[miningmx.com] — URANIUM prices have picked up sharply over the past two months bearing out the bullish predictions for the commodity made in August at the Africa Down Under conference in Perth.
On September 2, Miningmx reported Paladin Energy (Paladin) CEO John Borshoff as saying “a price break out is inevitable and imminent’.
Jonathan Leslie, CEO of Extract Resources which is developing the Rossing South project adjacent Rio Tinto’s Rossing Uranium mine in Namibia, told the conference that forecast uranium supply shortfalls would trigger higher prices.
Latest report from Australian firm Resource Capital Research (RCR) points out the uranium spot price is now $60/lb which is 25% up on the level of $48/lb that ruled in September and nearly 50% higher than the recent low of $40.50/lb in March this year.
RCR said the price surge had been driven by Chinese buying with the price impact of this also exacerbated by the return of financial investors and hedge funds to the market.
“There has also been an increase in market confidence in the growth outlook for Chinese reactor build following recent memorandums of understanding and long-term sales agreements announced by the Chinese with Kazatomprom, Areva, Cameco and Paladin Energy.’
The firm added that, “the impact of increased demand on the market has coincided with downgrades to production guidance at Ranger – among other producers.
“There have also been recent comments and indications of market discipline containing production growth in Kazakhstan (made when the uranium price was in the high $40’s/lb) and marginally reduced production guidance for 2010.’
RCR expects the uranium spot market to consolidate around current levels and then “potentially move higher into first quarter 2011 as utilities come back into the market at year start.’
Most of the world’s uranium is supplied through long-term contracts which makes the uranium contract price the key measure of market conditions.
According to RCR the long-term contract price has moved up to $65/lb from $60/lb three months ago.
RCR added, “there is growing expectation that the contract price will move higher, potentially into plus $70/lb territory, necessary to support development decisions at a number of advanced projects.’
RCR highlighted various projects being evaluated in Namibia by Extract Resources, Bannerman, Marenica and Deep Yellow.
The rise in uranium prices has sent the share prices of a number of uranium producers rocketing with the top performer being Toronto-listed Denison Mines Limited.
The Denison share price is up 26% over the past month and 123% up over the past three months.
The bulk of Denison’s operations are in the United States where it has three active mines but Denison is also assessing a potential new uranium mine at Mutenga in southern Zambia.
RCR pointed out the Merrill Lynch Uranium Equity Index – a global basket of uranium equities – is up 12% over the past month and 44% over the past three months.
The firm described the mid-term fundamentals for the uranium sector as “very strong with large expansion of nuclear power reactors slated globally through 2020 and 2030.’
Currently there are 441 nuclear power reactors in operation and 58 under construction while there are 479 new nuclear reactors planned or proposed globally as of November this year.
That’s 10% up on the 435 reactors planned or proposed as of December last year while a total of 84 new reactors are scheduled to be commissioned by 2017.
RCR added, “since December 2009 the largest increases in announced planned and proposed new nuclear reactors are in India (up 58% from 38 to 60) and China (up 27% from 125 to 159).
A looming “crunch’ factor in the market is also the end of the deal through which highly enriched uranium (HEU) has been provided to the nuclear power generating industry from decommissioned Russian nuclear weapons.
That secondary supply has kept the uranium price depressed for the past 20 years except for the short-term spike in 2007/2008 which drove the price above $100/lb.
Denison CEO Ron Hochstein told the Modern Energy Conference held in Denver in September that the HEU deal would end in 2013 and would not be renewed which would leave a large gap in the market.
