THE TRADE OF THE DECADE URANIUM

What Will Eventually Turn Out To Be
The Trade Of The Decade,
Is To Buy Quality Uranium Play's.
This unique energy source is a “backdoor play” on the growth of Emerging Markets.

There are 436 nuclear reactors in 30 countries around the world. But here’s the important thing; there are over 200 new plants in some stage of planning, engineering or construction. And most of these new plants will open in a Developing World nation.

But there’s not even enough uranium coming from the world’s mines right now to supply the current power plants across the world, let alone a couple hundred more. Thus, the uranium story is really quite simple. It is a supply and demand story. There is a lot of demand and not much supply. Any questions so far?

Mined supply of uranium satisfies only about 55% of total demand. The rest of the supply comes from somewhere else. These secondary sources of uranium come primarily from old nuclear warheads. But no one really knows how this enormous supply gap will resolve itself in the future. This is what we do know: when you get a supply deficit, prices rise. And I think that will be the case with uranium.

Uranium demand is on its way to hitting 226 million pounds per year. Yet last year, the top dogs of the uranium mining industry – which make up 90% of the market – produced only about 110 million pounds of uranium.

A sidelight to this statistic is the fact that 63% of all mined uranium comes from just 10 mines. This means that the global supply of uranium is susceptible to supply shocks. If one big mine floods or goes down for whatever reason, it’ll make a big wave in the uranium market.

The current spot price is around $42.25 a pound. In the summer of 2007, the spot price hit $136 a pound. But the uranium price collapsed, along with many other commodities, during the credit rises. The uranium price has not yet recovered, but I believe very much that it will, as supply/demand trends start to operate on the pricing of this commodity.

BILL GATES NUCLEAR FUTURE

Here’s Bill Gates’ now-famous talk at the TED conference last month where he talks about nuclear innovation:

Is a Bill Gates-backed nuclear start-up going to tackle two of nuclear’s biggest challenges: sourcing and disposing of uranium? “Talks” between TerraPower and Toshiba, one of the world’s three big nuclear energy industry leaders, are lending some hope to the idea.

TerraPower is a spin-off of Intellectual Ventures, a start-up founded by a former Microsoft CTO, backed by Gates, and has only a handful of staff. Its reactor designs could represent huge advantages over existing systems, but, the FT reports, it’s early days.

NUCLEAR FUEL MARKET TO DOUBLE BY 2020

Conversion will see the highest growth rate of all fuel cycle services in the period to 2020, according to a new report by GBI Research.

The report, “The Future of the Global Nuclear Fuel Processing Industry to 2020” also predicts that the nuclear fuel processing market will double in size, from being valued at $20.8 billion in 2009 to $42 billion by 2020.

According to the report, the uranium conversion market, which was worth $0.7 billion in 2009, will be worth $1.4 billion by the end of 2020. It will expand at an average annual growth rate (AAGR) of 6.6% over the period, increasing by almost 2% in volume. The enrichment and fabrication markets will grow in volume by 1.4% over the same period.

The market for uranium enrichment services will grow most rapidly in the Asia-Pacific region with an increase of over 150% from $1.7 billion in 2009 to $4.3 billion by 2020, the study says.

This increase will be due to the addition of reactors in countries such as China, India, the Republic of Korea and Japan. Japan currently has the largest market for enriched uranium in Asia, generating $1 billion in revenue.

This is expected to increase to $2 billion by 2020. India will see the highest growth rate in terms of revenue generation, which will increase from its present value of $33m to $207m by 2020, equivalent to an average annual growth rate of some 16%.

RUSSIA TO BUY AUSTRALIAN URANIUM

The Federal Government has paved the way for Australia to sell Uranium to Russia.

An agreement was signed in 2007 by the Howard government but it is yet to be ratified.

In 2008 a Labor-dominated parliamentary inquiry recommended the deal be scrapped unless eight stringent conditions were met, including the resumption of inspections of Russian nuclear facilities by the global watchdog, the International Atomic Energy Agency (IAEA), and that Russia separate its civilian and military nuclear programs.

