While I'm still a very strong believer in PEN as a business, the reactor issues continuing to be front page stories into a third day means, inevitably, that sentiment will be against U (as a market investment for some time) so we will have to be patient with these lower SP for a while. but time will sort things, as it always does.
Haven't had a lot of time to think further about the key questions I put forward yesterday - but here's a few initial responses based on a little research and a bit more thinking
1. Will the incident impact the price of U - in the short, medium and long terms?
Pundits are suggesting 'heavily' in the short term - but not in the medium to longer term. For a comment, check this reuters story:
2. Will the incident reduce demand for U and, if so, will this impact PEN's markets?
Seems it will impact demand - but not dramatically so. The research I have seen, suggests there will be minimal, if any, impact in China, France and Russia (3 of the biggest players), the probability of a slowdown in India and USA, and a definite slowdown in Germany. Potential Australian demand is too small to worry about.
Here's an extract on a possible unfolding of response in the USA (critical for PEN) from an excellent article, well worth reading for a brief assessment of likely responses in all key countries (also explaining why India is likely to rtake pause):
"In the U.S., companies including Southern Co. (SO) and NRG Energy Inc. (NRG) have submitted applications to build as many as 21 new reactors, adding to the 104 existing units.
?Certainly it?s going to cause some reappraisals because this is what you call a ?show-stopping? event,? said Robert Alvarez, a senior scholar at the Washington-based Institute for Policy Studies and former senior policy adviser at the U.S. Energy Department.
U.S. utilities canceled 14 nuclear plant orders in the wake of the 1979 partial meltdown at the Three Mile Island reactor in Pennsylvania, according to the International Atomic Energy Agency. The ?immense? psychological effect of the accident spread through the Western world, the agency said in a report.
?The arguments that held sway during the Three Mile Island days will hold sway today with this accident,? said Tom Cochran, a nuclear physicist at the New York-based Natural Resources Defense Council. ?The situations are somewhat similar, assuming this doesn?t blow up or breach the reactor vessel.?
Slower Development
The U.S. should slow the construction of new domestic nuclear power plants until officials can assess whether the situation in Japan signals a need for additional safety measures, said Senator Joseph Lieberman of Connecticut, an independent who heads the Homeland Security Committee.
Twenty-three nuclear power plants in the U.S. were built according to designs that are similar to the Dai-Ichi plant?s, Lieberman said yesterday on CBS?s ?Face the Nation.?
?I don?t want to stop the building of nuclear power plants, but I think we?ve got to quietly, quickly put the brakes on until we can absorb what has happened in Japan as a result of the earthquake and tsunami and see what more, if anything, we can demand of the new power plants that are coming online,? Lieberman said.
Still, Lieberman said he supports nuclear power because ?it?s domestic and it?s ours and it?s clean.? U.S. plants have had a good safety record since safety standards were upgraded after the Three Mile Island accident, he said.
Democratic Senator Charles Schumer of New York said he remains a supporter of domestic nuclear power.
?The bottom line is, we do have to free ourselves of dependence from foreign oil in the other half of the globe,? Schumer said on NBC?s ?Meet the Press? yesterday. ?I?m still willing to look at nuclear. As I?ve always said, it has to be done safely and carefully.?
Those who advocate nuclear power, which emits virtually no carbon dioxide, as a way to combat climate change will now have to deal with a ?greatly heightened skepticism? and ?heightened unwillingness to have nuclear power plants located in one?s own neighborhood,? Bradford said.
The damaged Japanese Dai-Ichi No. 1 reactor, designed by General Electric Co. (GE), began commercial operation in 1971 and is similar to units still running in the U.S., said Cochran, who advised U.S. regulators on the cleanup of Three Mile Island"
Full article at: http://www.bloomberg.com/news/print/2011-03-14/nuclear-renaissance-threatened-as-japan-fights-meltdown-at-quake-hit-plant.html
3. If there are such impacts (lower U price and/or lower demand) will this reduce the project's feasibility?
Unsure about this, but I wouldn't think in any significant way (due to low costs/relatively small supplier). However, PEN is due to release its DFS in April. This may be delayed now to factor in any anticipated policy changes. But this milestone is now more critical. We want to see that the project will be economically robust, despite the changes flowing from the Japanese disaster. If we get this assurance next month, we can sit tight and just wait out the poor sentiment.
4. Will the incident reduce the chances of being issued all the required permits? Or extend the processing times for them (due to heightened public scepticism re U and/or more stringent rules)?
I suspect that it will now be very difficult for PEN to achieve the NRC materials licence 18 months ahead of schedule (ie next March) as they were hoping to do through excellent submission preparation and relationships management. There will be more scrutiny on the NCR and they will have to justify any fast tracking.
So my bet is that the final permits will be issued later - hopefully later in 2012 (rather than in August 2013, as currently scheduled by NRC).
This is not a bad thing in the circumstances. It means a better chance of PEN commencing production at a time when sentiment has improved dramatically. But, of course, it means more patience will be required.
5. Will the incident reduce the chances off raising sufficient capital for mine development?
Probably not - with PALA already on board in a big way. But again, we should know next month according to current milestones - with 'strategic partner' and 'decision to mine' milestones mooted for April 2011.
In responding to the above questions, I have tried to be objective as possible (which is difficult from a holder's viewpoint). I like the company very much, but we have been dealt a serious external blow from left field. We need to deal with that and not fantasise and bury our heads in the sand about it.
My current view is that PEN will survive this crisis and survive it well - but U is going to be 'on the nose' for quite some time. So from a SP point of view, I don't think ther will be any quick recovery. But as the milestones are achieved that recovery (and prospering) will slowly but surely occur.
Good luck to all - short and long term, FA and TA!
PEN Price at posting:
8.5¢ Sentiment: Hold Disclosure: Held
(20min delay)