THE MYSTERY BEHIND URANIUM PRICING Jonathan Ratner, Financial Post Published: Wednesday, May 30, 2007 If you think those uranium sales that are often cited as the basis for recently skyrocketing prices are secretive processes, you're right. Everyone wants to know what price people are willing to pay for the nuclear fuel.
While they are often referred to as auctions, these uranium sales are done via a single round of private sealed bids, according to Eric Webb, senior vice president of information services at Ux Consulting Co LLC.
Market monitors like UxC and TradeTech provide commentary and develop uranium spot price indicators based on the most competitive offer price out there and other deals, but they never reveal actual bids.
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Printer friendly Font: ****Unlike gold or oil, there is no formal exchange for uranium. However, the recently-established NYMEX futures market may push the showdown between traditional uranium players and a new crop of participants further.
The next auction -- for 100,000 pounds of U3O8, the naturally occuring form of uranium -- has its bids due on May 30 and comes from Mestena Uranium LLC. A previous auction of the same size from the Texas-based company drove spot uranium prices to a new record of US$113 a pound in early April. Prices now stand at US$125, according to UxC.
Another unidentified seller, possibly a hedge fund, reportedly has two lots up for sale with bids due by June 1. The first lot is said to be 200,000 pounds of U3O8, while the other is for 100 kilograms of an enriched version of uranium(UF6), which is equivalent to 260,000 pounds of U308.
These two offerings constitute the largest amount of spot uranium into the market in many months, so it wouldn't be surprising to see price indicators move again sometime soon.
When a seller is prepared to go ahead, a letter with all the bidding specifications goes out to potential buyers with accounts that can hold physical uranium. These are primarily industry participants like utilities, suppliers and those in the broader category of fuel cycle companies, as well as traders and brokers.
Canada's Uranium Participation Corp. holds its uranium through management company Denison Mines Inc. for example. However, few in the financial community have direct accounts and suppliers have generally not been interested in their business, Mr. Webb said.
While he doesn't see any acceleration in the number of lots put up for sale, the way transactions take place has changed somewhat in the last couple of years. Traditionally, buyers make requests and sellers respond with offers to sell. These days, Mr. Webb said, sellers are increasingly putting their material up for bid.
Meanwhile, another interesting development raised by some uranium experts is that speculators may be driving up the spot price of uranium in order to boost the value of their investments in mining stocks.
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