The Government has now decided the treaty contains "appropriate safeguards" for Australian uranium to be used in Russia's civil nuclear sector and says it will make a final decision on ratifying the agreement in due course.

That has angered the Australian Conservation Foundation's David Noonan, a nuclear free campaigner. He says under no circumstances should Australia seal the deal.

"This is the Howard-Putin nuclear deal from 2007, before the last federal election," he said.

"We had expected federal Labor to honour their policy and election commitments to strengthen, rather than to weaken, nuclear safeguards.

"They're looking to breach the strong conditions and recommendations of this federal parliamentary inquiry not to proceed with proposed uranium sales to Russia."

The Government says the agreement would ensure any uranium supplied could only be used for peaceful purposes and that it has to be subject to Russia's safeguards agreement with the IAEA. In addition, it could only be used in facilities jointly agreed to by Australia and Russia.

But Mr Noonan is doubtful.

"We believe that on the evidence presented to the federal parliamentary inquiry, Australian uranium would simply disappear off the safeguards radar on arrival in Russia," he said.

"This treaty allows Australian uranium to be used for facilities that are not covered by the International Atomic Energy Agency.

"It provides specifically for the substitution of Australian uranium for uranium from other countries and that they would then ignore essentially where our own uranium would go."

There is currently no obligation on Russia to accept safeguards under the IAEA rules.

Instead they have voluntary safeguard agreements with the IAEA and they ratified the Comprehensive Nuclear Test Ban Treaty a decade ago.

But Mr Noonan says the parliamentary inquiry recommended there should be a complete separation of the military from the civilian nuclear sector in Russia and that there should be independent verification of that separation.

He says that has not happened.

"The inquiry also recommended that there should be evidence that Russia was finally providing proper nuclear security on both visile material and on radioactive waste," he said.

"There is a long history of failure to provide security material in Russia."

______________________________

UPDATE ON OUTCOME

Coalition says selling Uranium to Russia, but not India, Hypocritical

Friday, 19/03/2010

The decision to sell uranium to Russia has been welcomed by the Federal Opposition, which started the process in 2007 when it was in power.

However, Federal Liberal Member for Kalgoorlie, Barry Hasse, says it's further evidence that India should be considered as a suitable market for our yellowcake.

Mr Hasse says the safeguards promised by Russia are exactly the same as those India plans to put in place.

"We're very happy that a trade relationship for minerals is developing with Russia and we felt the same about India, but when the Labor government came in, they wouldn't contemplate selling uranium to India," he says.

"There is very little difference (between the two countries) in fact, although India is not a signatory to the nuclear non-proliferation treaty .

"But there's very little difference in the cheques and balances in place in a practical way."

However, Mr Hasse says supplying Russia with uranium is positive not only for Australia's growing uranium industry, but for the reduction of global greenhouse gas emissions.

BRAVE SELLERS MEET STOIC BUYERS IN URANIUM SPOT MARKET

16th March 2010 Update
UxC Uranium U3O8 Futures

Weekly Spot Ux U3O8 Price
U3O8 Price (lb) $41.25 [+0.50]

Judging by the various sector updates that have passed my desk (pc) these past weeks, the majority of stockbrokers has given up on uranium, at least for the medium term. It's an oversupplied market and that's pretty much all there is to it, seems the ruling view.

Exactly two weeks ago we published a story highlighting most price charts for uranium-related stocks were showing a so-called “Cross Of Death” - a technical signal indicating the future looks bleak for the sector. See our story “A Death Cross For Global Uranium Stocks”, March 02, 2010.

All this doesn't mean there can never be a positive signal coming from the uranium market. As a matter of fact, weekly spot prices for U3O8 have stopped falling and are now printing US$40.75/lb. This is US75c above the price bottom seen in 2009, as well as US25c more than the price set for the preceding week.

