January 30, 2010

Obama To Propose Tripling Of Nuclear Loan Guarantees To US$54 Billion

The Obama administration is planning to propose tripling a program that provides loan guarantees to construct nuclear reactors, an administration official said Friday, aiming to reach out to Republican lawmakers in an effort to break a logjam over energy policy.

The Obama administration will seek loan guarantees totaling about $54 billion, the official said. That is up from the $18.5 billion authorized. The details are to be unveiled Monday when the White House makes a fiscal 2011 budget request.

The proposal comes after the U.S. Energy Department announced Friday that it has asked former U.S. Rep. Lee Hamilton, a Democrat, and former National Security Advisor Brent Scowcroft to lead a panel charged with developing a long-term solution for managing the nation's used nuclear fuel and nuclear waste. The panel, which will be charged with developing an interim report within 18 months and a final report within 24 months, will also include Exelon Corp. (EXC) Chief Executive John Rowe, former Republican senators Pete Domenici and Chuck Hagel, and representatives of major labor and environmental groups.

The Obama administration has been promising for almost a year to create such a panel after deciding that a central repository for storing waste at Yucca Mountain in Nevada was not an option. The Nevada site has been opposed for years by that state's political establishment, most notably Senate Majority Leader Harry Reid (D., Nev.), who is facing a difficult reelection campaign this year.

Republicans have complained that the Obama administration's rhetoric in support of nuclear power has not matched its actions. Those criticisms may be challenged in coming months if the administration awards its first-ever nuclear loan guarantee and then expands the program. In the current program, 17 companies applied for $122 billion of loan guarantees, or about six times the amount of money available.

But the administration's efforts also could alienate the environmental wing of its base. The liberal group MoveOn.org said a survey of its members during the State of the Union address this week showed the most negative response to Obama came when he voiced support for more nuclear power and offshore drilling. The administration says that nuclear power can help reduce greenhouse-gas emissions since it produces less carbon dioxide than alternatives.

"I personally think that nuclear power has a place" because "it is carbon-free," U.S. Energy Secretary Steven Chu told reporters on Friday. "We will be able to solve the complete environmental concerns."

The Energy Department appears to be getting close to offering its first nuclear loan guarantee. Earlier this week, Southern Co. (SO) Chief Executive David Ratcliffe said in an interview that the company expects to finalize an application for a loan guarantee "within the next couple months." Scana Corp. (SCG), which has also applied, is "a couple months behind Southern" and is "hopeful" of receiving a conditional award "sometime in the next months," Scana spokesman Bryan Hatchell said Friday.

January 29, 2010

More Production, Resources For Australia's Paladin And Alliance Resources

Paladin Energy has enjoyed record quarterly uranium production and sales despite slower than expected progress at its Malawi mine. Meanwhile, Alliance Resources has confirmed a 16% resource increase at its Four Mile uranium project in South Australia.

Kayelekera (Image: Paladin)

Paladin's quarterly report for the final quarter of 2009 boasted record quarterly production of 987,310 lb U3O8 (380 tU) from its two operating mines in Africa. Most of this - 841,995 lb U3O8 (324 tU) - came from the Langer Heinrich mine in Namibia, which reached the anticipated production rates for stage 2 of the company's long-term four-stage expansion plan during the quarter.

The Kayelekera mine in Malawi, which started production in April 2009, produced a total of 145,315 lb U3O8 (56 tU) for the quarter. Ramp-up at the mine has been slower than anticipated because of problems encountered in the processing plant: specifically, the slow movement of uranium-loaded resin to elution, which has restricted the plant feed capacity. A secondary wash screening facility is to be installed in March or April, but in the meantime, improvements to the existing screening facility mean production should be much improved from the end of January.

The Australian company also reported record quarterly sales of 1.095 million lb U3O8 (421 tU) at an average price of $56.54/lb U3O8 and says it has signed a "substantial long term contract" with a major Asian utility covering the supply of over 4 million lb U3O8 (1539 tU), commencing in 2012. The company is also planning a trial shipment of uranium to China to "test and demonstrate the efficiency of logistics from Africa to Chinese conversion facilities."

More resources at Four Mile

Alliance Resources has announced a 16% increase to its mineral resource estimate for the Four Mile uranium project in South Australia. The resource now stands at some 71 million lb U3O8 (27,136 tU) at an average ore grade of 0.33%. The increase comes from an updated estimate for resources at the Four Mile West deposit, which now stands at 42 million lb U3O8 (16,112 tU) at an average 0.33% grade. The resource estimates include indicated and inferred resources at the Four Mile West deposit and inferred resources at Four Mile East, as classified under the JORC code (one of two standards used internationally in classifying uranium resources: it stands for Joint Ore Reserves Committee Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves).

