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A radioactive investment?
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June 30, 1998: 5:14 p.m. ET
Experts disagree on uranium's potential on news of a public offering
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NEW YORK (CNNfn) - Wall Street loves a bargain, but should it warm up to beaten-down uranium?
United States Enrichment Corp. on Tuesday announced an initial public offering of more than 100 million shares to raise up to $1.65 billion. The Bethesda, Md. company, owned by the U.S. government, processes uranium used in nuclear plants.
Investors will have access to a business that controls about 80 percent of the domestic uranium "enrichment" market -- and about 40 percent of the international market.
Uranium is a tiny part of the international metals and mining industry. Few analysts on Wall Street even follow it. And there are only a handful of public companies, including Cameco Corp. (CCJ), a uranium mining business based the Saskatchewan province of Canada. It trades on the New York, Toronto and Montreal stock exchanges.
Even fewer companies process uranium like United States Enrichment Corp.
James Dines, editor of the "Dines Letter," a metals and mining newsletter in San Francisco, said he hadn't reviewed terms of the IPO. But he sees a growing need for uranium around the world, even though demand has lagged in the United States.
Uranium has lost favor in North America because of concerns about the environment. In Europe and Asia, however, there are plans for many new plants.
"You're going to need uranium for these plants," Dines said. "I'm bullish. I think the long-term price of uranium is going to go up."
Demand is also far outpacing supply, said Marc Henderson, founder of Anaconda Uranium, a Toronto company that acquires uranium deposits. Nuclear reactors around the world are using uranium at twice the pace of mine production, he said. Anaconda trades on the Vancouver Stock Exchange.
"If you think nuclear power has any kind of future on a global basis, uranium is a screaming buy," Henderson said. "It's been down and out for 15 years. As an investor, you can go in when nobody cares."
Not everybody is optimistic. John Tumazos, a research analyst for the metals industry at Sanford Bernstein in New York, argued that a publicly-traded uranium company is a "no-winner."
"A publicly traded company for a product that's poisonous is not what the stock market is all about," Tumazos said.
Tumazos pointed out that Cameco is down about 50 percent since its initial public offering in 1996 on the NYSE. Cameco debuted above 50 on the NYSE, inched briefly towards 55 and has declined ever since. The stock was at 28-1/16 in afternoon trading, not far from its year-low of 25.
Cameco was owned by the governments of Saskatchewan and Canada when it debuted on the Toronto and Montreal stock exchanges in 1991. A company official said Canadian shares are trading three times higher than the debut price.
-- by staff writer Martine Costello
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