Uranium One in the newsSpot price strong as oil climbs
www.u3o8.biz
November 05, 2007
Last week marked another strengthening of uranium's spot price, tumultuous news from two of the metal's top producers and strong overall performances from the uranium sector as oil prices beat records and U.S.-Iran tensions continued to build.
Industry indicator TradeTech posted a new price increase late last week---a $5-jump to $90 a pound U3O8. That's the fourth consecutive weekly gain. Rival indicator UxC had not shifted its price from $85 a pound come the editorial deadline of this piece, but this latest rise confirms analysts' musings that September's low of $75 a pound was indeed the price bottom for the metal.
Uranium's spot price peaked in June at a never-before-seen $138 a pound, but quickly crashed in August, dropping 45 per cent to $75 come September. Panicked speculators then fled the sector, which saw very little activity until it began gaining strength in October as utilities looking to rebuild their inventories began to re-enter the market.
Announcements of shortfalls from the metal's top producers began shifting the delicate supply-demand balance back in the favour of demand and several large U3O8 purchases posted above then-current spot prices, which fuelled further price increases.
The supply troubles started last Wednesday, when shares of Uranium One Inc. plummeted $2.24, or 17.6 per cent, to $10.49 on heavy volumes of 74.6 million trades. That was after the Toronto-based uranium producer, gunning for top spot in a market dominated by Cameco Corp., drastically lowered its production forecasts.
Expected production dropped to 2.1 million pounds from 2.5 million pounds for 2007 and 4.6 million pounds from 7.4 million pounds in 2008. For 2007, that's a drop of 16 per cent, blamed on delays in commissioning equipment at Uranium One's Dominion Reefs plant in South Africa.
Come 2008, the company expects a drop of nearly 38 per cent; it says sulphuric acid shortages at its Kazakhstan projects are to blame. The Kazakh state nuclear company Kazatomprom told Reuters Friday that the sulphuric acid shortfall would be solved by January, but didn't rule out lower-than-targeted production rates. Uranium One rebounded slightly Friday on the TSX, finishing the week at $10.80.
Rival uranium giant Cameco Corp. had no time to celebrate Uranium One's troubles, given news of further delays at the company's beleaguered Cigar Lake mine.The flooded mine was supposed come online this year, but repairs are taking longer than expected. It is now projected to reopen in 2011 at the earliest. Last year's closure of the mine was one of the factors that helped uranium's spot price jump to $138 a pound last summer.
Cameco's stock fell $1.63, or 3.4 per cent, to $46.55 on Wednesday. The company posted impressive third-quarter sales, but said it expects fourth-quarter sales to be lower, due to anticipated drops in uranium sales volumes and spot price. Cameco finally rebounded $1.45, or 3.4 per cent, in Friday's trading, to $44.35, after sliding 13 per cent in three days.
Of course, coupled with strong fundamentals, these latest production woes are expected to keep the metal's prices firm. Indeed, many uranium stocks posted healthy gains last week, boosted by the U.S. Federal Reserve cutting rates another quarter point in an effort to breathe new life into an ailing American economy.
The Resource World composite uranium stock index, an index based on the performance of nearly 100 uranium companies, jumped an impressive 37.27 points Friday, or 2.96 per cent, to close at 1,298.28. The index continues to flirt with heights unseen, having blown past the 1,200-point threshold it's been hovering around most of October.
The index last visited the 1,200-point range in July, before spot prices tumbled from $138 a pound U3O8 to $75 a pound. After a few months in the dumps, the index has now recovered at a time when the uranium sector is again showing strength.
Finally, an interesting development in the U.S.-Iran conflict: U.S.-allied Gulf states, with Saudi Arabia at the helm, seem willing to set up a consortium to supply enriched uranium to Iran. This comes as an effort to ease Iran's showdown with the West over its nuclear program. The tensions are also partially to blame for recent spikes in oil prices: crude hit a record high on Wednesday above US$94 a barrel.
The West wants Iran to stop enriching uranium. It fears Iran's plans to develop nuclear reactors are a cover for the secret production of nuclear weapons. But Tehran insists it just wants electricity and has ignored UN Security Council demands to halt uranium enrichment.
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