OTCQX:PALAF - Post by User
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spazzmanon Aug 26, 2011 2:50pm
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Time to buy
Time to buy Today's Financial Post
Peter KovenAug 25, 2011 – 9:20 AM ET| Last Updated: Aug 25, 2011 1:43 PM ET
Versant Partners analyst Rob Chang begins his note with a question: Apart from general market weakness, what is the worst that could reasonably happen to the global uranium market?
His answer: Nothing.
Well, then. There is no doubt that following the Fukushima nuclear disaster in Japan, uranium has been in a slump with very little market activity. The spot price has trickled down to almost US$50.00 a pound, and Germany, Italy and Switzerland have pulled back on their nuclear plans (with Germany planning to exit the market entirely by 2020).
As far as Mr. Chang is concerned, this is the “point of maximum pessimism” for the industry. He wrote that the outlook for nuclear power remains positive, with 62 reactors under construction and hundreds more in the planning stages. He also pointed out that China completed safety inspections of its nuclear facilities ahead of schedule, paving the way for the country to resume its nuclear growth. China is the most important emerging source of nuclear power demand.
Even after Fukushima, Mr. Chang wrote that the uranium market is unbalanced, with production of 139.5 million pounds last year compared to demand from nuclear reactors of 179 million pounds. The difference was largely made up by the U.S.-Russia Highly Enriched Uranium agreement, but it may not be renewed after 2013. New mine start-ups will be required to meet demand, but they carry plenty of risk.
“Outside of global economic weakness, there does not appear to be a foreseeable negative catalyst for yellowcake,” Mr. Chang wrote.
“Germany, Italy and and Switzerland have made their decisions while the Fukushima Da-Ichi plant is under control [with no fatalities]. There is nothing to cause the next leg down.”