The backflip on uranium sales to India by the Prime Minister, Julia Gillard, gave the uranium sector a much-needed lift early last week.
But as BHP Billiton's chief executive, Marius Kloppers, said on Thursday, the proposed lifting of the ban on sales to India will not magically create a bigger market.
India's uranium needs are presently being met and its supply options have already expanded in recent times, with the US and Canada already having jumped the gun on uranium sales to India.
Advertisement: Story continues below BHP is looking to give the go-ahead for the first stage expansion of its Olympic Dam copper/uranium/goldmine in South Australia next year. But Kloppers's point was that ''there is no bigger market for us as a result of this''.
So last week's rally in uranium stocks was misguided, until Friday that is when Rio Tinto - a uranium producer with Ranger in the Northern Territory and Namibia - made another serious bet that uranium prices would rise in the longer term.
Rio increased its bid for the Canadian uranium explorer Hathor Exploration - the owner of the high-grade Roughrider uranium deposit - from $C4.15 a share to $C4.70 a share after Canada's Cameco came back with a $C4.50 a share offer, having started the bidding war in August with an opening $C3.75 a share offer.
Hathor closed on Friday at $C5.06 a share, a 90 per cent premium to its August share price before the initial bid from Cameco. The market is suggesting the battle is not necessarily over with Rio's latest offering.
Roughrider is not the world's biggest uranium deposit but it does have a fantastic grade. Even so, Rio and Cameco are clearly demonstrating by their actions that they believe prices will recover. Rio also recently pumped more than $340 million in to its majority controlled ERA, the owner of Ranger.
Uranium prices plunged by 30 per cent in response to Japan's Fukushima nuclear disaster in March, with safety closures in Japan and the adoption of an anti-nuclear stance by Germany reducing operating plants worldwide from 443 to an estimated 425 plants at one point.
Operating plant numbers have been rebuilding and expectations that the nuclear power plans of China and India remain intact has resulted in uranium prices recovering to $US53.50 a pound. The general consensus is that $US60 to $US65 a pound is likely in the next two years.
But the bidding war between Rio and Cameco for Hathor's Roughrider would not be pinned on those sorts of numbers. Their longer-term expectation would be for something higher given the industry remains in supply deficit and is as vulnerable to supply disruptions as any other sector of the mining industry.
So sentiment in the sector is improving, which is good news for investors who were holding ASX-listed uranium producers and explorers when the Fukushima disaster struck. The values of most are still 50 to 70 per cent below pre-Fukushima levels
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