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Uranium May Set New Record Price on Mestena Auction (Update1)

By Christopher Donville

Dec. 12 (Bloomberg) -- Uranium prices, after surging this year because of supply concerns, may top a record high this week when a private mine in Texas auctions 260,000 pounds of the radioactive metal used to fuel nuclear-power plants.

Mestena Uranium LLC of Corpus Christi, Texas, is selling supplies from its Alta Mesa mine to the highest bidder as of Dec. 15, said Dustin Garrow, president of ZB Marketing, a consultant in Littleton, Colorado, coordinating the auction.

The price of uranium has risen 81 percent this year to $65.50 a pound because demand is rising and power-plant operators are concerned that new supplies may not be available fast enough to fuel new reactors planned for construction around the world.

``Bidding will probably come in around $68 to $70 a pound,'' Kevin Bambrough, a strategist at Sprott Asset Management Inc. in Toronto who follows the uranium industry, said in a telephone interview. ``Uranium supplies are tight. Demand is strong.''

An underground flood in October at Cameco Corp.'s unfinished Cigar Lake mine in Saskatchewan has heightened concerns about available supply. Cameco, the world's largest producer of uranium, has said it expects the flood will delay construction of the mine by at least a year.

Before the accident, the project was slated to open in 2008 and Saskatoon, Saskatchewan-based Cameco predicted it would supply as much as 10 percent of the world's uranium when it reached full production in 2010.

Cigar Lake is 50 percent owned by Cameco, with the remainder held by AREVA Resources Canada Inc., Idemitsu Uranium Exploration Canada Ltd. and TEPCO Resources Inc.

Regular Auctions

This week's auction by Mestena will be the company's 11th since it began producing at Alta Mesa about a year ago, Garrow said in a telephone interview. The results will be confidential, though he said he expects they will be reflected in published market assessments.

``Every time we've done a sale, the market price has gone up,'' Garrow said.

The price of uranium rose $2.50 to a record $65.50 a pound from a week earlier, Ux Consulting Co. of Roswell, Georgia, said yesterday. UX's weekly price, which was $36.25 in December 2005, is based on the company's assessment of the uranium market and is widely used within the nuclear industry.

The Alta Mesa mine in southern Texas uses in-situ recovery techniques that involve the flushing of a chemical solution through underground ore bodies and the eventual recovery of the uranium from the solution. The mine can produce about a million pounds of uranium a year, according to the U.S. Energy Information Administration.

Global uranium consumption is about 180 million pounds a year.

Shares of Cameco rose 91 cents, or 2 percent, to C$45.41 on the Toronto Stock Exchange. They have risen 27 percent in the past year.

To contact the reporter on this story: Christopher Donville in New York at [email protected] .

Last Updated: December 12, 2006 16:39 EST