Well Brian, current market sentiment does not help, but the report attached below also explains a major reason for the weakness. Don't expect this weakness to end anytime soon.
I still hold UNX .... why, i'm seriously asking myself why!
-------------------------------------------------- Uranium price drops, Australia to sell to IndiaWednesday, 15 August 2007 Rebecca Lawson
THE spot price of uranium has recorded its largest single fall in nearly 40 years with analysts forecasting a further 33% price drop to $US70 per pound in the near future.
Uranium specialists TradeTech said the spot uranium price dropped $15 to $105/lb, the largest fall since the company began publishing prices in 1968.
TradeTech cited an oversupply of the metal and decreased demand as the reason for the drop, with the US Department of Energy preparing to auction up to 200 tonnes of uranium. Bids for the auction are due at the end of the week.
"Although current buying interest remains weak with only four buyers (all discretionary) active in the market, some buyers are watching the recent drop in prices closely with a view toward re-entering the market," TradeTech said on its website.
Speaking to MiningNews.net, ANZ Bank analyst Andrew Harrington said the speculative bubble that drove uranium prices to record highs is quickly losing air.
"The market is driven by a huge speculative bubble and despite the fact that it was a highly liquid and highly regulated market, you still had people that managed to figure out a way to speculate on uranium price and drive it up," Harrington said.
"I think some of those people are heading for the exits and [we'll] probably see some pretty drastic falls."
Harrington compares the spot price of uranium to another highly volatile metal, nickel, which has fallen from a record high of around $US54,000 per tonne to a low of $25,000/t.
"I imagine uranium may experience similar falls in the order of 50 percent or so and you may see $70 per pound in the not-so-distant future," he said.
Harrington said anything around and above $50/lb was still a pretty high margin for producers and if the uranium price goes down to $15/lb, no one should panic.
"Uranium price, the long-term price, used to be around $US10-12 per pound so I don't think anyone who is looking at producing uranium on a long run basis would have put anything with three figures in their forecasts of costs and production," Harrington said.
"Only the people who have invested in these highly speculative, non-producing, non resource listed uranium companies should be worried.
"They need to maybe look closely at what it is they expect to have in the way of returns from their investment."
Meanwhile, Resource Capital Research analyst John Wilson told MiningNews.net the fundamentals of the uranium story remain strong.
"The fundamentals on the uranium story remain very strong in terms of climate change, energy security, the number of new reactors being planned or proposed or being built, so I think the underlying story remains very solid," Wilson said.
He added there will be a "softness route" for the metal price through to the end of the year, following on from the northern hemisphere summer where demand from utilities traditionally softens.
"There is also some indication of hedge fund selling early in the summer which also reflects the price at the moment," he said.
Uranium reached a record high of $138/lb in June before it started its slump, ending a two-year reign of continuous price hikes.
Uranium producers Energy Resources of Australia and Paladin Resources experienced drops of 4.3% to $16.88 and 6.3% to $5.52 respectively, helped along by another fall in the broader market.
Australia has officially decided to start uranium shipments to India even though the latter is not a signatory to the nuclear non-proliferation treaty, news.com.au reports.
Following more than two hours of deliberation, the National Security Committee of federal cabinet decided last night to allow uranium exports to India.
The decision includes a condition that Australian inspectors are allowed to check on-site that the metal is only used for peaceful purposes and electricity generation.
The Federal Government has previously flagged the prospect of shipping uranium to India but was conscious of nuclear tensions between the latter country and its neighbour Pakistan.
MNS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
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