Let's Get Ready to Buy Some Uranium...Uranium Participation* (U : TSX : $5.39), Net Change: -0.02, % Change: -0.37%, Volume: 419,142
Let's Get Ready to Buy Some Uranium...Uranium Participation closed its previously-announced $57,558,000 bought-deal equity offering (10,522,500 common shares at a price of $5.47 per common share, including over-allotment option) - estimated net proceeds to company of $55,255,680. The net proceeds of the offering will be used to fund the purchase of uranium and to fund the ongoing obligations of Uranium Participation. At least 85% of the gross proceeds from the offering must be invested in, or held for future purchases of uranium. The TradeTech Daily U3O8 Spot Price Indicator on January 16 (the day the offering was announced) was US$35.00/lb. As of Monday, the U3O8 Spot Price Indicator was US$35.60/lb, up $0.60. According to UxC, "January’s spot activity increased; however, it was still considerably below levels that were posted last January. There were a total of 24 spot transactions reported during the month, with 22 of these deals in the form of U3O8 and the other two involving UF6. Total volume for the month comes in at 3.1 million pounds U3O8 equivalent...It appears that several sellers are waiting for an institutional investor to enter the market and purchase material, perhaps at higher price levels, and thus have not been too anxious to sell." It appears that everyone is waiting for Uranium Participation to start buying its uranium. Prior to this
raise, Uranium Participation last issued equity in May 2009 ($100 million at $7.75 per common share). The current post-Fukushima low demand scenario, combined with high levels of inventory (15-20 Mlbs U3O8), have kept broker average prices (BAP) at US$35-40/lb U3O8, which have challenged margins in the sector over the near term. Canaccord Genuity Mining
Analyst Joe Mazumdar recently highlighted the near-term uranium market remains challenged, but a shift in focus to mine production in the long term, driven in part by Chinese demand, he believes, will support an incentive price of US$70/lb U3O8, which is in line with his long-term price forecast.