Overview and Investment Comment on the Uranium Market
On May 29, 2008 Australian based Resource Capital Research came out with their ‘Uranium Sector Review For June 2008.’
Analyst John Wilson writes “Positive market sentiment has returned to uranium equities, driven by indications the spot uranium price is about to head up and relative stability in the equity markets following the sub-prime rout. While the equity markets remain volatile, the junior end of the resource sector was disproportionately sold down over the past 6 months and the recent bounce has seen may uranium companies’ share prices recover by over 100% from recent lows with further upside expected.”
Wilson points out that in the last month, share prices of majors such as Cameco, Denison Mines, Uranium One, Energy Resources of Australia and Paladin Energy have moved up 10%, up 21%, down 3%, up 15% and up 45% respectively.
While the current US$60/lb spot price of Uranium is down 15% from the US$71/lb price at the end of March, Wilson believes that “Forward indicators (fund implied price) currently indicate an expectation for an upward correction to the uranium price to around US$75 (+25%). In the past 3 months the fund implied price has ranged from US$57/lb to US$90/lb. According to recent market commentary by Trade Tech “[uranium] buyers are beginning to venture back into the market and sellers are less willing to cut prices”.
The number of planned and proposed new nuclear reactors globally, has increased from 222 reactors in January 2007 to 311 reactors in May 2008, a rise of 40%. These statistics can be compared with the 439 nuclear power reactors currently in operation and the 36 that are under construction. Wilson writes that the USA Congressional Budget Office has indicated that nuclear “power would be commercially competitive compared to conventional fossil fuel technologies at a carbon price of US$45/tonne (May ’08). Rising prices of competing energy sources - both spot oil and thermal coal prices, which spiked over US$130/bl and US$130/t respectively (May ’08),
reinforces the commercial potential of nuclear energy.”
Uranium related events of the last 3 months include:
- NamWater (Namibia) announced plans to build a second desalination plant to support water needs of the growing uranium industry. Commissioning is estimated in 2010 and the plant is expected to have a capacity of 25 million m3 per annum. The other desalination plant is already under construction (Areva and NamWater) with commissioning expected in Q4/09 and a capacity of 20 million m3 per annum to serve Areva’s Trekkopje heap leach project.
- Kazakhstan’s new sulphuric acid plant at Balkhash (cap. 1.2mtpa) is expected to be commissioned June ‘08. Kazakhmys Corp is building the plant adjacent to its copper smelter. Capacity is expected to be sufficient for KazAtomProm’s planned ISR uranium mining needs.
- Zambia is expected to issue uranium mining licenses beginning in July 2008. Companies with advanced uranium projects in Zambia include Equinox Resources which released its updated feasibility study for a standalone uranium plant at Lumwana 2Q08 and African Energy Resources (ASX:AFR) which released a Pre-Feasibility Study for its Chirundu uranium project 2Q08.
Company specific news and events from the last 3 months include:
- Uranium One (TSX:UUU) announced it will suspend development at Honeymoon ISR development project (SA) for 12 months.
- Bluerock Resources Ltd (TSX.V:BRD) uranium ore production commenced from the J-Bird project (Colorado) April ’08.
- Hathor Exploration (TSX.V:HAT) reported a significant discovery in the Roughrider Zone at its Midwest NE project in the Athabasca Basin. Intercepts include 15m @ 10% U3O8 and 9m @ 10% U3O8.
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Last update : 03-06-2008 06:00
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