After two years of mostly falling stock prices in the uranium sector, triggered by the Fukushima-Daiichi nuclear power plant meltdown in Japan, junior miners have become attractive acquisition targets as investors eye more bullish conditions ahead.

The tsunami-triggered meltdown led to nuclear reactors being shut in Japan and Germany, and uranium prices tumbled as demand shrank. Uranium is now around $42/lb, well off the 2011 high of nearly $73/lb, states uranium producer Cameco.

Some of the uranium sector’s dominant players, including Cameco and Anglo-Australian miner BHP Billiton, added to the gloom by shelving projects.

Still, the uranium sector – well represented at the Prospectors & Developers Association of Canada yearly trade show and mining convention, which took place in Toronto earlier this month – has seen many deals in the last two years, as depressed valuations create buying opportunities, says capital markets investment bank Cantor Fitzgerald analyst Rob Chang.

That is more than double that in the previous three-year period, he adds.

Chang singles out several small companies as attractive investments, including Uranium Participation Corporation, Kivalliq Energy, Energy Fuels and Uranerz Energy.

“Uranium is an area of focus as it is one of the few commodities with a price that is not above its long-term average. Uranium also has an excellent supply and demand backdrop,” he states.

Positive factors for uranium prices and demand include the scheduled end, later this year, of a 20-year-old programme that Cameco says converted an estimated 24-million pounds a year of highly enriched uranium from Russian warheads into fuel for reactors.

“And at the same time, construction continues on 64 new reactors worldwide, which will sharpen demand. Cameco expects a net 91 new reactors by 2022, pushing consumption up nearly one-third to 220-million pounds per year,” notes Chang.

Deal Making

Among recent deals, mining company Rio Tinto’s takeover of uranium exploration company Hathor Exploration last year, prompted rival mining company Denison Mines to buy uranium exploration and development company Fission Energy in order to gain control of nearby projects, says Fission Energy CE Dev Randhawa.

“The uranium junior mining sector is unique for its steady mergers and acquisitions despite challenging conditions across the broader mining industry,” he says.

A move in January by Russia’s State-owned uranium company Atomredmetzoloto, to take uranium exploration company Uranium One private, is also a sign that the market has likely reached bottom, Randhawa adds.

Investors have also shown they are still willing at times to plough money into exploration.

“Shares of junior mineral exploration company Alpha Minerals jumped sharply after it announced encouraging drill results in November and February at its Patterson Lake South property in Saskatchewan’s Athabasca basin, one of the world’s richest uranium areas,” he says.

The company, which partners with Fission Energy in the project, also says it is talking with many types of potential investors, including some uranium-mining majors.

“We have definitely got their attention. I can’t say we’ve got any hot offers on the table at the moment. It would be a bit early,” says Alpha Minerals CEO Ben Ainsworth.

In-house Funds

Many junior uranium miners are still struggling to find capital as some of mining’s biggest names cut costs and write down investments.

When Canadian uranium company U308 Corp needed to raise funds, it leaned on two of its directors for most of a C$3.2-million private placement that will tide it over for most of the year.

“It is rough, so it’s important for insiders to step up,” says U308 CEO Richard Spencer.

U308 stock is down 9% so far in 2013, following drops of 36% and 66% in each of the previous two years.

Cameco is worth around C$21.36 a share, or less than half its value about a month before the 2011 Japan earthquake and tsunami.

“Potential investors look at the downdraft that there’s been in the industry and say, ‘we’re fine with the fundamentals. It will rebound but it’s the timing of the rebound that we’re going to watch’,” Spencer says, predicting more deals as junior miners are forced to band together to survive.

With Russia’s Atomredmetzoloto taking Canada’s Uranium One private, the space for a new midtier producer is wide open, he says.

“That could spell opportunity for US com- panies either producing, or about to start pro- ducing, small volumes of uranium, like Ura-nium Energy and Ur-Energy,” he concludes.