Cautious outlook for uranium

Ines Schumacher | Thu, 18 Jun 2009 18:37

[miningmx.com] -- JUNIOR uranium stocks have shown a strong price gain over the past quarter, suggesting fundamentals for the uranium sector are trending upwards, Resource Capital Research (RCR) said in its June quarter report.

The past three months have shown over 100% growth in the Australian and Canadian uranium company market valuations, an indication that there has been a slight strengthening in the uranium price.

However, RCR warns that the future remains uncertain. “Over the past month, increases have been more subdued and caution is recommended for the second half of 2009 with concerns of a potential ‘W’ shaped market dip,” RCR said in a media release on Thursday.

The fund implied price, a leading price indicator, has pulled back from recent highs, RCR said.

The uranium spot price is trading at around $52 per pound, up 22% from three months ago, whereas the fund implied price has retreated from a recent high of $50.50/lb.

RCR reckons the long-term contract uranium price is $65/lb, down from $70/lb in December 2008.

“Strengthening of the spot price in May was likely a response to the C$100m capital raising by Uranium Participation Corp and to the initial uncertainty surrounding the Kazakh government’s investigation of KazAtomProm,” RCR said.

KazAtomProm has since assured the market that it will be able to fulfil its existing deals with foreign partners and it will meet its future production promises.

Other recent news in the uranium sector has been that China may adjust its nuclear energy production target upwards to 72 GWe by 2020, an increase of 60 GWe on the previous target.

RCR said this would require China to bring 60 new reactors on stream. Twelve reactors are currently under construction and the rest would need to begin construction by 2016 to meet China’s target.

There are currently 436 nuclear reactors planned or proposed globally, up from 318 in August 2008. RCR expects a total of 71 new reactors to be commissioned by 2015.