JOHANNESBURG (Business Day) -- Say what you want about "uranium man" Neal Froneman, he knows how to spot a trend early, and ride it for all it's worth.
With the uranium price having gained 600% in four years, it seems Froneman may be feeling the sort of euphoria that Motorola's executives must have felt in 1973 when they made the first cellphone, and thought: "I wonder if we can sell this?"
But shareholders in Uranium One (formerly SXR Uranium One) [TSX:SXR] must be wondering, does this uranium rollercoaster only go up?
Mining firms are now milking the fever for uranium, which is used to produce nuclear energy, but the spike in uranium prices since 2003 had much to do with the fact that the market failed to see that demand for uranium would soon outstrip supply.
Considering that uranium is more common than tin, and 500 times more common than gold, how long can this mismatch continue?
In 2003, Froneman's uranium plan seemed like lunacy, as the uranium price had trudged along at $15 a pound for 15 years.
It seemed like the straw that could break Aflease's back, not the straw he should have been clutching at.
But the surge in the uranium price to its present $135 a pound has made Froneman appear visionary.
Now, he sits atop a C$7.3 billion company which could be the largest uranium producer in the world if it meets its 2013 target of producing 28-million pounds of uranium a year. The working class drudge that was Aflease in 2002 bears no comparison to the swaggering fur-wearing, blinged-to-the-teeth Uranium One today.
To get there, Froneman engineered three mergers: with Southern Cross Resources in 2005, Kazakh producer UrAsia in February, and now with the U.S. company Energy Metals Corporation (EMC) [NYSE:EMU; TSX:EMC].
For investors, it's been swell as Uranium One's share price has climbed from about C$1.00 to C$14.40, hitting a high of C$18.65 in late February 2007.
So why is there something vaguely disconcerting about it all?
Well for a start, Uranium One has swallowed buckets of money from investors based on promises, yet has produced precious little yellowcake so far.
Only two of the 10 uranium mines in the stable are producing anything now - Dominion, which produced its first slurry in May, and one of UrAsia's mines.
The 14 pages of "risk factors" in Uranium One's report on March 28 are also disconcerting.
This includes the warning that "lower prices of oil, natural gas, coal and hydro-electricity may result in lower demand for uranium concentrates."
It also talks about the tightrope of public opinion, given that "an accident at a nuclear reactor anywhere in the world could impact the continuing acceptance of nuclear energy."
Then there is the surprising sluggishness in Uranium One's share price this year, after a raucous 191% gain last year. Have investors heard too many promises? Or are they simply taking a breath after last year? Can Froneman's ride continue indefinitely?
As one analyst said, "right now, every man and his dog is looking for uranium, but in five years' time we will have enough mines around the world to meet the demand."
With that in mind, can the uranium price climb beyond $200, as some say? Or is some scepticism warranted?
Clearly, "market efficiency" didn't work in 2003 when the market failed to predict how demand for uranium was creating a supply squeeze that would lead to a price spike.
Will it be any more efficient in predicting the downturn?