Uranium On The Cranium – Expert Alex Molyneux In The Hot Seat

TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

There seems to be a lot going on in the uranium sector in terms of consolidation activity and market-related news so I invited Alex Molyneux, Founder of Azarga Resources and Chairman of Azarga Uranium Corp. (AZZ.TO) / (PWURF) (market cap ~ C$ 22 million) to answer a few pressing questions. Alex is based in Asia and formed his own minerals investment group to take advantage of regional themes regarding minerals. Uranium has been his core focus due to his views that China will be heavily reliant on nuclear power to deliver clean reliable energy.

The interview was conducted 5-9th of July via email and Skype. The interviewer, Peter Epstein, CFA, MBA of EpsteinResearch.com. Has no prior or existing relationship with any of Mr. Molyneux or his business interests. Mr. Epstein does not own any of the stocks mentioned herein.

Q: Before we get onto the topic of consolidation, I have to ask, is it me or has there been a big divergence in uranium equities and the uranium price?

AM: It’s not you Peter. There has been a bizarre disconnect happening in the market. The uranium spot price has actually been a bright spot for global commodities, up around 30% from where it was 12 months ago. However, uranium-related equities have gone the other way. In looking at the Global X Uranium ETF (URA), an ETF made up of 20 uranium company stocks. URA is down roughly 35% over the same period and in fact is now at an all-time low since its inception in 2010.

Q: What’s driving the ‘bizarre disconnect’ as you call it?

AM: In one or two cases there are company-specific cases. For example, Energy Resources of Australia (ERA.AU) was one of the top five largest publicly listed uranium companies. They lost two-thirds of their market cap when they announced they had shelved the Ranger 3 Deeps project, which means the company effectively exits uranium production in the next couple of years when it’s through the material it’s processing from its older mine. However, there certainly has been a broad decline in uranium equities and we can say it became a rather precipitous drop in the last two months. I think the key here is a macro trade. As many major commodities are faltering with lower prices (iron ore, base metals, precious metals, coal and oil), investors are dumping everything in the minerals and energy space. Uranium equities are caught up in that storm. We speak to fund investors all the time and we know this is the case for certain names. It’s a classic, “sell what you can, not what you should.”

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I, Peter Epstein, CFA, MBA have no prior or existing relationship with any company listed herein. Readers and investors should take care to conduct ...

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