golden era of profit looms for uranium

Golden era of profit looms for uranium

Cameron England, Chief Business Reporter
From: The Advertiser
March 21, 2011 6:37PM

URANIUM producers are facing "a golden period of profitability", resources analyst Warwick Grigor says.

Speaking at the Paydirt 2011 Uranium Conference in Adelaide, Mr Grigor, from BGF Equities said the outlook for the uranium price was "satisfactory at its worst'', while demand continued to rise - despite the hyperbole surrounding the effect of the Japanese nuclear incident on the industry."There is a golden period of profitability coming for uranium producers and those who can become producers within a five-year timeframe,'' he said.

"Given the long-term outlook is very positive, even those that take longer to commence production should still have sound businesses provided they are not highly levered to the uranium price.''

Mr Grigor said Australian uranium companies had fallen in value by 33 per cent on average since January 28.

"When share prices make such dramatic breaks there is a complete shift in psychology,'' he said."All the old rules are thrown out the window. What goes down doesn't necessarily go back up.

"It took many months of building to reach the heights of December-January.

"It will take much more buying to get back to those heights.

"Here, today, it is difficult to see where that buying is going to come from.''

Mr Grigor said that Australian uranium companies represented good value at the moment, but would face problems in areas such as finding funds.

"Unless there is a solid recovery in the market sentiment for uranium stocks we will see continuing finance being a real concern for every uranium company,'' he said.

"It is back to the days of companies having to prove that they deserve the financial backing.

"They will be scrutinised much more closely. Many won't achieve the standard, particularly in the exploration stakes.

"This will have a general dampening effect on the whole sector as expenditure and progress become more measured.''

Mr Grigor said he believed the worst of the fall in the uranium price, from the peaks of $US135 per pound in June 2007, had already occurred.

"The price could reasonably trade within the $US60-$US90 per pound range for the balance of this year,'' he said.

"It would be most surprising to see it fall any lower.

"This means we can stop focussing on it as the primary reason to be in or out of the sector.

"We can start to focus on individual companies and project merits.''

According to Ux Consulting, the current price for uranium oxide is $US60 per pound.

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