease the uranium supply/demand pressure because there are simply not enough new mines or production.

For the past two weeks, uranium prices have remained flat. But on the week of December 25^th, uranium gained $6.50 a pound, the biggest weekly gain in over 20 years. This gain came after reports of an auction, on behalf of U.S. uranium producer Mestena Uranium, of some 260,000 pounds of U3O8 that over $70 a pound for the radioactive metal.

Dustin Garrow, president of ZB Marketing, facilitated the auction that led to the record price. "I think the next deal we'll see $75 a pound," Mr. Garrow said an interview. He declined to identify the buyer, but said it was made by a "non-utility, non-uranium producer." He has conducted eleven auctions this year for Mestena, selling roughly one million pounds of uranium.

Meanwhile, the widely-respected Australian based research organization Resource Capital Research, which specializes primarily in the uranium sector among other minerals resources, has predicted spot uranium oxide prices rising to $115 a pound during 2007.

According to RCR's latest quarterly review of the market, analyst John Wilson states:

Forward indicators suggest the uranium price is heading to $90/lb by mid 2007, an increase of 37% from the current spot price [of $65 an ounce when the report was written]; and $115/lb by September 2008, an increase of 75% over the current spot price. These price levels are revised up from our September uranium quarterly which indicated a uranium price of $60/lb (+ 50%) May 2007 and $88/lb (+31%) by late 2008. The upward revisions are largely driven by the expected impact to the uranium market of delays at the Cigar Lake project in Canada.

RCR's predictions would be great for our uranium stocks, but we think they're just a bit overzealous. While a break over the $100 in 2007 is possible, I believe prices won't be able reach those levels until at least early 2008.

Either way, the outlook for uranium is the same: BULLISH!!

Fact is, I'm on the record saying that if prices keep increasing like they have over the past 12 months, I expect uranium to top $125 a pound by 2010.

You read that right . . . Uranium prices could almost double in a few short years.

So how can you leverage higher uranium prices?

Well, you can't buy futures on the metal. But you can invest in the companies that explore for and produce the uranium. Personally, I like the upside of mid- to small-cap explorers right now . . . Especially those trading on the TSX Venture Exchange.

I recommend looking for junior mining firms with savvy management, a proven track record and a decent land package in a geopolitically safe country. These firms should also have mid- to advanced-stage properties. Historic production and drill results are always a plus. I expect firms like these do to very well over the next 3 to 5 years.

Until next time,

Luke Burgess
GoldWorld.com

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