AGS probably dropped because the spot price went down by $5....

AGS probably dropped because the spot price went down by $5.

Casey thinks no further drop, and here’s why:

-The DOE will not be selling uranium for the next while.

That ill-timed DOE uranium sale in August was the last government shipment available to the public this year, according to an agency news release. This means no more downward pressure from the government side.


-BHP is short roughly 1.9 million pounds of uranium.

Australia’s Olympic Dam uranium mine continued to operate at only 80% of capacity, according to owner BHP Billiton. BHP blames this shortcoming on port and rail restraints on the Australian coast. The lower uranium production, coupled with customers exercising their contractual rights to purchase additional uranium, means BHP will be short almost 2 million pounds of uranium. Also, we’ve heard that uranium grades at Olympic Dam have been lower than expected, leading to a drop-off in production. This could very well be a temporary problem as different areas of such a massive deposit will have different grades, but for now, it will have a very bullish influence on uranium. Most likely, BHP will have to enter the spot market to fulfill its contractual obligations.


-The long-anticipated uranium exchange traded fund (ETF) is coming.

Van Eck Global is expected to launch the world’s first uranium ETF later this autumn, which will add further speculation and demand in the uranium market. Speculators will come back full force when the news that BHP needs to buy uranium comes out.


-The DOE ultimately sold only one-eighth of the uranium that analysts anticipated, so those who lost out on the auction will have to re-buy at spot price.

Industry analysts originally planned for 4 million pounds of uranium to be sold by the DOE regardless of price. However, after August it became clear that only 500,000 pounds were going to be sold. This will force buyers to the spot market when they need uranium in the upcoming months. Since uranium is bought 12-24 months ahead, the utilities can hold out for a while… but not indefinitely. In August, the DOE sold into little volume; however, buyers in the future may be forced to buy into a similar lack of volume, which could send uranium spot prices on another leg upwards.

So here’s the meat: now is a great opportunity to strategically load up on excellent uranium juniors you may have missed. With these short-term, imminent signs that uranium is going back up, perhaps even faster and harder than its stumble, we are holding our uranium juniors tightly.