A new uranium offtake deal in Finland between Cameco Corp. and Talvivaara Mining Co. speaks volumes about where Cameco thinks prices are going, according to Versant Partners analyst Rob Chang.
Cameco agreed to buy the uranium produced by Talvivaara’s Sotkamo nickel-zinc mine in Finland until 2027, and will also provide an upfront payment of up to US$60-million to build the uranium circuit at the project.
Cameco typically prices sales contracts using a 40:60 ratio of fixed prices and spot prices. Given that the uranium spot price is currently a robust US$73.00 a pound, Mr. Chang wrote that this deal suggests Cameco is “very bullish” on long-term prices. By comparison, its cash costs in the first nine months of 2010 were only US$22.45 a pound.
BMO Capital Markets analysts David Cotterell and Edward Sterck added that the agreement is a positive move for Talvivaara.
“Cameco will provide the required technical knowledge and the partnership may expedite the permitting process. However, [Talvivaara] still faces significant challenges until it reaches commercial production,” they wrote.