By Melissa Pistilli-Exclusive to Uranium Investing News
Commodities markets are expected to pick up this year and the uranium sector is no exception. The uranium spot price enjoyed an incredible rally from 2003 to 2007 exploding from about $10 to more than $130 per pound before the global financial meltdown sent it crashing down to as low as $45 in October of 2008.
Uranium price movements stalled in 2009 averaging about $46 per pound and spot currently sits at $44.50 according to industry consultants Tradetech and Ux Consulting.
“The psychological effect of decreasing prices led many utilities to relax purchasing plans and turn away attractive offers in the expectation of further price declines,” said TradeTech President Treva Klingbiel. “While 2009 was a relatively active year for term contracting, a substantial number of utilities, particularly in the USA, continue to wait in hopes of catching the market at the absolute bottom before securing supplies for the longer term.”
Despite uranium’s lackluster performance over the last few years, 2010 holds promise as utilities and buyers from Asia, where nuclear power programs are on the rise, are expected to come back into the market creating much needed demand.
According to a recent report from Gerson Lehrman Group, “the expansion of nuclear power in countries like Korea and the UAE will increase demand for uranium and investment in uranium companies, which implies that there will be greater competition for uranium resources, increasingly driven by sovereign wealth investment.”
While a major rally is not likely, prices will remain supported and fundamentals are strengthening. The uranium market is still in a trough but about to enter recovery mode. The overall energy market is still bullish and this will help to create a more positive sentiment moving prices up in the medium to long-term.
Patricia Mohr, commodity market specialist at the Bank of Nova Scotia, says the uranium market should experience “significant price improvement” in late 2010 or 2011.
For now, low prices represent a good buying opportunity, says Macquaire Group, whose analysts are “bullish in the medium and long term given the nuclear build-out in China.” Macquaire recommends investors take a look at Uranium One [TSX: UUU].
There are also several nuclear power ETFs that offer an additional avenue for investors wanting to play the uranium market including Market Vectors Nuclear Energy [NYSE: NLR], iShares S&P Global Nuclear Index Fund [NASDAQ: NUCL], and Powershares Global Nuclear Energy [NYSE: PKN]
Canadian Miners Have Positive Outlook for 2010
According to a recent survey of mining execs from 74 companies conducted annually by Mining Recruitment Group, 70 per cent anticipate their industry making a recovery this year. Concerning the long-term outlook, 78 per cent are “strongly positive.”
“Sentiment is as high as I’ve ever seen it,” said Mining Recruitment Group president Andrew Pollard. Last year, 85 per cent had a bearish outlook compared to only 9 per cent this year, adds Pollard. “There is less fear out there.”
Uranium, gold and copper are expected “to have the greatest upside for price” in 2010.
Interestingly, 39 per cent of mining companies are looking to make acquisitions, which will be “a key part” of 2010 for the industry, Pollard said. “There is a lack of good projects available and a lot of companies after the same sorts of things, so there is going to be a war to see who can complete the deals.”
Bayswater Uranium in Bid for Pine-Tree Reno Creek
Bayswater Uranium [TSX.V: BYU] is one such Canadian miner actively making acquisitions.
Recently, Bayswater announced it has met the terms of a competing offer for Stratmore Minerals’ [TSX.V: STM] Pine-Tree Reno Creek properties. The company has offered $17.5 million in cash, $2.5 million in Bayswater shares to be paid on closing and a 5 per cent gross production royalty on the Wyoming properties. Bayswater has until April 6 to complete the transaction, which will give the miner a 100 per cent interest in the properties.
Bayswater’s move to acquire the Pine-Tree Reno Creek properties is in line with the goals of its wholly-owned US subsidiary NCA Nuclear, Inc. NCA’s Elkhorn project is located about 90 miles from Reno Creek in the Black Hills area of northeastern Wyoming. The company is moving the Elkhorn project forward toward feasibility studies and production.
Two groups of properties are involved in the project: the Elkhorn Properties, which are owned 100 per cent by Bayswater; and the Hayber Properties, a joint venture between NCA and NFUR HAUBER, a subsidiary of Ur-Energy [TSX: URE]. NCA can earn a 75 per cent interest in Hauber through $1 million in expenditures over four years.
On Monday, Bayswater announced the results of an NI 43-101 compliant report on the Elkhorn Project with estimates showing an indicated resource of 1.95 million pounds of uranium oxide at an average grade of 0.17 per cent equivalent U308 in 562,000 tonnes and in inferred resource of 570,000 pounds of uranium oxide at an average grade of 0.14 per cent equivalent U308 in 199,000 tonnes.