Montreal, Canada

Now in a deep bear market in 2010, spot uranium ranks among the cheapest of commodities and should form a major bottom soon following new agreements to build nuclear reactors worldwide, including the first reactor in the United States since Three Mile Island.

Also, the Chinese and Indians are boosting subsidies for new nuclear facilities this year while uranium supplies should finally begin to tighten following massive dumping since late 2007.

After hitting an all-time high of almost $140 per pound in 2007 spot uranium prices have collapsed to around $41 per pound as of March 19. Uranium, which was unquestionably in a bubble, has subsequently crashed following massive dumping by Kazakhstan since 2007. Kazakhstan emerged as the world's largest uranium producer in 2008.

Canada is home to several small uranium companies and many have been smashed to pieces since 2008.

The biggest uranium producer in the world, Cameco (Toronto-CCO), has been a great-performing stock over the last 12 months despite a poor market for spot uranium. That performance has more to do with a broad-based commodity recovery lifting large-cap resource companies than actual fundamentals; smaller uranium producers haven't fared as well over the same period.

Recently, I plugged a small-cap producer for the second time in my Commodity Trend Alert service; the first trade five years ago resulted in 274% return in 2007, which we booked. Recently, I purchased the same company again but got stopped-out as uranium failed to bottom.

Uranium speculation is a tricky market. Only a handful of markets produce this commodity – mainly Kazakhstan, Canada, Russia, Australia – while pricing is conducted weekly and not on a daily basis. This makes uranium rather illiquid.

But, provided the trend in government-sponsored spending accelerates, subsidies increase and companies can continue to find safe storage for uranium, it would seem logical that long-term consumption will increase, especially as oil prices head to $100 again.

Despite my recent loss in Canada on uranium, I'm undeterred. I'm about to buy one of the biggest uranium manufacturing companies in the world that's sitting on a rising back-log of orders from the Far East and trading more than 60% off its all-time high two years ago.