A “precipitous drop”Uranium price correction may hurt prospects for new discoveries
A “precipitous drop” in uranium spot prices may have hurt the ability of uranium explorationists and producers to raise critical capital.
Author: Dorothy Kosich
Posted: Friday , 07 Dec 2007
RENO, NV -
Haywood Securities Investment Banker Nicole Adshead-Bell Wednesday asserted that the recent correction in the price of uranium "is likely to lead to a reduction in the speculative capital" for high risk uranium exploration, as well as decrease the possibilities for new discoveries.
In a presentation to the Northwest Mining Association annual convention, Adshead-Bell noted that "the precipitous drop in the spot uranium price has diminished the ability of exploration and mining firms to raise capital."
Meanwhile, Haywood's research has found that uranium production has been inelastic to commodity price movement.
Despite all the hype surrounding the rising demand for uranium, less than 10% of new uranium production has actually been achieved. Only three new deposit discoveries have been made, Shea Creek, Mae Zone and Dulaan Uul. One solitary new conventional mine has gone into production.
Discovery to development is now averaging 10 years, Adshead-Bell explained, while recent real life examples, such as Paladin Resources Langer Heinrich mine in Namibia, took 34 years to bring into production. If Cameco's Cigar Lake in Canada actually begins uranium mining production in 2011, it will be three decades after the deposit's discovery.
Only five mines now supply 51% of global primary uranium production, according to Haywood Securities.
Global challenges are putting pressure on 103 million pounds of uranium production, Adshead-Bell suggested. For instance, rebel activity and increase in government ownership issues in Niger are putting pressure potentially on nine million pounds of uranium production. Indigenous landowner issues and uranium mining bans could impact up to 46 million pounds of uranium production in Canada and Australia.
Meanwhile, Adshead-Bell asserted that 14 new uranium mines must come on quickly to help mitigate the impacts of potential supply disruptions in uranium.
Access to capital is a key factor for future uranium output. When uranium prices are stable or rising, capital is most accessible for uranium explorationists and producers.
Adshead-Bell found that all TSX "pure play" uranium producers need capital for uranium production and expansion.
Meanwhile, a 25% fall in uranium spot prices from June 2007 to September 2007 generated a decline in analyst sentiment, generating a subsequent slide in Canadian uranium company financing activity. Adshead-Bell noted that uranium "has only recently become a flavor of the month" for many fund managers.