catch 22, page-25

Bilt5 - the analysts don't agree with your comments on the impact of Germany on the U price - and neither does the market. The long term U price is still $68, the level it was in the wake of the tsunami - so no impact there. (This is the most important price for PEN - as 80% of production is mooted for long term contracts). As well, there has been no or very little impact on the spot price.

The analysts are saying that the 'damage' is PERCEPTUAL - not FUNDAMENTAL. That is, Germany is not that important in the overall context of the U market (and was also expected to have a diminishing importance even without this latest Merkel decision). That is, unfounded perceptions of Germany's 'importance' to the future of the U industry is impacting U company share prices but is expected to have NO significant impact on the growth of the U (spot and long term) price.

Therefore NO impact on PEN's business (as distinct from impact on PEN's share price due to unfounded perceptions and irrational fear - which, of course, is an inevitable component of the markets)


Here's a few quotes from an article last week on the German 'effect' that make this point very clear:

Despite the negative reaction from uranium investors as Germany is set to become the first major nuclear-free industrial power, analysts remain optimistic about the nuclear fuel. They cited continued support from some of the world?s biggest consumers of uranium and Germany?s relatively limited role.

?Germany has long been regarded as ?weak? on nuclear power and was not expected to be a significant factor in reactor growth over the medium or long term,? said Greg Barnes, an analyst with TD Newcrest.

?We continue to expect that the uranium price should recover from the Fukushima incident, albeit slowly,? he added. ?China, India and South Korea ? all three of which are expected to add significant new nuclear capacity ? have recommitted to nuclear power following the events at Fukushima.?

The nuclear renaissance appeared to be well underway without much German involvement as it currently uses only 5% of the world?s uranium supply. This number was expected to fall to 4.1% by 2015 and 3.2% by 2020.

David A. Talbot, an analyst with Dundee Securities, believes investors in the uranium sector should stay the course. He said the long-term fundamentals remain very strong for the sector ? despite Germany?s decision to opt out.

?We believe that China?s growth alone should dwarf the German impact,? Mr. Talbot said in a research note, anticipating China will use five times the fuel requirements of Germany by 2020.

Despite having only 13 reactors in operation, China already uses 11.5 million pounds of U3O8 annually, compared to Germany at 9 million. China also has 27 reactors under construction, 50 planned and 110 proposed. Early this month, it reiterated that its long-term goals for nuclear power remain unchanged following the events in Japan.

?It should not impact the spot market of which the uranium stocks tend to trade in tandem,? Mr. Talbot said. ?It could impact the stocks in the short term as this news plays with investor perceptions of Germany?s importance.?

FULL ARTICLE at:
http://www.resourceintelligence.net/uranium-stocks-decline-as-germany-goes-anti-nuclear/19081