Uranium to click again for investors Robin Bromby December 21, 2006
URANIUM stocks are poised for a new speculative burst after a dramatic spike in the metal's price and an analyst prediction that it will break through $US100 a pound next year.
The spot price jumped 9.9 per cent this week to a record $US72/lb, up $US6.50 from last week. The metal started 2006 at $US36.25, half its present level. Worries about uranium supplies are growing, with 251 new nuclear reactors either being built or planned compared with the 442 in production.
The news saw Paladin Resources, with the only new mine in the world going into production, surge another 23c to $7.95.
Summit Resources, which has Queensland's biggest uranium holdings, rose 5c to $2.74. South Australian explorer Marathon Resources lifted 8.5c to $1.595.
The latest rise in the price was triggered by an auction in Corpus Christi, Texas, held by small US producer Mestena Uranium.
It put 260,000lb up for sale, and bids came in up to about $US73/lb, which led the industry monitor Ux Consulting to post the new spot of $US72.
Local analysts RBC Capital Markets said that Ux Consulting had indicated prices could move to much higher levels if demand remained strong.
RBC issued new price forecasts of $US100/lb for next year and $US85/lb for 2008.
There has also been a reported frenzy for acquiring new uranium projects, with exploration lease prices rising fivefold.
Paladin Resources is moving to production at its Namibian mine and in advanced planning for a Malawi mine.
Managing director John Borshoff is not surprised by the rising price. He said Paladin was the only company in the world starting a new mine at a time many reactors were planned.
Few people had understood the crisis in the demand-supply balance, Mr Borshoff said. "Most of the analysts just haven't got a clue."
It would take 20 to 30 years to ease the pressure on uranium because there were not enough new mines or production.
BHP Billiton's planned South Australian uranium-copper mine expansion would touch just a small part of the problem.
"The Olympic Dam upgrade is a drop in the ocean," Mr Borshoff said. Paladin had locked 25 per cent of its Namibian output into contracts to meet bank loan conditions, but the rest was available for sale at a price the market would pay.
Sydney-based Resource Capital Research's latest quarterly report on the uranium sector said the 65 Australian juniors it followed gained an average 7 per cent in November, with a 53 per cent rise in market capitalisation over six months and 186 per cent over the past year.
RCR said planned or proposed new reactors worldwide had increased dramatically since May, with 251 new ones in construction or planning stages. In May, China planned 24 new reactors. By November that had risen to 63. Russia was up from nine to 26, the US from 13 to 23.
AGS Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
