The uranium mining sector has been generating more heat than usual in the past two years as a revived interest in nuclear power globally has pushed up prices for the radioactive substance.

The agreed reverse take-over of UrAsia Energy by SXR Uranium One, announced yesterday, to create the world's second largest listed uranium company, is the latest illustration of the uranium boom.

Analysts said yesterday that more takeovers were likely and that uranium mining shares would continue to soar.

From the late 1980s until 2003, the uranium price languished at about $10 a pound. Few nuclear power plants were built during this time and there was plenty of uranium available owing to Soviet weapon decommissioning.

But in the past few years, stockpiles of uranium have dwindled, while nuclear power has come back into favour in many countries and scores of new reactors are planned. By last August uranium had risen to $50 a pound.

In recent months, the price has gone further, driven by news of flooding at the Cigar Lake mine in Canada, owned by market leader Cameco. Worries about shortages have pushed the uranium price up to its current level of about $75 a pound.

Neal Froneman, chief executive of SXR Uranium One, yesterday said he thought the uranium boom was sustainable. "We believe that in the long-term there is no reason why uranium prices will fall below $60 per pound but in the short-term they could go above $100 per pound."

He said the combination of SXR Uranium One and Ur-Asia would give the new company critical mass and attract a new audience of investors. "It is clear that in this business size does matter. The market is desperately looking for the next emerging senior producer. We will have a market capitalisation of one-third the size of Cameco's but by 2012 will have a production profile that is similar, so we expect a re-rating of our stock."

Although there have been many listings of exploration companies in Australia, Canada and the UK to raise money for uranium projects, these groups are by and large risky propositions.

Investors who want high-quality exposure to the uranium boom have few choices but to buy Cameco shares, as French producer Cogema is government-owned and Rio Tinto and BHP Billiton mine many other commodities, so are not pure plays. The new Uranium One will provide an alternative to Cameco, said Mr Froneman.

The proposed deal is being seen as the opening shot in a frenzied effort by uranium producers and explorers to gain extra muscle in the market. "This is the beginning, not the end, of the consolidation cycle," said one Toronto analyst.

Relatively new producers, such as SXR Uranium One and UrAsia, have the advantage of a greater exposure to the fast-rising uranium price. More established companies, such as Cameco, BHP Billiton and Rio Tinto, are heavily tied to long-term contracts with power utilities, giving them less leverage to spot prices.

The deal will step up pressure on smaller players - such as Canada's Denison Mining and Paladin Resources, based in Perth, Australia - that are trying to carve out a place in the uranium industry.

According to Justin Reid, analyst at Sprott Securities, "for them to retain market share, they have to do something aggressively, and they have to do it now".

The key targets in future consolidation, according to Mr Reid, will be "US-focused companies with solid assets that have already started the permitting process and are backed by good operating teams". Among that category, he cited Ur-Energy of Denver, and Energy Metals and Strathmore Minerals, based in British Columbia.