March 17 (Bloomberg) -- Paladin Energy Ltd., the Australian company producing uranium in Africa, may be an “attractive” acquisition target for larger producers such as Cameco Corp. and Areva SA, JPMorgan Chase & Co. said.

The Perth-based company’s share price reflects little value for its undeveloped uranium resources and prospects, meaning the company may be targeted by larger companies looking for uncontracted material for delivery to customers or for their own use, JPMorgan said in a March 16 report.

Cameco, the world’s largest uranium producer, is “highly likely” to make an acquisition, Canada’s National Post said March 11, citing RBC Capital Markets analyst Fraser Phillips. Spot prices for uranium, used to make nuclear fuel, have slumped more than 30 percent in the past six months because of sales by financial investors raising cash, weighing on Paladin stock.

“We believe that now is the ideal time for long-term uranium players such as Cameco and Areva to be acquiring what we see as under-priced assets,” JPMorgan analysts led by Melbourne-based Brendan James said in the report. “We believe potential acquirers would be looking quite closely at Paladin’s project pipeline and exploration potential.”

Paladin gained 32 cents, or 10 percent, to A$3.48 on the Australian stock exchange, the biggest jump for 10 weeks. The stock outpaced a 3.1 percent advance in the exchange’s benchmark index. JPMorgan has an “overweight” recommendation on the stock.

Paladin shares should rally in the lead-up to the Queensland state election on March 21 given that the latest polls show a lead for the opposition Liberal National Party, which is likely to overturn the state’s ban on uranium mining, The Royal Bank of Scotland said in a separate March 16 report.

The stock may also benefit from the start up of an expansion of Paladin’s Langer Heinrich project in Namibia and of its Kayelekera mine in Malawi, both due this quarter, Sydney- based RBS analyst Lyndon Fagan said in the report. RBS initiated a “trading buy” on the stock.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

Last Updated: March 17, 2009 01:39 EDT