Hedge Funds & The Uranium “Arms Race”
Thursday, April 26, 2007 : PermalinkHedgeCo.net - Several hedge funds have been buying largely into the processed uranium market, causing most of the new demand for uranium and helping drive up the price more than fourfold within thepast year.
Some hedge funds that have been reported as buyers are Adit Capital, who according to reports, bought up millions of pounds for as little as $20 per pound. Citadel Investment Group assumed control of2.3 millions pounds through its stake in an IPO, and GLG Partners and Fortress Investment Group have set up teams to begin trading uranium.
There is no futures market for uranium and a declining supply of the product, coupled with an increase of outside investors, such as hedge funds, has led the Nuclear Energy Institute to suggestallowing only end users of uranium to purchase it. It is mined by only by a few companies such as Canada’s Cameco Corp.
Uranium Participation Corporation is a closed end mutual fund that buys and holds uranium, making it one of the only ways for an average investor to buy directly into uranium. Its documents can befound on SEDAR and regarding transparency, the fund publishes its NAV every month on its website, disclosing what it has paid for uranium. It is exchange traded on the Toronto Stock Exchange by thesymbol is U. There are also warrents on U for those who are inclined to more aggressive positioning.
A newly created uranium futures contract will begin trading on the Nymex electronic system on May 7, according to their VP of marketing Randy Warsager. Most of the Nymex products are traded on theChicago Mercantile Exchange Globex system under a joint agreement between the two markets.
The Wall Street Journal has called hedge funds’ involvement in the market “a new type of nuclear-arms race.†Hedge fund and other investors hold around 20 mm lbs of uranium equivalent, according toDavid Hard of NukemInc.com, that’s about 20% of one year’s mine production.
Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net
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