St. LOUIS () -- In what has been a very active week in the uranium sector, Geiger Counter Limited, a new fund to concentrate on investing in uranium and nuclear power opportunities, launched this week on the London Stock Exchange [LSE:GCL] and Channel Islands Stock Exchange [CISX:GCL], offering investors yet another way into yellowcake.
GCL, a closed-ended collective investment fund created by New City Investment Mangers, successfully raised lb12 million via a subscription of 24 million ordinary shares at 50 pence.
The fund will primarily invest in companies involved in the exploration, development or production of uranium, as well as fossil fuels and potential alternative energy supplies, "given the growing demand for energy and the shortage of existing supplies," according to the press release.
Andrew Ferguson, co-fund manager, gave Resource Investor some hints as to what companies in which GCL may invest.
Ferguson said the fund will look into producing company's like Cameco [NYSE:CCJ; TSX:CCO] and distributing companies like Energy Resource of Australia [ASX:ERA]. He also noted developing companies like SXR Uranium One [TSX:SXR] and Paladin Resources [TSX:PDN; ASX:PDN] and junior companies like Omega Corp. [ASX:OMC] and Albidon [AIM:ALD; ASX:ALB].
Ferguson said the fund will focus on companies in the sector with "proven management," but noted that "we're not just looking at the production and development side of it."
He said GCL will invest in companies involved in the construction and servicing of nuclear power stations, thus offering an integrated investment in the sector.
"We are offering a window on the world of uranium and are providing investors the opportunity of gaining exposure to a variety of junior uranium focused companies whilst retaining one name in their share portfolio," said Adam Cooke, an Executive Director of New City Investments Managers, in the release.
GCL, however, will not take direct holdings in the commodity.
The fund's launch coincides with a flurry of takeover activity in the junior uranium market: Mega Uranium [TSXv:MGA] has intends to buy out Australia's Redport Ltd. [ASX:RPT]; Crosby Partners, and investment bank, has made an offer for Marathon Resources [ASX:MTN]; Paladin Resources [TSX:PDN] is bidding for Valhalla Uranium [ASX:VUL].
And, , SXR Uranium One [TSX:SXR] said it had reached an agreement to purchase Rio Tinto's [NYSE:RTP] Sweetwater Uranium Mill and associated Green Mountain uranium properties. Then, on Tuesday, SXR said it had signed an exclusivity agreement with U.S. Energy Corp. [Nasdaq:USEG] to buy the mothballed Shootaring mill and uranium properties in Utah, Wyoming, Arizona and Colorado.
"It's a very clever, strategic move" for SXR, added Ferguson, given the renewed interest in developing more nuclear energy in the U.S.
Analysts Paul Van Eeden previously a high uranium price will facilitate more deals. The price of uranium has performed well and has risen steadily in the last five years from $7/lb to the present $45.5/lb.
On Tuesday, Britain unveiled its Energy Policy for the next 50 years, saying nuclear power could make a "significant contribution" to the country's needs as it seeks to reduce dependence on imported fuel.
Although the wording was softer than comments made by Prime Minister Tony Blair in May that nuclear energy was "back on the agenda with a vengeance," it still signifies that nuclear power will be in Britain's future.
Britain's 23 nuclear power stations supply about 20% of the country's electricity but all but one are due to be closed down by 2023.
"Security of energy supply is one of the key issues of our time, and it is this which has helped to push nuclear power to the forefront of political agenda," said Cooke.
Energy security will be the key issue at the G8 summit in St. Petersburg on July 15 - 17.
The world is consuming roughly 180 million tonnes of U3O8 uranium a year but only producing 90 million tonnes. So far, the deficit is made up by stockpiles. Until 2004 about 45% of demand was met from secondary supplies rather than immediate mine output, but global stockpiles are running down, according to the company.
"It seems highly likely that nuclear power will fill a large part of the increased demand for new power generation capacity and new mine production of uranium will be required to fill that demand," said GCL.
According to the World Nuclear Association, at the end of last year there were 442 reactors in operation. The current 442 reactors require 180 million pounds of U3O8 with just over 100 million pounds coming from primary production. The current supply position is projected to be barely sufficient until 2012.
The WNA also estimates the current number of reactors could double within 20 years.
- China has stated that it will add two nuclear power generators each year with at least 25 already at the placing stage;
- India is quadrupling nuclear capacity by 2020 and has recently started up the first of its large indigenous reactors with eight more units under construction;
- Finland has four reactors providing a quarter of its electricity and is now building a fifth;
- France continues to generate 78% of its power demand from nuclear reactors.
"We have a very strong conviction in the strength and future growth of the uranium and nuclear markets, especially with both China and India looking to rapidly increase their nuclear capacity," Cooke said.
The fund's directors believe the outlook remains very positive, given that demand for nuclear energy is only likely to increase due to current and projected high energy prices - and about two thirds of electricity generation is provided by fossil fuels at present.
"We believe that we have recognised the potential of this market at an early stage and look forward to generating significant returns on our investments," concluded Cooke.
Share Price Activity
GLC is currently trading at 62 cents, up 12 cents or 19%, after initially opening at 50 pence on Monday.
U3O8 spot price is trading at $45.50, according to UxC.com.