Can Uranium Prices Come Down Temporarily? Sure Can!
In fact, I’m hoping we get a pullback. That would be a golden buying opportunity.

Here are a few factors that could drive uranium lower in the short-term…

1. Russian imports. Right now, Russia has two choices. It can sell uranium to the U.S. market through the United States Enrichment Corp. (USEC) or it can pay a 116% tariff. But Russian-owned Techsnabexport is working on a new civilian nuclear power deal between Russia and the U.S. You can bet that U.S. utilities, desperate for lower-cost uranium, are pushing hard for this deal, which could come as soon as the first quarter of 2007.

2. Cigar Lake update. Last week, Cameco announced it expects to seal off water flow to its Cigar Lake uranium mine by the second quarter. But it has delayed preliminary cost estimates and timelines, which were supposed to come out in February, until late March.
Does that sound to you like Cameco’s going to get that mine back online anytime soon? It sure doesn’t sound like it to me. So Cameco is STILL having trouble stopping water from flooding the mine. One engineer in Vancouver joked that so much water is pouring in, Cameco should stop trying to mine uranium at Cigar Lake and turn it into a hydroelectric project.
Nonetheless, it would be surprising if the March report isn’t upbeat. Corporations have a way of putting even the worst news in the best light…and maybe Cameco will surprise everybody by reporting actual good news.
On the other hand, if Cameco pushes its timeline for Cigar Lake back by years, uranium could lift off the launch pad.

3. Overspeculation. I like speculation as much as the next guy, but according to a recent update from TradeTech’s Nuclear Market Review, “Speculators are holding about 24 million pounds of U3O8 equivalent.” That is about 22% of global uranium production in 2005.

So if Cameco announces good news on Cigar Lake, or if Russia’s Techsnabexport hammers out a trade deal, speculators could decide to sell, temporarily exaggerating any short-term decline. The Uranium Participation Corp. is holding a bunch of uranium with the intention of selling to utilities at a higher price at a later date. If prices start to go down, the fund could decide to start unloading.

SUMMARY: I expect a pullback in uranium prices this year, but it will be a short-term correction in a big bull market. What I recommend is you put HALF your money to work NOW, then put the rest to work if and when we get a sizeable pullback.
If uranium doesn’t pull back, at least you’re in the game. If uranium does pull back, you’ll average in for a better price.