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Uranium boom predicted
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Australian Broadcasting Corporation

Broadcast: 02/04/2007

Reporter: Neil Woolrich

Neal Woolrich reports that concern over global warming is likely to produce a boom for uranium miners.

Transcript
ALI MOORE: Australia's uranium sector was abuzz today on newspaper reports of a massive discovery in South Australia. It comes at a time when the price of uranium has jumped 10-fold in five years. In another sign of growing support for the industry, the Prime Minister today toured the world's biggest uranium deposit - BHP Billiton's Olympic Dam. Neal Woolrich reports.

NEAL WOOLRICH: It's a sight that until recently might have been considered a political death wish.

JOHN HOWARD, PRIME MINISTER: The coalition remains very strongly committed to the expansion of this mine. Unlike Mr Garrett, who has reservations about the expansion of uranium mining, the coalition has no reservations.

NEAL WOOLRICH: Today the Prime Minister had a first-hand look at the world's biggest uranium deposit - BHP Billiton's Olympic Dam in South Australia. As fears over global warming increase, nuclear power is enjoying a renaissance, and tight market conditions have pushed the price of uranium up 10-fold in five years.

ANDREW HARRINGTON, ANALYST, ANZ: We've seen a chronic underinvestment in uranium mining and that's seen a very slow response to increased demand. At the same time, we had a lot of uranium supply coming from recycling of old weapons, old nuclear weapons, and that source of supply for uranium is starting to dwindle.

NEAL WOOLRICH: More than 40 uranium stocks are listed on the local market but only BHP Billiton and ERA mine it in Australia. ERA's share price has more than doubled in six months, despite falling five per cent today on forecasts that heavy rain would cut production by up to a third.

WARREN EDNEY, SENIOR MINING ANALYST, ABN AMRO: Our view is that the earnings will certainly improve and the PE multiples will contract substantially by 2010 when they do get some benefit from the much higher uranium prices. So, there is still some value there. Obviously, the key longer term for them is what happens with Jabiluka.

NEAL WOOLRICH: Today Adelaide Resources soared 18 per cent and Alliance Resources 12 per cent, on reports that a massive deposit has been found in South Australia. That could bring them to the attention of private equity firms, who are taking an increasing interest in the sector.

ANDREW HARRINGTON: There has been some noise in the market about private equity or speculative players that have bought stakes into companies that are legitimate buyers and using that entry point as a means to get involved in the purchasing of the metal.

NEAL WOOLRICH: ABN Amro's Warren Edney says the health of the local industry will depend on whether the Australian Labor Party abandons its no new mines policy.

WARREN EDNEY: It does seem to mean that the Australian explorers do trade at a discount to their North American or Canadian peers, maybe as much as 20 per cent.

NEAL WOOLRICH: But, if the ALP doesn't shift, Australian explorers may have to follow the lead of Paladin Resources. In three years it's grown from almost nothing to become a $5 billion company, by mining uranium in Africa, and, in the process, side-stepping the political debate back home