Hi Lou

Always enjoy your perceptive analyses.Could you please comment on Bayswater Uranium. It is one of the few Jr uranium companies with good liquidity but I have a lot of trouble trying to figure its technical patterns.

Thanks,

John

Hi John,

Click to Zoom

Bayswater Uranium Corporation ( BAY TSXV) has just concluded a formal agreement to buy the Reno Creek Uranium Project in Wyoming and will have to raise $50M to get the deposit into production by 2015. The company also has many other advanced stage and exploration stage uranium projects in Canada where it controls 5.5 million acres in known uranium basins.

The question is whether BAY can manage all this activity efficiently and if investors can wrangle some gains out of the stock?

The three year chart provides a good view of the aggressive decline of the stock starting in 2007 as the bloom came off the uranium sector. The stock found a bottom in late 2008 at $0.05 and had a run but the uptrend looks to be broken at this point.

The three month chart gives us another perspective on the trading action of BAY. The stock is holding on to support at $0.11 but is trading below its 50 and 200 day moving averages which has to be seen as a warning flag.

Click to Zoom

The spike in October that took BAY to $0.20 was prompted by drill results from their Kilgore joint venture with Otis Gold Corp. ( OOO TSXV) in Idaho. Otis can earn a 75% interest in the gold deposit as a result of their activities on the property.

The spike drove volume into BAY skewing the view of liquidity. The average daily volume over the last 3 months is 809,000. Yesterday it traded 166,600 shares which represents approximately $18,326 in value. It suggests that the stock is not as liquid as it might appear.

The next big hurdle for Bayswater will be raising the $50M it needs to get the Reno Creek Project into production by 2015. The company will have to restructure at that point and consolidation of the stock is on the table.

Given the low value of trading and the pending financing and consolidation I think that you would be best served to confirm the financing is in place before chasing this stock.

Happy Capitalism!

Good Morning Lou,

Would you be so kind to give us your thoughts on the future on nuclear expansion in Asia and in particular with Uranium One who seem to be teaming up with important government partnerships through Japan and Russia. Seems to me they all want a piece of Uranium One to gain on market exposure through increasing future demand for uranium in Asia .Also if you can comment on the technicals for uranium one’s current pennant formation.

Thank you

Massimo

Hi Massimo,

The world demand for uranium is expanding with Asia expanding its atomic power capacity. There are currently 44 new power plants under construction  worldwide. All of them are being built in  China, Russia, India and Japan which answers part of your question about the demand for yellow cake.

In June of 2009 Uranium One announced the acquisition of a 50% interest in the Karatua Mine in Kazakhstan. The deal would see Russian interests own 16.6% of UUU and Japanese interests own 16.6% of the company. The Karatua deal will give UUU interest in a fourth property in Kazakhstan which produces 19.5% of the world’s primary supply of uranium. The company is also actively advancing projects in Australia which produces 19.3% of global supply and in Canada which produces 20.6% .

The three year chart shows that the long decline that started in 2007 was reversed and now the uptrend that started in October of 2008 has met resistance at $4.00.

Support comes in at $2.00 if it continues to retreat from these levels.

The three month chart also indicates that UUU could not breakthrough resistance on the 50 day moving average after the sharp rise in June. What is noticeable since the June advance is that volume has trailed off considerably. 

There is a pennant formation on the chart which can indicate a continuation of the uptrend but it needs a rise in volume to confirm the opportunity. Resistance is now at $2.75 with support at $2.50.

Uranium One has a great fundamental story with increasing production and strong partnerships which positions the company for a promising future. But remember that we are in a trading market so you have to take profits when available and cut losses when evident.

Happy Capitalism!

I sold Paladin Energy up around $4.65 and thought it would go back to $3.80

It has done this. Should I be trying to buy it back here ?

I appreciate your thoughts.

Steve

Hi Steve,

Paladin Energy ( PDN TSX) has been advancing a number of uranium projects and doing a good job at it in a very challenging environment for the mining industry in general. The Langer Heinrich mine in Namibia which completed its Phase I construction in January of 2007 and just got board approval for Phase III expansion on June 30, 2009 is doing the heavy lifting.

The Kayelekera mine in Malawi is expected t o come into full production in January 2010. The company is sitting on about $140M in cash. From a fundamental basis you have to like the story of a management team that has been advancing its projects to completion. But we don’t own stories we own stocks and they trade and the question is buy, sell, or hold.

The chart is showing a nice recovery from the lows but some resistance at $4.80 which has the stock pulling back. I would have liked it to hold onto support  on its 50 day moving average but it hasn’t.

The next level of support is at $3.80 which is where you bought in before. In Wednesday’s session you can see from the candle stick that buying came in below that level to keep it from breaching support.

Despite the buying that salvaged  support at $3.80 I’m not sure I like the signals generated by the RSI or the MACD .The fact that the uptrend line has been broken and that we have been getting lower highs and lower lows since June suggest that an entry point at previous support might be in question.

If it doesn’t hold $3.80 there isn’t much support till $3.00 so if you decide to try and catch a bounce off of $3.80 be aware of downside and the other signals on the chart. For my money I would say that the support at $3.80 is good not great and given that you have booked a profit on the last trade you might want to play a bit of defence.

Happy Capitalism!

FIS stopped running in the spring

Hello Mr. Lou,

My good friend Gurpreet told me that you are the man with all of the answers. Recently I heard about yet another uranium explorer in the Athabasca basin called Fission Energy – FIS. What do you know about them and their management?

Thank you very much Mr. Lou,

Kamal

Hi Kamal,

Give my regards to Gurpreet and tell him thanks for the endorsement. I may not have all the answers but I do know this, the time to buy a stock is when it’s going up and Fission Energy Corp, FIS TSXV, stopped running in the spring.

FIS 3 Year

You are correct they have a good land base in Saskatchewan and their management seem seasoned enough but the stock is making new lows on a steady basis.

It got a bit of a lift on the Cameco news that they had more flooding to deal with at Cigar Lake putting the world supply of uranium in doubt once again. But it didn’t turn the stock out of the downtrend.

Uranium stocks had a great run but have run out of gas so it would be wise to watch FIS if you like their land base and drilling results. But wait for the turn; remember the best time to buy a stock is when it’s going up!

Happy Capitalism!