Cameco sees long-term uranium deficit, price riseWed Jun 11,...

Cameco sees long-term uranium deficit, price rise

Wed Jun 11, 2008 5:01pm EDT
(In U.S. dollars, unless noted)

By Cameron French

TORONTO, June 11 (Reuters) - Uranium prices should continue to be volatile over the next few years, but should rise in the long term as uranium supply falls well below global demand for the fuel, a Cameco Corp (CCO.TO: Quote, Profile, Research) official said on Wednesday.

Speaking at a mining conference in Toronto, Chief Financial Officer Kim Goheen said new construction of nuclear reactors, led by China, Russia and India, should result in steep uranium production deficits that will drive prices higher.

"Global support for nuclear energy has never been stronger as the world grapples with balancing an increasing electricity demand with security of supply and climate-change issues," he told a mining conference in Toronto.

He said the world's fleet of about 440 nuclear reactors should grow by 83 by 2017, which should result in a cumulative deficit of 450 million pounds of uranium to that point.

Current reactor demand is seen at 182 million pounds this year, while mined output is expected to be about 125 million pounds.

Mined uranium production has fallen short of reactor demand for years, due to weak prices in the past decade, which stifled exploration and led to abandonment of mines.

The shortfall has been made up by secondary sources, such as decommissioned nuclear weapons or recycled uranium.

But as these sources evaporate, resources will fall short of demand, Goheen said.

Spot prices hit a record high of $136 a pound a year ago, but were around $59 this past week. However, prices were below $10 a pound as recently as 2002.

Since most uranium is sold under long-term contracts, actual realized prices generally lag moves in the spot market.

With most utilities' requirements already contracted for the next few years, Goheen said spot prices could be hard to predict due to thin volumes.

"(But) irrespective of today's volatility, the long term fundamentals are overwhelmingly positive," said Goheen.

Cameco, based in Saskatoon, Saskatchewan, is the world's top uranium producer and expects to produce about 21 million pounds this year. ($1=$1.02 Canadian) (Reporting by Cameron French; editing by Rob Wilson)