A new moratorium on uranium mining on Labrador Inuit Lands came into effect this week, worrying investors and depressing share prices of explorers active in that region.
The Nunatsiavut Government voted eight to seven in favour of implementing the ban on Tuesday. It’s worth pointing out that there’s no mining taking place in Labrador today and none scheduled in the next three years. Furthermore, the ban still allows for uranium exploration activities to continue.
The decision was nonetheless a shocker to Canadian junior explorers invested in the region, including Aurora Energy Resources (TSX: T.AXU, Bullboard), which plunged the deepest, losing $1.77, or 33.6 per cent on the TSX on Tuesday (the day the ban came into effect) on the heaviest trading volumes the stock had seen since going public.
Investors were worried the ban could derail the company’s plans for a proposed mine, but Aurora stated it still plans to conduct an infill drill program at the Michelin and Jacques Lake deposits and continue with a pre-feasibility study on the Michelin project.
The decision to ban uranium mining before it has even started is a contentious one, creating a tug of war between employment opportunities in rural Canada and the need for environmental protection.
The ban is regarded as a way to stall uranium mining in Labrador until the Nunatsiavut Government, the Government of Newfoundland and Labrador, and regional planning authorities agree upon a land-use plan.
And it seems the investor panic after the moratorium was announced may have been too extreme. After been hit so very hard on Tuesday, Aurora’s shares have already started their recovery. The company’s stock gained 38 cents on Wednesday, 24 cents on Thursday, and another three cents on Friday to close at $4.15 after some kind words from uranium analysts.
The biggest kudos came from RBC Dominion Securities analyst Adam Schatzker, who said Aurora investors have overreacted to the moratorium, given the company’s start date for its Michelin/Jacques Lake project isn’t expected until 2014. The Aurora Energy share price target was cut to $8 from $12.50, but its rating was increased to "outperform" from "sector perform."
Uranium’s spot price remains unchanged this week at $71 a pound U3O8 and activity and demand on the spot market remains week. The metal’s long-term price is also unchanged at $95 a pound U3O8 at least until the end of April.
Looking at the weekly uranium update from Toll Cross Securities, the metal’s futures from April through August ‘08 are priced at $75. Those rise in September to $85, but fall again in October and November to $75. December ‘08 futures are worth $80 and December ’09 futures are worth $85.
According to Toll Cross, junior explorers were down 2.8 per cent compared to this time last week, while advanced exploration inched up 0.3 per cent. Production visibility companies dropped 0.2 per cent and producers gained 8.1 per cent. The Toll Cross Junior Uranium Index fell a fraction of a per cent, dropping to 359.74 from 360.76.
Back on the TSX, a number of stocks closed higher Wednesday and Thursday on news that China is shopping for uranium producers and is ready to spend up to $1 billion. The resource-hungry giant is seeking to secure uranium for its 30 nuclear power plants now in various stages of construction and operation.
The news buoyed major producers slightly, including Cameco (NYSE: CCJ, Bullboard)/ (TSX: T.CCO, Bullboard), Denison Mines (NYSE: DMM, Bullboard) / (TSX: T.DML, Bullboard) and Uranium One (TSX: T.UUU, Bullboard), but also pushed higher a number of smaller companies with no other news coming from their pressrooms. Analysts are seeing China’s entry into the global uranium market as a pivotal point for the beleaguered sector.
Resource-hungry China looking for nuclear supply needed to move a number of its reactors from planning to production is expected to buoy uranium prices and stocks of uranium companies—especially those on China’s shopping list.
