October 6, 2009

Uranium Remains Undervalued


The short-term uranium spot price has fallen $2.50 to $42 per pound U308 continuing its three month downtrend. The biggest factor affecting recent cuts is fear in the market over the US Department of Energy's (DOE) release of 1,200 tonnes of UF6 into the market next month.

However, some analysts point out that although these fears are influencing the short-term price, long-term prices have not been affected because strong fundamentals in the uranium market as a whole remain in place. Both Ux and TradeTech's longer term price benchmark is still at $65 per pound.

The stockpiles DOE might bring to market would probably only account for barely 2 perc ent or less of annual uranium supply and won't make much of an impact on longer term supply and demand, says Dundee Securities analyst David Talbot.

Market analysts at The Royal Bank of Scotland (RBS) recently forecasted uranium prices regaining strength soon and expect this trend to continue through 2011 peaking at $95 per pound with supply tightening as the Megatons to Megawatts program comes to an end in 2013.

Ray Goldie, senior analyst at Salman Partners, has projected uranium reaching a high of $150 per pound over the long term.

While supply factors are what have impacted spot prices as of late, it's the demand side of the equation to which investors should pay more attention. Talbot and Dundee Securities see demand rising around 2.2 per cent each year and expect demand to surpass supply within the next decade as new mines take years to come on line.

RBS expects "a deficit market" as early as 2014 along with rising nuclear energy usage around the globe. As it stands now, current supplies are not consistent with "logistical, statutory and operating bottlenecks" in producing countries like Canada, Namibia and Australia, say analysts.

A look at major uranium players' share prices this year indicates that there are investors who believe rising global nuclear power demand will make uranium a hot commodity again. Bloomberg reports that Paladin Energy [TSX: PDN] and Energy Resources of Australia [ASX: ERA] shares have climbed 84 per cent and 36 per cent respectively.

Uranium Mining in Western Australia

Western Australia (WA), according to the Liberal Barnett government, is "leading Australia through the financial gloom" as the state garners a 19 per cent increase in its minerals and petroleum exports in the year to June, reports The Australian.

Reg Howard-Smith, Chief of WA State Chamber of Minerals and Energy, expects a great increase in royalties to the state and as much as 30,000 new jobs by 2014 with new and advancing natural gas, iron ore, gold and uranium projects.

Robust investment is behind the recent growth in WA's mining industry, says Mines Minister Norman Moore. New capital expenditures totaled $22.8 billion, up 34 per cent from last year.

The Australian Bureau of Statistics reports that uranium exploration spending alone was up 77 per cent for the year. Premier Colin Barnett has said the uranium mining industry may possibly be WA's most important new sector, reported The Australian.

Last year, the newly elected Liberal government lifted Western Australia's uranium mining ban, sparking a race between uranium miners like Toro Energy [ASX: TOE] and Mega Uranium [TSX: MGA] to open the first uranium mine in WA.

Latest reports put Mega Uranium in the lead. While Toro hopes to have its Lake Way/Centipede project near Wiluna in production in 2012, Mega's Lake Maitland project, also near Wiluna, is anticipated to come on-line in 2011.

This month, Mega received approval from the WA government on its mining lease for the project.

Peter McNally, executive vice-president of project development, says the Lake Maitland deposit holds an estimated 12,000 tonnes, a number which is anticipated to grow.

"From recent exploration work, Mega increased the resource in the vicinity of 15 per cent, which is quite significant, and we're continuing to explore to the south," said McNally. "We expect to find more."

A small uranium processing plant is in advanced stages of the design phase and is expected to export around 750 tonnes a year beginning in 2012. The project is a joint-venture with the Japan Australia Uranium Resources Development (JAURD) and Itochu Corp. The Australian reports that over its 10 to 12 year life span the Lake Maitland has the capacity to export $3 billion of uranium.

VISIT MY tturaniuminvest HOMESITE

No comments:

Post a Comment