One article, in a city newspaper, quoting a local stock broker, decimates all world uranium explorers (except EXT)
Areva should have talked to this guy before spending $ 2.5B on Uramin + $1B on the Trekkopje deposit (120-150ppm). Areva, the largest vertical integrated company in the uranium sector, in the world, knows more than this guy.
Couple of points:
1. EXT will be the MOST profitable new deposit; not the ONLY profitable deposit.Return on investment, at curret sp's, remains to be seen. Markets differentiate varying profit abilities via share price.
2. There is a mountain of reports out in 2009, all pointing to increases in demand and supply requirements. I draw your attention to the most recent, by the CRU Group, which was quoted in the SMH article.
A couple fo quotes from the CRU site, re their report " Next Generation Uranium – at what cost?":
" (There will be a)significant impact on the market dynamics of the uranium industry in the coming decades. The long-run availability of uranium and the cost of this supply will be a critical consideration. A key question is the price required to incentivise companies to find and develop the next generation of mines...."
" The 26 uranium projects reviewed in our analysis have been selected as a representative sample of the broader industry. The anticipated long-term supply ‘gap’ establishes a requirement for new mining capacity.
· CRU Analysis believes that, in the long-term, the uranium market must post a sufficiently attractive price, and hence a reasonable rate of return, in order to attract investment in exploration for, and development of, new mine capacity. "
" (CRU estimates that more than 3,000 projects are under development globally), project quality is declining: CRU calculates that the average grade of projects at the feasibility study stage is 35% lower than the grades of current mines. Exploration projects have average grades 60% below existing operations. As a result of these lower grades, and/or location in higher-cost geographical regions, next generation projects will have higher operating costs, on average, than current producers.
“The uranium spot price has averaged just $33/lb since the turn of the millennium, and is currently about $46/lb,” added Parums. “So it’s clear that there will need to be a significant long term increase in prices to enable the development of new mine capacity.”
CRU report concludes that there will be an increase in the U3 to compensate for the next generation, lower grade deposits
3. Gizmo's assertion, that BMN (and many other explorers / developers) is a dead duck, because it is a hard rock 200ppm deposit, is based on the conclusions of a broker and a journalist, in a SMH report.
I place more faith in people like Dattel's; industry reports, and companies like Areva.
Long mine life, and secure supply are just as important as ppm's. I bet you that both India and China rate these two things very highly.
" ''The only companies that are going to get [contract pricing] of $US60-$US70 a pound are the big companies and projects with 10- and 20-year mine lives."
Remember, the cost of yellowcake is a very small component in the overall scheme of nuclear power generation; look at Areva.
Don't be too haste to write off all developers, other than EXT.
Without fear or favour, Skip.
DISCLOSURE: I own EXT, PEN, ERA, PDN, BMN, POLO(AIM), RIO, BHP, ACB.
P.S.1 - I presume the reference by Warwick Grigor at BGF Equities, to "hard rock" was to differentiate explorers with ISR deposits like PEN. I also presume, the 200 ppm reference was to differentiate between BMN and EXT.
If BGF are pushing PEN and EXT, then you can draw your own conclusions from his comments. After all.."BusinessDay asked a long-time uranium sector watcher, Warwick Grigor at BGF Equities, for tips."
P.S2 - Gizmo, I lost your email AGAIN (hopeless), please resend. I'm going to have to come down to Curitiba and sort you out over a couple of caparinhas!!!LOL
EXT Price at posting:
$9.11 Sentiment: LT Buy Disclosure: Held
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