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Gday BT, Not music to my ears but supports my thesis uranium...

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cait11

458 Posts.

20/04/15

10:16

Post #: 15117259
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Originally posted by battenberg trust ↑

Music for friend Caites Ears,

The U3O8 spot price has floundered a little since the start of April. Though it was sitting at $39.50 at the beginning of the month, it's since dropped down to $39 per pound.
Compounding that stagnancy, the uranium market was dealt a heavy hit this week when a Japanese court issued an injunction to block the restart of two reactors at Kansai Electric Power Company's (TSE:9503) Takahama nuclear power plant. Reactor restarts are a key psychological catalyst for the uranium market, and the news is expected to have a negative impact on the space.
Safety concerns
Nuclear power is not looked upon favorably in all areas of Japan, and the Fukui Prefecture, where the Takahama plant is located, is one such place. It's thus perhaps not too surprising that the Fukui District Court shelved plans to restart the two reactors.
The court's decision was reportedly made on the basis of safety concerns and is the first injunction against any nuclear power plant in Japan in 50 years. Specifically, the court ruled that regulations implemented after the 2011 Fukushima disaster are no guarantee against another accident.
"The new regulations are not reasonable, therefore there is no need to study whether the Takahama plant satisfies them," the court said, adding that the regulations are "so loose that compliance with these regulations wouldn't secure the safety of this plant."
According to NHK, residents of the Fukui Prefecture are in favor of blocking the reactors, and have "argu[ed] that the government's plans ignored or underestimated risks and failed to meet tougher safety standards that were imposed after the Fukushima crisis."
Kansai Electric is working on getting the injunction lifted. Originally, the reactors were scheduled to restart later this year, but that is now unlikely given the setback.
What's an investor to do?
Raymond James analyst David Sadowski believes that while the injunction is negative for the uranium space, there are many other areas in Japan that will ultimately support reactor restarts.
He states in a note released this week that the "underlying narrative remains supportive" and "reactors should get restarted eventually and much of the 100 Mlbs will be required to fuel them." He also notes that on the whole there has been a lot of support for getting reactors back online, and that's led him to view this setback as merely a bump in the process.
He does, however, note that it is unclear if Japan's pro-nuclear central government will be able overturn district courts like the one in Fukui Prefecture. In addition, the court's decision could still have a negative impact on equities, and could slow down the process of bringing nuclear power back to Japan. Sadowski also believes that if more utilities are blocked, the uranium price could bear the burden, sinking lower as the market factors in the implications.
Still, Sadowski is positive on the uranium market long term. His note includes a model of a scenario in which 20 reactors restart over the next four years, and it shows that excess inventories would be slowly chipped away at through to about 2019. If only 10 reactors come online over five years, oversupply will rise, negatively impacting prices. However, even in the latter scenario the situation would be rectified by roughly 2020, leaving the supply shortfall intact.

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Gday BT,

Not music to my ears but supports my thesis uranium will be lower than the markets believe.

What I find interesting is on page 6 of the John Kyle HT valuation report. It says HT is worth $13 million. That is for 100%. But we know BLR does not own 100% of HT and needs to pay $13,5 million to own 100%. It would seem to me that WU is paying too high a premium. This deal might see WU walk away. Then we will have trouble.

Cait

BLR Price at posting: 0.3¢ Sentiment: None Disclosure: Not Held
2 Upvote

0 Great analysis

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