Four Mile is being developed as an in situ recovery (ISR) project through a joint venture of Alliance Resources (25%) and Quasar Resources (75%), with plans for a satellite ion exchange plant to carry out initial uranium recovery at Four Mile. The uranium-loaded ion exchange resin would then be trucked to Australia's only existing operational ISR uranium project, the nearby Beverley plant, for further processing.

All the resource estimates for Four Mile up to now have been made in anticipation of ISR as the only mining method, but Alliance reports that additional mineralization identified above or within about 20 metres of the water table in the western area of the Four Mile West deposit could potentially add up to 30% to the resource if proved recoverable by ISR or mineable by other means. According to Alliance, there is significant potential for further expansion of the resource base with other areas of mineralization awaiting further evaluation and drilling. Commenting on the latest announcement, Alliance Resources managing director Patrick Mutz described Four Mile as a "substantive uranium deposit which is still open in several directions."

Australia's Energy Resources Full-Year Profit Lifts 23% On Uranium Sales

Uranium miner Energy Resources of Australia Ltd (ERA) has posted a 23 per cent rise in annual profit on the back of higher revenue from sales of the mineral.

ERA, majority owned by Rio Tinto Ltd, said the outlook for the uranium market remained bright due to sustained government interest around the world in nuclear energy as a viable source of power.

It said production and sales in 2010 are likely to be broadly similar to previous years, albeit weighted to the second half.

Net profit for calendar 2009 was $272.6 million, up from $221.8 million in 2008, after sales of uranium oxide lifted revenue by 55 per cent to $767.8 million.

ERA says sales revenue rose mostly due to an increase in the average realised sales price.

It realised an average sales price of uranium oxide of $US50.84 per pound in the year, up from $US32.53 per pound in the previous year.

At the end of 2009, the average spot market price was $US44.50 per pound, up from $US52.50 in 2008.

Production in 2009 of 5,240 tonnes, which was in line with production from previous years 5,339 tonnes.

"The 2009 annual production was achieved due to consistently strong performance in the processing plant through the year," it said in a statement on Friday.

During the year, ERA achieved the milestone of 100,000 tonnes of uranium oxide sold from the Ranger mine in the Northern Territory.

"While production, sales and average realised sales price in 2010 are expected to remain broadly similar to recent years, production and sales will be significantly weighted towards the second half as an effect of mine sequencing, lower grades and scheduled maintenance in the processing plant in the first half," it said.

However, ERA also said higher spending on scheduled maintenance costs and expenditure on development projects "will adversely impact earnings over the year."

ERA declared a final dividend of 25 cents per share, up from 20 cents in 2008.

The total dividends payable to shareholders for the 2009 year was 39 cents per share, up from 28 cents in 2008.

By 1240 AEDT, ERA shares had slipped 0.43 per cent to $20.79, against a 1.85 per cent drop on the benchmark index.

January 27, 2010

Alliance Resources Sees More Uranium At Four Mile

ALLIANCE Resources has announced a 16 per cent increase in its resource estimate for the $110 million Four Mile uranium project near Beverley.

The company said the resource estimate for Four Mile West had been revised upwards to 19,000 tonnes of uranium oxide, increasing the overall project resource to 32,000 tonnes, or 71 million pounds of uranium oxide at 0.33 per cent.

The upgraded estimate included 14,000 tonnes of uranium oxide at an average grade of 0.34 per cent which has been proved as ``indicated'' in accordance with Australian standards.

Alliance said the resource estimate did not include uranium oxide mineralisation above or within 20 metres of the water table, which could add up to 30 per cent to the Four Mile West resource if it could be successfully recovered.

Alliance Resources managing director Patrick Mutz said there remained ``significant potential'' for the further expansion of the mineral resource at Four Mile by further evaluation and drilling campaigns.

"The updated mineral resource estimate for Four Mile has reinforced our view that Four Mile is a substantive uranium deposit which is still open in several directions.''

The mine is currently the subject of legal action between the two joint venture parties who own the mine, Alliance and Quasar Resources.

Last year, Alliance said Four Mile has been delayed until April 2010 "or beyond'', while the two parties resolved Native Title and management disagreements.

January 25, 2010

Rising US$ Supports Australian & Canadian Uranium Sectors

$Canadian - $Australian - $U.S.

