Australian Financial Review PRINT EDITION: 15 Mar 2011 Street Talk Edited by Sarah Thompson and Paul Garvey
The nuclear power plant issues in Japan are understandably weighing on shares of uranium explorers and producers.
But the bulls think China's continuing focus on nuclear power - albeit probably with extra safety precautions - will be enough to keep the yellowcake market sufficiently strong to absorb extra supply in the longer term.
Shares in Extract Resources, whose major shareholder Kalahari Minerals is subject to a potential takeover offer from China Guangdong Nuclear Power, plunged 7.7 per cent to $9.81. That compares with the $10.75 seethrough value of the bid for Kalahari. As long as the situation in Japan doesn't worsen significantly, Street Talk hears China Guangdong is likely to remain very much interested in bidding for Kalahari and ultimately Extract.
As for uranium demand as a whole, the incident in Japan could affect new nuclear plant construction in developed countries and India, but it is unlikely to speed the decommissioning of older reactors. The lives of those are often being extended, and notably last year there was twice as much uranium demand from new reactors than was lost from the retirement of older plants. Construction of another 62 new reactors is already under way.
That said, in the short-term demand for uranium will fall due to the hiatus at the Japanese reactors.
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