Uranium’s upward momentum continued this week, fueled by further increases in the spot price of the metal and by more news of massive partnerships and promises of growth in the global nuclear sector.
According to price publisher Tradetech, classic Schadenfreude has yet again reared its head in the market, as negative news from uranium producers helped motivate sellers to further raise their offer prices. And buyers, lately shy of price increases, were seemingly willing to pay more for the metal.
Tradetech’s spot price indicator jumped US$1.25 to settle at US$64.50 a pound U3O8, a price the company expects to mark the level of compromise between willing buyers and willing sellers.
According to Tradetech, spot demand was strong, with nine buyers still seeking nearly three million pounds U3O8 equivalent. These came from all fields in the sector, including investors, financial firms, traders, and, much to the delight of analysts, utilities.
On Monday, London-listed Nufcor Uranium Ltd., one of the world’s largest uranium-holding funds, confirmed it was buying 620,532 pounds of uranium from a major international player for fourth-quarter delivery at a price of US$59.03 a pound.
The transaction was a source of much speculation in recent weeks, and helped push the spot price of uranium above US$60. According to Reuters, earlier this month traders suggested Nufcor could buy as much one million pounds U3O8 equivalent, after raising about US$75 million in share issues. Just the same, some 600,000 pounds still represent a large chunk in a market with very little liquidity, and is certainly enough to keep market bulls excited.
Ux Consulting, however, was less optimistic than rival Tradetech, boosting its price estimate by 50 cents to US$64.50 a pound, but also warning investors that buyers are now appearing a bit reluctant to continue raising their bids to match rapidly rising offer prices of sellers eager to make a buck. According to UxC, demand remains discretionary even as utilities are expected to return to the market in the next few weeks.
As far as long-term prices go, things are stable at US$80 a pound U3O8 at least through the last week of July. Futures are also retaining their pleasant positive curve, as follows: July contracts are worth US$65, August contracts US$66, September US$67, October US$69, November US$70, and December US$72. This trend continues further into the future, with June 2009 contracts worth US$74; September and December 2009 contracts worth US$78, and March 2010 contracts also worth US$78.
Strangely enough, even as spot uranium prices continue to rise, stocks of uranium companies continue to drop. According to the weekly uranium update from Toll Cross Securities, which tracks performance of a selection of companies meant to provide a cross section of the entire sector, junior explorers were down 5% compared to this time last week. And companies in other stages of development didn’t fare much better. Advanced explorers were down 6%, production visibility companies down 4%, and producers down 6%. The Toll Cross Junior Uranium Index continues to tumble, falling 6% to 268.71 from 287.71 points.
In industry news, Rio Tinto announced plans to double uranium output within the next five years. The move comes with promises of increased production at its existing Roessing mine in Namibia as well as new projects in Kazakhstan and Jordan. Rio is also diversifying its operations with announced growth opportunities in coal, titanium, and potash, a fertilizer increasingly important in a world worried about food shortages.
Over in Australia, Energy Resources, a subsidiary of Rio Tinto, is gearing up to become the first Australian miner to export uranium to China. Australia’s government lifted a ban on the sale of nuclear fuel to the Asian tiger more than two years ago. Energy Resources is expected to deliver the uranium to China sometime this year. Rio Tinto already sells uranium to China from its Roessing mine in Namibia.
And as long as we’re on the subject of energy-hungry giants, it’s worth noting that U.S. Secretary of State Condoleezza Rice has thrown her weight behind a proposed nuclear energy deal between her country and India. According to the Associated Press, Rice said the Bush administration would press American lawmakers to approve the agreement. The deal would provide India with fuel for its hungry reactors in exchange for access by international inspectors to its nuclear facilities.
Nuclear giant Areva reported a 16% rise in first-half sales on Thursday, saying sales climbed to US$9.7 billion. Reuters attributed the company’s recent success to the global revival of nuclear power and rising demand for both uranium and nuclear reactors, while World Nuclear News felt the company is succeeding thanks to the construction of two new nuclear power reactors and a mixed oxide (MOX) nuclear fuel facility.
But Areva is also dealing with two confirmed uranium leaks at its nuclear facilities in France. Some analysts feel Areva is handling the spills as best as it can, but critics have recently attacked the company’s communication and security measures. Mandatory inspections at all of France’s nuclear facilities continue and analysts bearish on the company feel investor confidence could have been shaken by the recent mishaps.
Kazakhstan, the world’s third-biggest uranium miner, continues to voice its ambitions to overtake Canada and Australia next year by producing nearly 13,000 metric tons of the metal. Bloomberg reported that country’s state-run uranium producer Kazatomprom plans to produce in excess of 9,000 tons of uranium this year. The country is also looking to have a hand in the entire nuclear cycle, not just mining, as was shown last year by its purchase of a stake in Westinghouse Electric from Toshiba.
Over in Russia, that country’s leading uranium miner Atomredmetzoloto, a subsidiary of state nuclear power corporation Atomenergoprom, just announced its plans for a joint venture for uranium prospecting and mining with French nuclear giant Areva. Atomredmetzoloto produced 3,413 metric tons of uranium in 2007. It plans to mine 3,880 tons this year.
In Asia, Malaysian utility Tenaga is proposing the construction of that country's first nuclear power plant, following government suggestions to look into nuclear power. The proposed plant would cost roughly US$3.1 billion dollars. At this stage, plans are preliminary and, according to Singaporean newspaper Today, the company is expecting a backlash from the public.
Finally, support for the construction of more nuclear power plants in California has grown over the past 20 years, according to a recent poll conducted by Field Research Corp. Among other queries, the July poll asked 809 registered California voters whether the building of more nuclear power plants should be allowed in California, and found 50% of respondents said, “yes.”
According to World Nuclear News, a similar Field poll conducted in 1990 found just 38% of Californians were in favour of more nuclear power plants. As it stands, California has a moratorium on nuclear power plant construction, but nuclear supporters, including that state’s assemblyman Chuck DeVore, are fighting to have the ban lifted.