7 Day Chart January 19th - January 25th - 2010

January 23, 2010

Cameco's Cigar Lake Uranium Project Update

Cameco says Cigar Lake uranium project ready for development as early as April 2010

Cameco Corp. (TSX:CCO) says it expects to have enough water pumped out of its flooded Cigar Lake uranium mine to resume development on the project by as early as April.

CFO Kim Goheen said Friday that the company has already pumped most of the water out of the northern Saskatchewan mine, which has been flooded for three years.

Goheen said refurbishment of shaft one, the main shaft, is three-quarters complete and the water level is down to the 475-to 480-metre level.

"De-watering, and work to secure the underground developments, is expected to be complete between April and October of this year," he told investors in Whistler, B.C.

"Crews have safely re-entered shaft one and are working to restore the ladder way, mechanical and electrical systems, including additional pumping to provide further assurance."

The Saskatchewan-based uranium miner will complete an updated report on the progress by the end of its first quarter.

Goheen said the key element to preparing the mine for development is not removing the water but refurbishing the main shaft.

"We're very cautious but very optimistic things are working out," he said.

Once up and running, Cigar Lake is expected to produce 18 million pounds of uranium annually, half of it belonging to Cameco, which owns 50 per cent of the project. The company aims to double its uranium production by 2018.

The other half is held by a number of investors, the largest being French nuclear giant Areva.

Cameco said last month that it plans to use proceeds from the $872-million sale of its stake in Centerra Gold Inc. (TSX:CG) to finish Cigar Lake.

In November, Cameco said it had stopped the inflow of water and expected the process of pumping out the mine to take six to 12 months.

Goheen said uranium miners need to increase production and exploration to meet demand over the coming decade, but added there has been little development because uranium prices have been below the production costs of most suppliers.

While there is still volatility in the price of uranium, which is trading at 43.50 a pound, it is up from last April's low of $40 a pound, he said.

Cameco has several other projects in various stages of development, including the Kintyre project in Australia and Inkai in Kazakhstan.

Shares in the company were down just over one per cent at $30.13 with about 500,000 changing hands in midday trading Friday on the Toronto Stock Exchange.

January 19, 2010

RBS Equities Australia Say Cameco May Bid For Australia's Paladin Energy

Jan. 19 (Bloomberg) -- Cameco Corp., the world’s second-largest uranium producer, may be more interested in acquiring Paladin Energy Ltd. after the Australian company fell 15 percent in three months, RBS Equities Australia said.

“I think Cameco would certainly be looking at Paladin,” RBS analyst Lyndon Fagan said today. “Paladin’s share price has been underperforming recently because of failing to deliver on production targets, and the recent weakness could provide an opportunity for the likes of Cameco.”

The Australian uranium producer on Oct. 29 cut its production forecast after delays to an upgrade at the Langer Heinrich mine in Namibia and the replacement of equipment at the Kayelekera venture in Malawi. Perth-based Paladin estimated production of 5.6 million pounds to 6.1 million pounds for the year ending June 30, down from a previous projection of 6.6 million pounds.

Cameco declined to comment on a potential bid for Paladin. “As one of the world’s leading uranium producers, we are often associated with speculation about various business deals,” Lyle Krahn, a Cameco spokesman, said in e-mailed comments today.

Paladin Managing Director John Borshoff didn’t immediately return a phone call seeking comment.

The Australian uranium producer’s shares have fallen 15 percent from A$4.80 on Oct. 19 to close at A$4.07 yesterday, compared with a gain of 2.5 percent for the benchmark S&P/ASX 200 Index. Paladin traded at A$4.05 in Sydney, down 0.5 percent, at 1:35 p.m. local time, valuing the company at about A$2.9 billion ($2.7 billion).

Saskatoon, Saskatchewan-based Cameco, should it be interested in acquiring Paladin, would probably need to pay a premium of more than 30 percent to the Australian company’s share price, Fagan said by telephone in Sydney.

Speculation Not New

Discussion of a potential Cameco-Paladin transaction isn’t new. JPMorgan Chase & Co. said in March 2009 that Paladin may be an attractive target for producers such as Cameco. Speculation that Cameco may buy Paladin is increasing, and a takeover would cost the Canadian company about A$4 billion, the Australian Financial Review said in its Street Talk column today.

Paladin completed a share sale to institutional investors, raising A$429 million, the company said in September. Borshoff said last year the company may grow beyond Africa and Australia, while expanding its project in Namibia. Paladin will consider acquisitions of its own, he said in October.

