Uranium gives a warm glow

By Daily Mail Reporter
Updated: 06:24 EDT, 27 December 2006

Christmas is the time to be cheerful about those recent share tips that still bring a warm glow. Some of the brightest are the uranium mining stocks tipped in this column in autumn.

The flooding at Cameco's Cigar Lake mine in Canada in October has lifted the uranium price to record levels. Having doubled in the 18 months to June to $45 a pound, it shot up last week to $72. When a US company offered 260,000 pounds of uranium for auction, several buyers offered more than $70.

Cigar Lake had been due to produce some 15% of world supply by 2011. There seems little chance of that now.

Two months on, the first phase of the repair effort was completed this week. The next stage is to drill holes into the area where the flood came through, then fill the holes with concrete. Each stage has to be approved by regulators. Cameco will set out the full plan in February. It is clear that there will be no quick fix.

This is good news for our September 9 share tips. UrAsia Energy, which has three projects in Kazakhstan, is up more than 50pc from 140p to 220½p. Nufcor Uranium, which buys the stuff for investors, has risen from 264½p to 305½p.

Any intrepid readers who followed the Canadian/Australian miners tipped have done even better. Paladin Resources is up more than 60pc from C$4.93 to C$7.98. SXR Uranium One is ahead 67pc from C$9 to C$15.18. Altius Minerals, tipped in 2005 at C$4.10, has more than doubled to C$10.17.

Hargreave Hale, the UK stockbroker which was very early to spot uranium's potential, thinks the price could reach $100. Judging by the pace of progress at Cigar Lake, the party is far from over.

HIGH IMPAX

Investment manager Impax Group has been growing fast enough to justify the steep rise in its share price since it was first tipped here at 5p. Its funds more than doubled in the year to September from £170m to £434m, and are now £475m.

Impax, a specialist in environmentally friendly stocks, has benefited from a strong inflow of funds into this sector as the battle against pollution goes global. It moved from losses to pretax profits of £213,000 with revenues rising to £3.8m.

The shares are now 21p so those who followed our 2005 tip have quadrupled their money. The question now is whether there is more to go.

I think there is. Assuming Impax earns just over 1% on its funds, current year revenue should reach £5m. Working out underlying profits is complicated by the need to provide for staff incentives and write off goodwill.

Earnings per share will be diluted this year because loan stock has been converted. But 2005/6 cash profits were around the £500,000 level. Impax paid no tax and still has £4m of tax losses to set against future profits. The key for any fund manager is how investments perform.

The group's investment trust Impax Environmental has risen from 93p to 113p this year - solid, rather than stellar. But since launch in 2002 it has climbed from 60p. More relevant to readers, it has almost doubled since tipped here at 58½p in August 2004.

For Impax Group, growth in funds managed will slow this year as it focuses on making its new assets perform. It has appointed Bridgewell as its broker. As it establishes a track record, it could attract interest from big investors, and possibly predators, though its plans are to stay independent and grow.

At 21p it is valued at £22.5m. That still looks modest for a group with funds managed heading for £500m. I think the shares have further to go.