Half-life of uranium miners' slump may prove short Barry...

Half-life of uranium miners' slump may prove short
Barry FitzGerald
May 4, 2011


Chatter that the partial meltdown at the Fukushima nuclear power plant in Japan would kill off long-term demand for uranium is proving to be exaggerated if recent actions of state-owned nuclear groups in Russia and China are any guide.

Prior to the tragic events at Fukushima and surrounds, Russia's Rosatom and China's CGNPC demonstrated what they thought about the long-term demand for uranium would be by lobbying $1 billion-plus bids for uranium deposits in Africa involving Aussie companies.

Rosatom bid for ASX-listed Tanzanian uranium developer Mantra Resources (ASX:MRU) while CGNPC lodged an intention to bid for London-listed Kalahari Minerals, the owner of a 43 per cent stake in ASX-listed Namibian uranium developer Extract Resources (ASX:EXT).
Advertisement: Story continues below

Post the (on-going) dramas at Fukushima, Rosatom reached agreement with Mantra to reduce its agreed bid price by 12 per cent. And overnight, Kalahari told the London market that CGNPC wanted to shave 7 per cent off its takeover bid, subject to it winning an appeal to Britain's Takeover Panel which would allow it to do so.

So we know that the Russians and Chinese still think that there is a need to secure long-term supplies of uranium, even if the price of doing so has come off by 7-12 per cent.

It is against that background that other ASX-listed uranium explorers/developers not currently the subject of a takeover bid have been beaten down something shocking in the post-Fukushima world. Share price declines of more than 50 per cent since Fukushima took the double hit of earthquake/tsunami are common.

Time will tell if the sell-off has been overdone. But on the basis of what the Russians and Chinese are up to in the sector, you would have to think so.

Take the Mantra bid. The Russians are still happy to pay something north of $US8 a pound for reserves/resources at Mantra's (undeveloped) project in Tanzania.

Garimpeiro's interest today is what that might mean for A-Cap Resources (ASX:ACB). It has just upgraded the resource estimate at its Letlhakane uranium project in sunny Botswana by 65 per cent to 261 million pounds, making it the tenth-biggest undeveloped uranium deposit in the world.

The market yawned when A-Cap released the upgrade, leaving the stock at 34 cents a share for a market capitalisation of $68 million. That values Letlhakane's in-the-ground uranium at all of 26 US cents a pound.

Now Letlhakane is not the highest grade uranium deposit around but there is an expectation that a mine study now underway will confirm that it will be able to produce uranium for something less than $US40 a pound.

That compares with the current Fukushima-affected spot price of about $US55 a pound and the $US72 a pound long-term price ? the one that matters when it comes to the price power utilities are prepared to pay to secure supplies for their multi-billion dollar power plants.

What's more, A-Cap let slip last week that while the local market might be sleeping when it comes to the uranium sector, the operator of all of South Korea's nuclear power plants, KEPCO, is not. Like the Russians and Chinese, the Koreans are out there looking to secure long-term uranium supplies.

KEPCO and a bunch of technical experts from the US have visited Letlhakane as a possible opener to KEPCO taking up a stake in the project of 40 per cent. Don't expect that to happen in a rush.The Koreans will first want to see A-Cap confirm mining costs of less than $US40 a pound.

That will come when A-Cap completes a bankable feasibility study in to a development of Letlhakane early next year, with a view to getting it in to production in 2013. Assuming A-Cap ticks all those boxes, its current market value of 26 US cents a pound of uranium-in-the-ground is likely to have become but a distant memory.

http://www.smh.com.au/business/halflife-of-uranium-miners-slump-may-prove-short-20110504-1e7c5.html