Cameco, which plans to double annual uranium output from its existing operations by 2018, will consider acquisitions of mining assets and creating joint ventures with customers, Chief Executive Officer Jerry Grandey said in November. Paladin Energy is among the companies Cameco considers attractive, he said.

Even so, Grandey said: “We’ve always been challenged by the valuation.” Paladin shares rose 69 percent in 2009 to finish the year at A$4.18.

Cameco agreed to sell its stake in Centerra Gold Inc. for about C$872 million ($850 million), the company said last month.

The Canadian producer currently has “substantial financial capacity for acquisitions,” RBC Capital Markets analyst Fraser Phillips in Toronto wrote in a report yesterday.

By James Paton Jan. 19 (Bloomberg)

Uranium Spot Price Tumbles Yet Again

Industry consultant TradeTech's weekly spot price indicator for yellow cake has tumbled more than 1.5% during the week ending on Friday. TradeTech puts the blame on a "combination of offers from aggressive sellers and limited, largely discretionary, demand".

TradeTech's U3O8 spot price indicator now stands at US$43.75/lb, US75c (1.69%) lower than the week prior.

The consultant registered five transactions for a combined total of approximately 700,000 pounds U3O8 equivalent. Buyers included utilities and intermediaries, with TradeTech indicating prices in some of the spot transactions concluded were below the new spot price indicator.

The consultant adds the drop in price seems to have attracted new demand which, in turn, is likely to ease some of the downward pressure on prices.

TradeTech's Mid-Term U3O8 Price Indicator stands at US$50.00/lb, while its Long-Term Price Indicator stands at US$60.00/lb.

January 16, 2010

Australian Uranium Sector Update

The spot uranium price is now US$44.50 per pound, which is down 5% from 3-month ago levels and compares to a spot price of US$52.50 per pound as at the end of last year. Prices rallied in October as an incident at the Olympic Dam mine saw a jump in the spot price to US$49.50 per pound, but this level has failed to hold.

Given the incident is likely to take about two million pounds of uranium out of the market by the first quarter of 2010 thanks to lost production at the project, industry consultant Resource Capital Research (RCR) suggests the current price weakness is a little concerning for uranium prices going forward.

Little change is expected in the near-term as RCR notes the Fund Implied Price, which is a good leading indicator for near-term spot prices, is currently trading at US$45 per pound having ranged between US$42-US$49 per pound since August. Most likely to influence prices in coming weeks according to RCR are expectations of increased uranium purchases by utilities on the buy-side, countered by ongoing concerns with respect to increased US Department of Energy liquidations on the supply-side. Currently RCR notes there are modest concerns in the market with respect to downside price pressures.

Long-term contract prices for uranium currently stand at US$61 per pound, down from US$70 per pound in December last year, while RCR notes there are 436 nuclear power reactors in operation and 53 under construction. Globally a further 436 reactors have either been planned or proposed, up from 376 in December of last year. This should boost long-term demand and so provide some support to prices in the years ahead.

Despite the spot uranium price issues, RCR notes the market valuation of Australian companies with one or more uranium project has risen 12% over the past month, 18% over the past three months and more than 350% over the past 12 months. This means the Australian uranium sector has outperformed its Canadian counterpart, where the gains have been 4%, 19% and 198% respectively.

Among the listed Australian plays making news this quarter, RCR notes African Energy Resources (AFR) has seen significant share price gains thanks to exploration success in Africa and the awarding of a mining license in Zambia, while Black Range Minerals ((BLR)) continues to make progress in acquiring the balance of the Hansen uranium deposit it doesn't already own.

Elektra Mines ((EKM)) continues to explore the Yamarna belt region in Western Australia and has returned some high grade discoveries of late, leading RCR to suggest a resource of one million ounces is possible by the middle of next year, while Energy and Minerals Australia ((EMA)) has also been active in drilling its Mulga Rock Deposits project. As well, the company is expected to announce a resource upgrade at its Ambassador deposit in the first quarter of next year.

Energy Resources of Australia ((ERA)) offers some valuation upside according to RCR if current exploration of its East Alligator River assets in the Northern Territory deliver good results, while Extract Resources ((EXT)) continues to lift its resources towards 600 million pounds. This means the key for the company will be how any project is structured for development in RCR's view.

Greenland Minerals and Energy ((GGG)) is due to provide a pre-feasibility study on the Kvanefjeld deposit sometime this month according to RCR, while Mid Exploration ((MEY)) continues to aggressively explore the Marenica deposit in Namibia, where there is potential for a heap leach operation.

