uranium uturn, page-3

Read it myself on Kitco this morning and it's dated 11 Sept. but when you get into it it's dated 23 July.

It also covers general production hurdles, lower production from Rio's Rossing mine in Namibia, lower than expected amounts released from the States etc. So some general info on uranium outlook included that may be worth a re-read for anyone interested.

Here it is:

More supply is coming into the market, but not in the overpowering quantity some feared, e.g. five million pounds from the U.S. government.

Nearly 200 metric tons of UF6 was offered earlier this week by the U.S. Department of Energy (http://stockinterview.com/News/07182007/DOE-Summer-Uranium-Auction.html ) for delivery by September 21st. This sale represents slightly more than 10 percent of the sizeable amount bandied about in the media a few months ago.

And some buyers are still active. According to NMR, “One non-U.S. utility is expected to enter the market soon to secure approximately 200 thousand pounds U3O8.”

While the uranium market has been quiet, it is far from dead. A week ago, Klingbiel wrote that the underlying fundamentals of the long-term uranium market were instead very much alive.

And it’s no wonder considering the realistic length of time many of the newer uranium projects will take to actually become uranium mines.

Although uranium is abundant in many regions around the world, economically and expediently recovering uranium is not as easy as many ‘armchair quarterbacks’ suspect.

During this past week, we expanded our commentary about problematic uranium projects, present and future, in the world of uranium mining. Initially, we discussed several potentially ‘tainted’ major mining projects in key uranium-producing regions in our Uranium Outlook 2007-2008 (http://bookstore.stockinterview.com/productcart/pc/home.asp ).

Our intent was to help educate many analysts and investors who have taken far too seriously the many forward-looking news releases and overly optimistic power point presentations by uranium mining company executives.

Take for example Citigroup’s (NYSE: C) Alan Heap. Our Australian colleagues at FNArena.com often have a few laughs at Mr. Heap’s expense, reporting on his seemingly misguided analysis of the uranium market. Out of pity, we sent Mr. Heap a complimentary copy of Investing in the Great Uranium Bull Market. We hoped he would more accurately analyze the commodity which his firm has charged him to accurately report upon.

Although Mr. Heap recently capitulated and upgraded his uranium price forecast – this time to US$100/pound for the next three years – in his early July ‘Mutation to Uranium Utopia’ commentary, his long-term analysis is lacking.

Hopefully, uranium miners will skip this next part to avoid uncontrollable chortling.

Mr. Heap wrote, “Barriers to entry for mine production are relatively low. Exploration and mine development are not particularly complex.” As a result of these deep thoughts, Mr. Heap forecast a long-term uranium price of US$25/pound, sometime after 2010.

In an article this past week (http://www.stockinterview.com/News/07182007/Uranium-production-uncertainty.html ), we warned, “Too much water, too little water, politics, greenies, economics, indigenous tribes, desalination plants, NGOs, camel trails, regulators and rebels are but a few of the land mines analysts face when hoping to forecast long-term uranium price peaks.” We also cautioned, “The safest bet is seemingly against future uranium production.”

We wrote this because developing uranium mines can be especially complex in today’s regulatory climate. Having reviewed hundreds of presentations, filings, prefeasibility and more advanced studies and other documents, it is a tribute to the persistence of uranium miners that any uranium mining actually takes place.

Of the world’s large mines, where we anticipated problems this year and next, we included Rio Tinto’s (NYSE: RTP) Rossing in Namibia. In a news release this past week, the company announced Rossing’s production fell about 400 metric tons in the second quarter – down by 29 percent compared to the same period a year ago.
In 2006, Rossing ranked third, behind Cameco’s McArthur River and ERA’s Ranger, in terms of uranium producing mines. This quarterly production shortfall represents about 13 percent of the Rossing mine’s production last year and about one percent of the world’s total uranium mined for the year.

Progress is taking place in moving uranium projects forward, but they are not happening as fast as many analysts believe. Mr. Heap did highlight in the summary of his report, “Mine supply is not responding immediately.” No kidding, Mr. Heap.

In this past week’s coverage, we pointed out some of the reasons why mine supply is not coming online as rapidly as some once believed. There are more problems ahead, which have come across our radar, and we are following up on these. Please stay tuned.

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