uranium growth story unharmed

Uranium growth story unharmed by Fukushima drama

IF there's a consummate example of how fortune favours the brave, it's the intrepid punters who weighed into uranium stocks as the Fukushima drama unfolded.
In the days following the March 12 earthquake-tsunami, a sense of

Armageddon pervaded as Japanese authorities struggled to control the stricken reactors.

After a week of headlines about meltdowns and radioactive clouds, the media's interest turned to fireworks in Libya when it became clear there wasn't going to be a neat and cataclysmic denouement (victims dying from radiation illnesses decades later doesn't really make for the moment).

A mere nine days after the disaster struck, the uranium industry looked perilously close to having regained its mojo. At a pre-arranged uranium talkfest in Adelaide last week, the industry faithful offered the usual various excuses as to why Fukushima wouldn't harm the uranium growth story.

"Yes, it was a cock-up, but the industry will learn from any lessons that emerge";

"Yes, it was a cock-up, but it was a one-in-300-year event and the safety procedures worked . . . eventually";

"Yes, it was a cock-up, but no one was killed (yet) while thousands of Chinese coalminers die every year. And what about Deepwater Horizon?";

"Blame the media circus and let's do a whip around for a better PR adviser";

"Haven't you heard of global warning? Nuclear power will have to increase twentyfold if the world is to meet basic carbon-abatement targets";

"Australia should feel guilty for exporting yellowcake. Let's do penance and go one step further and enrich the stuff ourselves!"; and

"Ok, there were a few hairy moments, but do you really think it's going to stop the nuclear programs of energy-hungry China, India and Russia?"

Criterion cringes at the mention of "safe" and "nuclear" said in the same breath. What's especially disturbing is the Tokyo Electric Power Company's inept handling of the whole crisis.

But in essence we suspect the uranium lobby has it right: Fukushima won't alter the fundamentals of uranium demand. In the words of one famous anti-uranium rocker-turned-pollie, it's a case of "short memories". As an acid test to what the crisis really means, the spot uranium price proved resilient during the crisis, retracting slightly to about $US60 a pound but still well up on the circa $US50 a pound at the beginning of the year.

In another sign of (almost) business as usual, Russian buyer ARMZ last week returned to the table with a revised offer for Mantra Resources, a mere 12 per cent lower than the original offer drawn up last December.

It's likely that Japan -- which accounts for 12 per cent of global uranium consumption -- will buy less of the stuff as it audits its nuclear plants (and whatever the case, Fukushima is kaput). This should have minimal effect on producer Energy Resources Australia (ASX code: ERA), which sells 20 per cent of its output to Japan on a take-or-pay basis.

In any event, ERA had been struggling with weather-related supply constraints at its Ranger mine in the Northern Territory.

Paladin Energy (PDN), which operates two African mines, has no direct Japanese clients. The weak spot price won't help its already erratic earnings, but a weak share price merely heightens the appeal of Paladin -- the world's only independent-listed uranium miner -- as a takeover target.

If anything, the disaster will restrict funding for new projects, both in terms of uranium mines and new reactors built to stricter and costlier safety standards. The junior explorers bore the brunt of the panic selling. But in many cases it's questionable whether their deposits had a snowflake's chance in an overheating reactor of being developed anyway.

According to uranium gadfly Warwick Grigor, of BGF Equities, uranium has to be trading $US60 a pound or more to encourage new mines. "If no new mines are developed, then existing production is barely enough to meet the minimum demand estimates, even allowing for moderation and no growth from here.