scarcity drives uranium to record high

Scarcity drives uranium to record high

THE price of uranium has smashed through $US100 ($122) a pound as supplies of the nuclear fuel become more scarce.

The uranium spot price soared $US18 last week to $US113 a pound - the largest single jump since NUEXCO began reporting uranium prices in 1968.

Uranium does not trade on an open market like other commodities.

Buyers and sellers negotiate contracts privately and prices are published by independent market consultants.

The new benchmark, reported by consultants TradeTech, formerly NUEXCO, was set by an auction in the United States last Wednesday for 100,000 pounds of yellowcake.

The bidding came as Australian uranium producer Energy Resources of Australia warned that wet weather would hamper its production for at least a year.

In its newsletter published on Friday, TradeTech said ERA's announcement contributed to the huge price rise last week.

The US-based consultancy said utilities looking for large amounts of uranium for near-term delivery and continued interest from speculators and hedge funds had also helped push the price up.

The uranium price has increased 57 per cent since the beginning of this year alone, and is up more than 170 per cent in the past 12 months.

Resource Capital Research recently predicted the price of yellowcake would touch $US125 a pound this year and rise as high as $US140 a pound in 2008.

Australian uranium producers have missed out on much of the upside of the uranium boom because most of their uranium is sold under long-term contracts that are only partially influenced by the spot price.

However, BHP Billiton has begun talking to potential customers about an expansion at its Olympic Dam mine that would triple its uranium output.

Paladin Resources is also well placed to cash in on recent rises, having just commissioned the world's first new uranium mine in 15 years in Namibia. The company is close to moving on a second project in Malawi.

The uranium boom has pushed the value of listed explorers in Australia up 23 per cent in the past three months, according to RCR, and up 122 per cent in the past year.

The exploration industry is keenly awaiting the outcome of debate at the Labor Party's national conference this month, with the ALP expected to end its opposition to new uranium mines in Australia.

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