MARKET VIEWS Two Australian studies positive on uranium outlook Investors in Australian uranium shares would have been comforted by two studies that have claimed the uranium price slip was bottoming and the upside in the coming years would be positive.
Author: Ross Louthean Posted: Monday , 01 Oct 2007
PERTH -
The Australian team for Deutsche Bank's Global Markets Research believes that while the broking house's projection on the future uranium spot price has now been lowered it would still be robust at least until the end of 2009, and perhaps beyond.
A revision on a June quarter assessment was that the projected 2007 spot price would average lower at $US101.35/lb, would then average $US128.75/lb in 2008 and be about $US130/lb in 2009 before tapering to $US95/lb in 2010.
A serious imbalance would remain between supply and demand until 2009 "at the very least," the latest report said.
However, "the risks for more potential market deficits beyond then are considerable."
Deutsche Bank saw this as a "time to buy" selected stocks and it nominated two Australian producers - Energy Resources of Australia Ltd (ERA) which has the Ranger mine in the Northern Territory and Paladin Resources Ltd which recently commissioned the Langer Heinrich mine in Namibia and is developing a second mine, Kayelekera in Malawi.
The broking house also saw price growth potential in Marathon Resources which holds the Mount Gee project in the Flinders Ranges of South Australia and Uranex NL which was delivering strong exploration results from Thatchers Soak in Western Australia and Bahi in Tanzania, and had an evolving project called Mkuju in southern Tanzania.
Deutsche Bank said that ERA's 2007 production capability was dogged with uncertainty due to elevated water levels in Ranger's operating pit as a consequence of a heavy Wet season. This limited mining of high grade zones deeper in the pit and, at one point, the company's 2007 forecast output was reduced to 4,750 tonnes of U308, with 2008 expecting only about 3,350t U308.
Deutsche Bank said, however ERA appears to have achieved a significant milestone in gaining approvals to irrigate land before initiation of the Wet season. The company is undertaking several strategies including increasing the rate of water removal that should see Pit 3 emptied by November.
Full year output in 2007 was now likely to exceed 5,200t while output in 2008 could exceed 5,000t.
Meanwhile, Sydney-based Resource Capital Research in its September quarter study was more circumspect about the near-term rise for spot uranium, predicting it to reach $US90/lb by early 2008 and $US120/lb by September 2008.
A positive ahead seen by RCR was that planned and proposed new nuclear power reactors worldwide increased strongly from January to August 2007. As reported by the World Nuclear Association, this category has increased from 222 reactors (January 29) to 304 reactors (August 30), an increase of 82 reactors (or 37%).
China announced 114 planned and proposed new nuclear power reactors, up from 63 in January '07 (an increase of 81%); and the US is up from 23 in January '07 to 32 units (up 39%).
RCR's study covered global uranium exploration and development companies with a focus on Australia, Canada, the United States and United Kingdom. RCR said more than 500 junior and mid cap explorers, development and production companies were identified in this review that took in uranium exploration "districts" Australia, Canada, US, Argentina, Peru, Mongolia, Zambia, Tanzania and Namibia.
RCR's principal, John Wilson, said the share market valuation of the selection of Australian uranium juniors was up 6% over the past month, down 19% over the past three months, and up 78% over the past 12 months. This compared with a selection of Canadian uranium juniors, up 15% over the past month, down 13% over the past 3 months, and up 68% over the past 12 months.
Australian uranium companies are in aggregate trading at 45% off their 12 month highs and Canadian uranium companies are trading at 48% off their 12 month high.
Juniors are making solid progress advancing through important project milestones. Energy Metals Ltd (Bigrlyi, NT) and Western Prospector Group (Gurvanbulag, Mongolia) have scoping studies pending. Bannerman Resources released its Goanikontes, Namibia scoping study 3Q07.
MNS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)