THE uranium market was turning around and this time it was for real after being depressed for the past decade during which price recoveries were predicted on several occasions but never materialised.
That was the view from a panel discussion on uranium held at the Investing in African Mining Indaba taking place in Cape Town.
According a presentation given by panel moderator Jonathan Guy, research director at Numis Securities, Numis is predicting a long-term uranium contract price of $60 per pound ($/lb) and a spot price of $50/lb, but the firm also pointed out that the “price rebound is likely to be more acute however, market tends to be shock catalyst driven.”
The uranium spot price currently sits around $29/lb to which level it has risen gradually over the past year from around $20/lb. That appears to have been largely the result of production cuts implemented by major uranium producers Kazatomprom and Cameco in 2017.
According to Numis, the short-term market is still oversupplied and key short-term drivers will be further actions by Kazatomprom; Japanese nuclear power station restarts and aggressive Chinese contracting behaviour.
Numis commented that the “long-term fundamentals remain positive and a key driver of price shift will be a return to contracting on the part of energy utilities.”
Asked what had changed this time around to improve confidence in this latest recovery prediction panel member Daniel Major, CEO of Goviex, replied, “the first thing is strong demand. Nuclear generation is now at the same level that it was pre-Fukushima.
“On the supply side you have a lot of projects closing down and you have the Kazatomprom and Cameco shutdowns which have effectively put the market into a deficit.
“The other item that has disappeared off the map is under-feeding.” (under-feeding involves the re-enrichment of low-grade uranium tails assays to produce extra uranium).
“That had resulted in the appearance of 20m to 30m lbs of new material that had not been mined out of the ground but was coming out of the uranium enrichment circuit.
“That meant you had two big mines that appeared from nowhere but actually did not exist.
“So, effectively, you have not only just seen production cuts but you have seen another production cut with that. The other thing that has changed is that the US government has stopped selling and they used to sell five million lbs/year.
“There was also an inventory overhang but now you have people like Yellow Cake (Yellow Cake Plc, a specialist company buying and storing uranium) sucking metal out of the market as well.
“So you have a massive tightening of inventory; demand growth and big supply cuts . That’s why you are going to see a difference this time,” Major concluded.
Uranium equities like goviex are still in the shit hole. So why would anyone invest when uranium prices are going up but mine equities are disconnected and depressedSorry but thosy rosey picrtures are not turning out the way they portray there optimism about this sector.
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