namibia uranium article, page-5

Yet another article on U3 future demand ....however the way its dragging out ....I may not reap the benefits

Maybe I could join Tibbs as an ........

"Orangatang Trainer" in Malaysia & teach 'em how to trade on the ASX."...

Merry xmas everybody ....ho ho ho !!

December 15, 2009

Theres Been Plenty Of Activity In Uranium Lately, Even If The Spot Price Still Leaves A Lot To Be Desired


By Sally White and Alastair Ford



Russia spooked the uranium markets last week, and that was no help at all in a market that had already been weakening. Prices had in any case been easing back on the transfer of uranium by the US Department of Energy to New York-listed USEC, which operates the only enrichment facility in America. That created an environment in which the latest spot price is around US$45 a pound, five per cent lower than it was three months ago, and in which long term contract prices are also weakening.
But last week Russia decided to assert itself, broadcasting that it would be supplying the world with nuclear fuel in a couple of years, and making it sound as though it would flood the market. This new supply would be from the recycling of the countrys Cold War arsenal. Currently, Russias ageing nuclear arsenal is recycled for it by the US on a contract that runs out to 2013. Russia also said it would increase output from uranium mines and increase enrichment capacity.

The Russian supplies from old warheads are currently key to the global uranium market, accounting for 13 per cent of world supply, and helping to fill the current shortfall from mined output. In fact, most analysts expect Russian supplies to the US to continue after the contract expires, but to fall to around two thirds of current levels.

At Macquarie Securities, though, analyst Max Layton said concerns about global supply following the expiry of the Russia/US agreement were being overplayed. The Russians will use it, sell it to the Chinese, or sell it as part of other reactor packages. From a global supply-demand balance perspective it doesnt matter whether they sell it to the US, he commented.

Whether thats true or not, theres no doubt that Russia has been pursing lucrative deals to supply fuel directly to US power companies. Six commercial contracts have already been signed with US nuclear power plant operators, said Ivan Dybov, spokesman for Rosatoms civilian arm, Atomenergoprom.

Meanwhile, if the uranium price has been weaker, that weakness has not so far been felt on equity markets, or at least not directly. Uranium miners have been doing rather better than the mineral itself. The latest market valuation of uranium companies published by Resource Capital (RCR), and out last week, showed an average 12 per cent rise in value over the last month and of 353 per cent over the last 12 months. Canadian companies show a four per cent rise over the last month and 198 per cent on the last 12 months.

An increasing number of projects have gained mining licences RCR lists among others Toronto quoted Mega Uranium, for Lake Maitland in Western Australia, and Australian quoted African Energy Resources for Chirundu in Zambia. Meanwhile, several uranium juniors have been making serious progress with development projects, including Manhattan Corporation, which is currently drilling in Australia, and which has been ably promoted by boss Alan Eggers the world over. Manhattans share price has increased markedly over the past six months, and Mr Eggers says he sees no reason why it wont continue to rise. Before we commit on that, well have to let the drill bit have its say, but it was interesting to see, in a recent presentation at our Minesite Christmas forum, a schematic in which Mr Eggers represented the number of nuclear power stations either at the commissioning stage, or at the planning stage. The overwhelming majority of these were in China.

That presents a likely dynamic which one or two mining company directors, including Andrew Bell of Red Rock, Clive Sinclair-Poulton of Beowulf, and Mark Reilly of Forte Energy have recently highlighted. The Chinese will increasingly be looking to lock up uranium supply to feed all these new power plants, while the Russian decommissioning can only go on for so long. Clive Sinclair-Poulton reckons that once the true scale of the Chinese requirements becomes clear after the Chinese have already acquired most of what they need then the upward pressure on the uranium price is likely to be substantial. Whether that will be felt next year remains to be seen, but theres no doubt that uranium bulls have plenty to be cheerful about even if the short term price is weakening. And the way to play that seems to be in equities.



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