fosters report in depth

June 19, 2012 12:20PM
EXTRACT OF FULL ARTICLE

Foster Stockbroking reckons that re-starting all 54 reactors would push up total global uranium demand by 30 million pounds, or 17 per cent.

“We are already witnessing early signs of this with the long-term uranium prices increasing last month by 2.5 per cent (to $US62.5/lb), the first increase in long-term prices since January 2011,” Foster says.

The firm believes that with global output of 150 million pounds against demand of 180 million pounds, the market is already in deficit by 30 million pounds.

The firm expects this shortfall to become even more acute after a US-Russian “megatons to megawatts'' agreement - by which the US buys 24 million pounds of former Russian weapons uranium a year - ends in 2014.

“This should bode well for the existing producers, which should benefit from a rising uranium price, as developers which should see interest return in the sector”, Fosters says.

Shares in the pure-play Paladin Energy (PDN, $1.26) shares enjoyed some support yesterday, but continue to wallow near record lows on concerns about short-term funding options.

As the only independent-listed uranium play globally, the operator of two African uranium mines has to be seen as a takeover target.

“The most obvious suitor would be uranium giant Cameco who recently filed a prospectus to raise $US1 billion (despite a healthy balance sheet of $US1.3 billion) signalling it could be on the acquisition path,” Foster says.

While Paladin doesn't supply uranium directly to Japan, it will at least benefit from any emerging sentiment.

Our past speculative buy calls on Paladin have been sadly awry, but that merely heightens the probability of us getting it right one day so we'll maintain the call.

CRITERION From: The Australian June 19, 2012 12:20PM

http://www.theaustralian.com.au/business/opinion/paladin-energy-likekly-to-benefit-from-nuclear-japan/story-e6frg9lo-1226401022573