URANIUM sector stocks soared yesterday after Prime Minister John Howard said an accord could be signed as early as next week to allow exports of the nuclear fuel to China.
The news coincided with a Resource Capital Research report predicting that Chinese investment in Australia's more promising uranium exploration juniors was likely to follow execution of such an agreement.
"Security of uranium supply is paramount to China's expanding nuclear power industry, and cost is a secondary issue," wrote RCR analyst John Wilson who also predicted the yellowcake spot price was likely to rise from $US40/lb at present to $US58/lb by June next year.
"As such, the junior end of the market, particularly companies with code compliant resources still continue to receive a high degree of interest.
"We understand that many companies have already commenced dialogue with Chinese investors."
China plans to boost nuclear energy fourfold by 2020 by building 28 nuclear power plants to meet rising energy demands, according to the World Nuclear Association.
Mr Howard said China's Premier Wen Jiabao might sign the uranium export agreement when he visits next week, paving the way for direct Chinese investment in the sector.
"The discussions with the Chinese have been going on for some time, we have made very good progress," Mr Howard said in Canberra yesterday.
"It's possible the discussions could be satisfactorily concluded so that something could be said or signed when the Chinese Premier visits Australia next week."
He said an Australian delegation would travel to India to discuss a uranium treaty the country signed with the US.
Australia, which has the world's largest known uranium reserves, started talks last year with China to ensure exports would be used only for peaceful purposes.
While shares in leading Rio Tinto-controlled yellowcake producer ERA jumped 45¢ or 3.4 per cent to $13.75, the main price action was at the exploration end of the sector, led by recent bourse debutant Encounter Resources (ENR) which piled on a staggering 85 per cent to close up 40.5¢ at 88¢ after trading as high as $1.15.
Deep Yellow (DYL), which has uranium exploration licences in Australia and Tanzania, bolted up 5¢ or 43.5 per cent to close at 16.5¢. Extract Resources (EXT) shot up 2.9¢ or 30.2 per cent to 12.5¢ while Pepernini Minerals stacked on 7¢ or 21 per cent to close at 40¢.
Jindalee Resources spin-off Energy Metals (EME) gained almost 15 per cent to finish the day up 33¢ at $2.53 and Summit Resources gained 12.5¢ to close up 10.6 per cent at $1.30 while recently listed explorer Toro Energy (TOE) ended up 8.5¢ at $1.39.
Fat Prophets resources analyst Gavin Wendt noted that the potential opening up of the Chinese market was increasing confidence that all the exploration spending now going on was actually worthwhile.
"If it was possible to add more enthusiasm to the whole uranium sector this has done it," he said.
Shares in BHP Billiton, which produces uranium at its Olympic Dam mine in South Australia, also gained 7¢ to close at $26.85 amid the renewed wave of optimism.
Spot prices for uranium are expected to surge 34 per cent this year and average more than $US38 a pound, helping boost uranium export earnings 50 per cent to $712 million ahead of a further rise next year, according to the Australian Bureau of Agricultural and Resource Economics.
Australia has about 30 per cent of global uranium reserves but currently meets only 21 per cent of demand.
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