Long-term price of uranium stable through end of this month, but then expected to rise steadily.
Things are looking up in the uranium market, as the metal’s spot price continued to climb last week, driven primarily by strong buyer demand. Price publisher Tradetech raised its price projection by US$3.25 to US$63.25 a pound U3O8 late last week, reporting the metal’s spot price gained steadily through the week, as buyers eager to cash in on new demand raised their offer prices. Eight transactions were reported, with nine buyers still seeking several million pounds of the material.
Rival price publisher Ux Consulting quickly followed suit, raising its price estimate US$4 to US$64 a pound U3O8 on July 14. According to Tradetech, investors and financial groups still make up the bulk of the buyers in the spot market, but utilities are also starting to shop around.
Reuters reported much of the latest price hike was fuelled by London-listed Nufcor Uranium Ltd., one of the world’s largest uranium-holding funds, which is touring Canada and selling shares to raise money for future uranium purchases. Nufcor already holds around 2.3 million pounds of uranium stocks, and, according to traders, it’s looking to raise some $75 million to buy more than a million pounds of uranium.
This marks the third straight weekly price increase and bullish analysts are expecting the rise to continue through the coming weeks and months, especially now that interest from utilities appears to be picking up. Just the same, market bears are wondering how long this rally could last without support from utilities, who may shy away from entering the spot market if prices rise too fast.
To be sure, several weeks of continuous gains should attract utilities back into the spot market. According to Tradetech, the price is set for recovery this summer and fall; bulls hope the metal will rise as high as US$95 a pound U3O8.
For now, uranium’s long-term price is stable at US$80 a pound U3O8 at least through the end of July, but is then expected to rise steadily. At this point, uranium futures are worth US$65 for July, US$66 for August, US$67 for September, $US69 for October, $US70 for November, and US$72 for December. Looking forward to next year, we see June 2009 futures priced at US$74, a price that’s expected to hold through March 2010.
According to the weekly uranium update from Toll Cross Securities, the recent spot price rally has yet to affect the floundering stocks of uranium companies. Compared to this time last week, the majority of companies are in the red, according to a selection of players monitored by Toll Cross: junior explorers were down 2%, advanced explorers down 10%, production visibility companies up 5%, and producers down 5%. The Toll Cross Junior Uranium Index remained nearly stable, dropping 1.6 points, or 0.5%, to 287.71.
The Western Prospector saga hit what could be its climax on the Toronto Stock Exchange on Tuesday, with the company posting massive gains after trading was halted in the morning session to reveal the company could well be getting taken over. Western shares jumped 58 cents, or a whopping 80.6%, to close Tuesday at C$1.30, after its board of directors unanimously accepted a C$1.34-per-share bid by Tinpo Holdings Industrial Company Ltd.
The cash deal, which valued Western’s equity at some C$74 million, represented an 86% premium to Western's closing price of 72 cents on July 14, 2008, and a 168% premium to Western's closing price of 50 cents on May 9, 2008, the latter being the last trading day before the unsolicited takeover bid by Khan Resources Inc.
Tinpo’s offer beat out the Khan bid by 130%. Tinpo’s offer will take the form of a takeover bid, with one of Tinpo’s subsidiaries set to acquire all of Western's outstanding shares. The offer, still subject to regulatory approval, will be open for acceptance for at least 35 days. Meanwhile, Khan Resources also gained on Tuesday, climbing 24 cents, or 28.2%, to C$1.09.
In global nuclear news, political leaders continued this week to recognize the importance of nuclear power in the battle against global warming. In the UK, The Independent newspaper reported Prime Minister Gordon Brown wants to accelerate the construction of at least eight nuclear reactors and will set no limit on the number of reactors to be built by private companies. The move trails worries of a potential energy crisis in the UK if the country doesn’t reduce its dependence on oil, which continues to get astronomically more and more expensive.
And, over in Germany, Chancellor Angela Merkel announced a slowdown of the country’s planned phase-out of nuclear power. Merkel, like Brown, is worried Germany will be unable to cut greenhouse gas emissions without the help of nuclear reactors, which produce no carbon dioxide. According to Agence France-Presse, Germany plans to take offline the last of its nuclear reactors by 2020 under a plan approved by former chancellor Gerhard Schroeder, but Merkel is rethinking the plan, despite heavy fire from critics and political opponents.
Uranium analysts hope the growing political support for uranium, coupled with ongoing production shortfalls and less than certain supplies of the metal, could add vigor to already strong uranium market fundamentals.
Of course, not all is rosy in the nuclear sector. With leaks of nuclear material and bans on uranium mining making headlines, its clear nuclear power still has to address issues of health and environmental safety if it’s to enter the global energy mainstream.
Safety troubles continue for French nuclear firm Areva, which detected a uranium leak that’s potentially several years old at a factory in southeastern France. The news comes hot on the heels of government-ordered safety testing at all 19 nuclear plants in the country. The tests were prompted by another leak at an Areva facility earlier in June. Analysts are calling the Areva incidents embarrassing, especially given the company’s leading role in the French government’s plans to roll out French nuclear technology around the globe.
In Canada, Nova Scotia’s Department of Natural Resources is thinking about lifting a moratorium on uranium mining in the province, but only if it finds sufficient proof uranium mining would benefit the province economically without hurting the environment.
According to the Canadian Press, the provincial government will take into account input from citizens and scientific research when making the decision. As Nova Scotia develops a new mineral strategy, the Mining Association of Nova Scotia is campaigning to have the moratorium lifted. Environmental opponents, on the other hand, are fighting for the ban to be made permanent via legislation.