Supply concerns boost spot uranium priceCameco in the news
Supply concerns boost spot price
November 7, 2007
U3O8.biz
Bad news from uranium suppliers keeps boosting the metal's spot price. Just days after raising the spot price $5 to $90, industry indicator TradeTech boosted its price again; this time, a $3-raise to $93 per pound of U3O8.
Both buyers and sellers are returning to the market, TradeTech
reported. And it's not just speculators and hedge funds that are back
for another crack at uranium. Seven buyers are actively seeking more
than 1.3 million pounds U3O8 equivalent.
A couple of sellers are looking to offload around 360,000 pounds U3O8
equivalent, but are unwilling to commit to a price. TradeTech
indicated that sellers looking to make firm offers were looking for
bids significantly higher than the still-fresh spot price of $90,
which explains the most recent price increase. Rival indicator Ux
Consulting raised its spot price by $5 to $90 a pound U3O8 on November 5.
Cameco Corp. said Tuesday it expects its uranium production to
increase 80 per cent over the next nine years, which would bring the
company's mined production to 36 million pounds of uranium by 2016.
But of course, this hinges on new output from the company's Cigar Lake mine in Saskatchewan and its Inkai mine in Kazakhstan, both of which are facing troubles.
The Cigar Lake operation flooded in 2006 and is now not expected to
open until 2011 at the earliest. On Tuesday, the company released
documents which stated no deadline for the repairs at beleaguered
Cigar Lake.
The Globe and Mail newspaper reported Tuesday the mine was scheduled
to come online in 2007 and, upon reaching full capacity, was expected
to produce 18 million pounds of uranium per year---one-tenth of the
world's total output.
The Inkai mine is expected to start production in 2008, but Cameco is
now looking for alternate sources of sulphuric acid, a necessary
ingredient for extracting uranium from its ore during the mining
process.
Kazakhstan was recently hit with a shortage of the acid, which was
responsible for a recent 17.6-per-cent share slide of Cameco's prime
competitor Uranium One Inc. That company now expects its 2008 output
to be 38 per cent lower than this year's levels.
Adding to the supply woes, the National Post newspaper reported the
Russian company that sells Cameco dismantled nuclear warheads is
asking for more money now that uranium prices are on the rise.
That would mean Cameco would have to dish out more bucks for roughly
seven million pounds of uranium it gets from Russian company Tenex
every year. The news was expected to put another dent in Cameco's
shares, but company officials said they're confident they could reach
an agreement with the Russian supplier.
Cameco's shares rose $1.14, or 2.5 per cent, to $45.95 on the TSX on
Tuesday. Shares of Uranium One continued to slide, dropping 12 cents,
or 1.2 per cent, to $10.25. The company was trading close to $13 a
share late October.
The sector may still seem fragile, but the Resource World composite
uranium stock index, an index based on the performance of nearly 100
uranium companies, skyrocketed 51.74 points Tuesday. That's 4.15 per
cent, closing at 1,297.63. The index continues to close at heights
unseen, having blown past the 1,200-point threshold it's been hovering around most of October.
Finally, we're back to square one in the U.S.-Iran conflict, after the latter rejected a proposal by Saudi Arabia to set up a uranium
consortium in the Persian Gulf.
The consortium was meant to supply enriched uranium to Iran in an effort to ease that country's showdown with the West over its nuclear program, but Iran wants no part of such an agreement if it would spell an end to its own enrichment program. In fact, it rejected a similar proposal from Russia last year.
The West seems desperate to have Iran stop enriching uranium. It fears Iran's plans to develop nuclear reactors are a cover for the secret production of nuclear weapons. But Iran insists it just wants
electricity and has so far ignored UN Security Council demands to halt uranium enrichment.
www.u3o8.biz