Speculators make uranium the latest commodity boom
www.nytimes.com
There aren't many. Prices for processed uranium ore, also called U308, or yellowcake, are flying through the stratosphere. Yellowcake is trading at around $90 a pound, nearing the all-time high, adjusted for inflation, of about $120 in the mid-1970s. The price has more than doubled in the past six months. As recently as late 2002, it was below $10.
A string of natural disasters, notably the flooding of large mines in Canada and Australia, has triggered the most recent spike. Hedge funds and other institutional investors, who began buying uranium in late 2004 to exploit the volatility in the relatively small market, have accelerated the price rally.
But the more fundamental causes of the uninterrupted ascendance of prices since 2003 can be traced to inventory constraints among power companies and a drying up of the excess supply of uranium from old Soviet-era nuclear weapons that was converted to use in power plants, coupled with the expected surge in demand from China, India, Russia and a few other countries for new nuclear power plants to fuel their growing economies.
"I'd call it lucky timing," said David Miller, a Wyoming legislator and president of Strathmore Mineral, a uranium development firm. "Three relatively independent factors - dwindling supplies of inventory, low overall production from the handful of uranium miners that survived the 25-year drought and rising concerns about global warming - all have coincided to drive the current uranium price higher by more than 1,000 percent since 2001."
Strathmore controls more than 3 million acres, or 1.2 million hectares, of exploration projects in Canada and previously discovered sources in the United States, primarily around Grants, New Mexico. In its heyday the Grants "uranium belt" coughed up 340 million pounds, or 154 million kilograms, of uranium, making New Mexico an even larger producer than Utah or Wyoming. Some politicians in the area are rolling out the red carpet for what they hope will be a new wave of mines, mills - and jobs - in the region.
Strathmore, with a market capitalization of $300 million, is one of some 400 publicly traded "uranium stock" companies, most of which are on the Toronto Stock Exchange. Many of them are much smaller than Strathmore. Some are essentially shell games.
"There's so much money pouring into this sector," said Julie Ickes, editor and publisher of StockInterview.com, which tracks uranium prices and companies.
"If you put 'uranium' in your company name, you can look like you're looking for property. It's a lot of talk."
The feverish trading in speculative uranium company shares harks back to the early 1950s, when some 500 stocks traded on the Salt Lake City Penny Stock Exchange. Moab then touted itself as "the uranium capital of the world."
"You could say there were more millionaires than people here in Moab," quipped Sam Taylor, 73, who has been the publisher of the local weekly, The Times-Independent, since he took it over from his father in 1956.
Globally, some 180 million pounds of processed uranium is consumed each year by nuclear power plants. Production worldwide from mines amounts to only 100 million pounds. Roughly 75 million pounds comes out of utilities' stockpiles. What is actually traded in the spot market is only about 35 million pounds.
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