Mining stocks


"We expect the uranium market to remain fairly robust over the next few years, and to support a price of roughly US$60/lb,"


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Tight uranium market expected through 2010

Posted: February 06, 2009, 2:02 PM by David Pett
Uranium, Mining, Cameco

There may be a big mushroom cloud of concern overhanging uranium markets these days, but Desjardins Securities analyst John Redstone isn't too worried.

"We expect the uranium market to remain fairly robust over the next few years, and to support a price of roughly US$60/lb," he said in a note to clients.

The analyst discounted a number of issues that are making the rounds, the first of which is the curtailment of nuclear reactor construction due to the global financial crisis.

"Firstly, we do not expect a significant increase in world nuclear reactor capacity through 2010, he wrote. "Consequently, we expect world demand for uranium to increase by only 2.2% in 2009 and 2.1% in 2010.

Mr. Redstone added that many of the nuclear programs, including those in Russia, China and India, that are driving the reactor capacity increases over the next several years are financed by state-backing and therefore likely sheltered from the freeze in credit. Other programs in Japan and South Korea "are conservatively funded and should be able to proceed," he said.

As for talk about rising production in Kazakhstan and the possibility of the US Department of Energy supplying the market with excess uranium, Mr. Redstone believe adjustments will be made as not to disrupt the market fundamentals.

Based on his expectation for a ‘tight’ uranium market through 2010, he continues to rate Cameco Corp., Canada's largest uranium miner, a "buy" with a $29.55 price target. Cameco stock was up 6% to $20.95 in Friday afternoon trading.

David Pett


Devalued Kazakh currency ups Uranium One margins

February 05, 2009, 2:05 PM by David Pett Uranium, Mining, Uranium One

Uranium One Inc. is expected to get a nice margin boost from the recent devaluation of the Tenge, Kazakhstan's national currency.

On Wednesday, the Kazakh government changed its policy and now supports its currency at around 150 Tenge to the U.S. dollar, which represents a valuer reduction of about 20% from the governments previous FX support at 120 Tenge.

RBC Capital analyst Adam Schatzker increased his Uranium One price target from $3 to $3.50, on his estimate that the devalued Tenge will reduce operating costs by 12.5%. The analyst maintained his "buy" rating on the stock.

This change directly affects Uranium One's Kazakh operations given that 80% of its operating costs are Tenge-based," he said in a note to clients.

"We have modified our model to account for the currency devaluation and, as expected, the company's profit margin increases since its revenues are U.S. Dollar-based."

Shares in Uranium One have climbed 13% so far this week, with the bulk of the increase coming yesterday, following the Kazazh currency change.

David Pett

Photo: Kazakhstan's Central Bank chairman Grigory Marchenko walks near a poster featuring a 1000-tenge note after a news conference in Almaty on Feb. 4, 2009. Kazakhstan's central bank said on Wednesday it would stop supporting the tenge currency within its previous corridor and allow the national currency to depreciate to around 150 against the dollar. Shamil Zhumatov/Reuters

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