For Monaro Mining ((MRO)) the focus according to RCR will be on advanced exploration drilling at its US projects in the first quarter of next year, while NGM Resources ((NGM)) has already returned some encouraging early results from its large strategic land holding in Niger, Africa.

While long-term Paladin ((PDN)) expects to grow its African operations even further, the current focus for the company according to RCR is the ramp-up of production at both Langer Heinrich and Kayelekera, where delays have already caused production guidance for 2010 to be lowered to 5.6 million pounds from 6.6 million pounds previously.

For PepinNini Minerals ((PNN)) exploration remains the focus as RCR points out along with the impending release of the Crocker Well Project bankable feasibility study the company also has some high grade gold, copper-nickel and other base metal targets that should keep the stock in the news in the first half of next year.

Toro Energy ((TOE)) has made ground in expanding its Wiluna resource base via the acquisition of some additional ground and RCR notes the company is cashed up to produce a bankable feasibility study on the project, while White Canyon Uranium ((WCU)) has almost reached the ore body at its Daneros project and so RCR expects first shipments of ore either this month or early in 2010.

January 12, 2010

Uranium Market Poised for Recovery in 2010

A declining trend in uranium prices continued into 2009, and TradeTech’s uranium spot price dropped to US$44.50 per pound U3O8 on December 31, 2009. However, buyers are expected to return to the market during the first quarter of 2010, as a number of utilities can justify discretionary purchases and buying from Asia is expected to remain strong.

Denver, CO January 7, 2010 -- A declining trend in uranium prices that began in 2008 continued into 2009, as TradeTech’s uranium spot price fell 15 percent from US$52.00 per pound uranium oxide (U3O8) at year-end 2008 to $44.50 on December 31, 2009.

The uranium market attempted to recover from the effects of a global financial crisis that began in late 2008, and the spot price strengthened by mid-year. However, this trend was short-lived as several sellers competed aggressively to conclude sales and the spot price fell again in the second half of the year.

In early October, the spot price climbed briefly as BHP Billiton reported damage to the main shaft of its Olympic Dam that would take months to repair. The company declared force majeure on certain uranium deliveries, which brought a number of buyers, primarily traders and financial entities, to the market and the price rose to $50.00 per pound U3O8. By December, however, the spot price retreated as the US Department of Energy’s sale of uranium to fund cleanup of the Portsmouth uranium enrichment facility overshadowed the market.

The drop in spot prices in the second half of 2009 caused lower expectations of market participants, especially among buyers. “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. 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,” said TradeTech President Treva Klingbiel.

“Buyers are expected to return to the market during the first quarter of 2010 as a number of utilities have indicated they can justify discretionary purchases for inventory at current price levels,” Klingbiel added. In addition, buying from Asia is expected to remain strong as India and China, in particular, forge ahead with plans for expanded nuclear energy programs to meet rising energy demand.

January 7, 2010

Paladin Energy Now On Cameco's Radar

Will Cameco Move Up The Nuclear Fuel Chain?

Wednesday, January 6, 2010

Andrew Willis

Cameco has $2-billion burning a hole in its pocket, and BMO Nesbitt Burns has an interesting take on where one of the world's largest uranium producers will spend its cash.

Cameco is flush after selling its stake in Centerra Gold, and is expected to do something with this capital, as earnings will drop by 20 per cent without Centerra’s contribution. Most analysts have rolled out a list of junior uranium plays as potential acquisitions, with Paladin Energy considered the most attractive target, and junior miner Berkeley Resources another possible purchase.

However, BMO Nesbitt Burns mining analyst Edward Sterck surveyed the landscape, and highlighted a potential deal with the cash-strapped British goverment.

Cameco could move up the nuclear fuel chain by acquiring the U.K. government’s one-third stake in URENCO group, which has four plants that enrich uranium for use in reactors. The British-based company’s web site explains that this is the highest value-added stage of the fuel supply chain.

After crunching the numbers. Mr. Sterck said: “acquiring a one-third stake in URENCO for $3-billion would dilute Cameco’s net present value per share by 10 per cent but increase earnings by over 40 per cent by 2014. A stake in URENCO looks like the most accretive transaction, but Paladin is also a strong candidate from an earnings perspective.”

When it comes to Paladin, BMO Nesbitt Burns said a takeover would need to be pitched at a 40 per cent premium to where the stock is now changing hands, “resulting in a 27 per cent dilution to Cameco’s net present value per share, but increasing earnings per share by as much as 30 per cent by 2014.”

Paladin currently boasts a $2.9-billion market capitalization.