Junior uranium companies are a dime a dozen; how to find out which ones will be worth a dollar or more.

It's not surprising that the skyrocketing price of uranium has triggered a proliferation of new uranium juniors. Hundreds of private and public companies are now busily searching for the metal, compared with just a handful a few years ago.

The concern, according to some analysts, is that many of these tiny companies - sometimes called "chihuahuas" because of their size - are nowhere near production and that, like their namesakes, they could come back to bite investors. That makes it critical for would-be investors to conduct proper due diligence before plunking down their investment dollars.

"There's a lot of froth among grassroots uranium companies," says Bart Jaworski, a Vancouver-based mining analyst with Raymond James. "Just the mention that a uranium company is about to stake ground is enough to send market caps soaring."

Near-term growth stories are less risky, he notes, but that doesn't mean investors should avoid more speculative plays altogether. "There are quality exploration stories out there. Some stocks have grown four to five times in the past few months, based on good exploration ground. Some of these companies have a lot of upside but you have to be very selective about them."

Selectivity starts with an assessment of company management, says Jaworski. "That's the single most important factor when assessing uranium juniors." Doug Casey agrees. "With any junior mining company, people are definitely number one," says the New Zealand-based head of Casey Research. "The problem is that for a full generation uranium had an unjustly bad name and that kept people out of mining schools and companies in the field. Today, there's a dearth of good, experienced people and most of the guys who know anything about uranium exploration are in their 50s and 60s."

Casey recommends that investors take time to get familiar with the people involved in uranium companies and find those with a track record of success. "Look at what they've done in the past. Have they been involved in successful operations or discoveries? It's hard to find a mine under the best of circumstances but you want to tilt the odds in your favor."

John Wilson, a Sydney, Australia-based analyst with Resource Capital Research, says it's easier to evaluate companies that are near or in production, than those at the greenfields stage because exploration risk is not usually associated with the former.

"If a company is at or near production, look at its net present value. How many shares are out? What's the market cap? What are its operating costs and cash position?"

It's important to pay attention to the news flow from active exploration programs, he adds. "Be aware of the major milestones in developing a project as it moves from exploration to production. In the early stages it's less important to meet milestones but as you get closer to production it becomes more of an issue. Milestones may be missed for good reasons and it's management's responsibility to communicate why deadlines have slipped."

More technical skills are required to assess companies involved in greenfields exploration, says Wilson. "You need a different level of analysis and greater familiarity with exploration risks and techniques. More inference by the investor is required."

Start by determining the company's ground position and type of target, he says, whether sandstone, calcrete or an unconformity-related target, such as those found in Saskatchewan's Athabasca basin and northern Australia.

"Get a sense of the potential magnitude and type of the target. And look at who holds the neighboring ground and what their results have been. What kind of historical success has occurred there? A lot of companies hold ground that was worked back in the '70s and then dropped. Some quite credible work was done back then, although it may not comply with current standards. If it was done by a reliable company it could indicate that something is there."

Bart Jaworski urges would-be investors to assess a company's exploration upside before buying it. "You almost need to be a geologist to do this properly," he says. " Kick the tires on the geological concept and the prospectivity. Check out the development story - look at the grade, jurisdiction and amenability to mining techniques. Is it open pit or underground? A lot of uranium prospects look good but they can be discontinuous and very wispy."

Timing can be critical when it comes to uranium exploration, he adds. "There's a huge permitting life with new prospects and with time setbacks, exploration companies may miss the whole window. Near-term growth stories will be within the sweet spot but looking beyond three years there will some disappointments."

Political factors can play a major role in a company's success, notes Doug Casey. In late April the Australian Labor Party (ALP) is expected to overturn a 20-year ban on establishing new uranium mines, which could send the price of shares for companies with uranium exposure in that country surging upwards.

The change would allow Australia's state and territory governments where the ALP holds power to approve new uranium mine projects without breaching their party platform. And that could have enormous repercussions for mining's hottest commodity.

Casey believes that the price of uranium will keep rising for the foreseeable future. "The peak oil geological argument - the idea that the world is fast running out of cheap oil - is very compelling. There are also political factors: the Middle East is an active war zone and I think that will continue to spur the search for other sources of power."

"Also, there's a massive supply/demand imbalance. We currently mine only 60% of what's used - we've been living off inventory for a decade - and that will continue because of the length of time it takes to put new deposits into production."

"Taken together, all of these things mean that the price of uranium could reach $200 within a couple of years."