'uranium returns to the agenda'

source:Joh Beveridge, heraldsun.com.au,15/2/12

AUSTRALIA'S battered nuclear sector got an airing yesterday and it was a tale of two cities.
Paladin, with its suite of African uranium mines, managed to increase production a little but also ratchet up its first half loss to $US120.2 million, courtesy of a whopping $US133 million impairment charge on its Kayelekera mine in Malawi.

Which helped the market decide to let another 5.6 per cent of air out of its tyres.

At the same time exploration minnow Uranex enjoyed a 32.4 per cent share price rise after revealing that some "unsolicited approaches" from parties in Asia and North America were now in the running for a joint venture on its very promising Mkuju uranium project in Southern Tanzania.

These new players are in addition to the Chinese government, finance and business figures that are already in joint venture negotiations, adding some much needed competitive tension as players try to get access to future uranium supplies, despite the damage done to the industry by the Fukushima nuclear accident.

It all adds up to a fairly confusing picture for those brave souls keen to invest in the nuclear sector in Africa, although the traditional warning that the big share price gains happen to explorers rather than miners is worth keeping in mind.

The attraction of Paladin is exposure to any rises in the long-term uranium price and the removal of some operational risk at its producing mines.

While Paladin failed to live up to promised production numbers, its Langer Heinrich mine is now operating at 92 per cent of stated capacity and Kayelekera has ramped up to more than 90 per cent.

Uranium bulls point to the fact that only three countries have scaled back their nuclear plans post-Fukushima - Italy, Germany and Switzerland - while Japan, France, the US, Britain and South Korea are maintaining or growing nuclear power and China, India and Saudi Arabia are rapidly expanding theirs.

Between them, China and India alone are planning 225 new reactors, all of which will need long-term uranium supplies.

Low uranium spot prices have tightened the supply side of the equation by slowing uranium exploration and mine development.

Uranex has the advantage of plenty of upcoming news flows as a maiden mineral resource estimate, some metallurgical test work and an environmental study on drilling at its Likuyu North deposit will all be released in March.

These tests should show how easily and efficiently uranium can be extracted from the sandstone style of mineralisation by acid leach processing.

Add in the potential for a decision on a joint venture partner and positive drilling on the highly prospective Likuyu South deposit and Uranex switches from a speculative buy to a speculative buy on the dips following the healthy lift in its share price.

Paladin switches from a buy to a hold, given any repricing courtesy of firming uranium prices will be a longer term proposition.