The latter sentence is only half-true. Industry consultant Ux Consulting raised its weekly spot price indicator to US$40.75/lb last week. Fellow-consultant TradeTech has now followed up with a similar increase.

TradeTech has observed that sellers in the market have tried to raise their prices over the week past following on from the news that market overhang from the US Department of Energy had been successfully allocated, but potential buyers were not looking at the same songsheet.

TradeTech only recorded one transaction being successfully concluded in the week ending Friday. The consultant's mid-term price benchmark has remained at US$50/lb, the longer term benchmark has remained at US$60/lb.

Unfortunately for those remaining uranium enthusiasts left, all demand remains discretionary, at least for now.

By Rudi Filapek-Vandyck

16/03/2010

POSSIBLE BOTTOM FOUND FOR URANIUM SPOT PRICE

It would seem we missed the monthly report on the uranium industry by consultant TradeTech in our reporting last week. Otherwise we would not have reported a small gap between weekly U3O8 spot prices at TradeTech and peer Ux Consulting.

Contrary to our report last week, TradeTech too had made the decision to lower its weekly spot price indicator to US$40.50/lb, similar to UXC's price, by lowering by an extra US25c after it had lowered to US$40.75/lb on Friday February 26.

Anyway, now we have settled this matter, the price gap we reported last week has opened up this week instead. TradeTech left its weekly spot price unchanged at US$40.50/lb while UxC has actually raised its price by US25c to US$40.75/lb.

Yes, you read that correctly: one of the industry's weekly spot prices has actually stopped falling and recorded a small gain this past week.

On TradeTech's assessment, February saw a total of over 2.8 million pounds U3O8 equivalent changing ownership through 15 recorded transactions. TradeTech does note that news of a successful allocation of uranium in the form of UF6 from the US Department of Energy has changed the dynamic in the market in that buyers are more willing to do deals and sellers were actually trying to raise their prices.

As such, it's probably a fair assumption spot uranium prices have seen their bottom, for now.
We also picked up that Canada is thinking about relaxing ownership rules for Canadian uranium companies. At present, Canadian law restricts foreign ownership to 49%.

Long term uranium benchmarks have remained unchanged at US$60/lb.

10/03/2010 1:15:03 PM
By Rudi Filapek-Vandyck

END OF THE LINE FOR YUCCA MOUNTAIN

An Interesting Article on Yucca Mountain's demise.

04 March 2010
The withdrawal of its licence application yesterday marked the official end of the Yucca Mountain repository project.


Yucca Mountain
Aerial A file photo of Yucca Mountain
being used here for the last time.


The landmark means that efforts to make real the pledges of the 1982 Nuclear Waste Policy Act resulted only in $10 billion of spending on a project now described as "not an option." The project came to an official halt yesterday when the Department of Energy (DoE) filed a motion with the Nuclear Regulatory Commission (NRC) to withdraw the application to build and operate Yucca Mountain.

About one year ago President Barack Obama cut all funding for the DoE's work towards realising Yucca Mountain apart from answering questions from the NRC related to the license application.

However, "President Obama is fully committed to ensuring that the nation meets our long-term storage obligations for nuclear waste," said Scott Blake Harris of the DoE. The route for this is to be the 15-member Blue Ribbon Commission on America's Nuclear Future, nominated last month. It is to evaluate fuel-cycle and disposal options, including the reprocessing of used nuclear fuel, but will not touch on any siting concerns. Work for the group begins with its first meeting on 25-26 March and will continue until 2012.

Seeing as the USA's used nuclear fuel and other highly radioactive materials left over from weapons programs are temporarily stored at dozens of different secure sites, it is likely that a small number of larger longer-term facilities would be recommended. Most likely the permanent disposal route would be another geologic repository after a new site selection process based on voluntary participation of communities.

URANIUM SPOT FALLS TO $US40.50 P/LB

4/03/2010 1:15:02 PM

By Rudi Filapek-Vandyck

I received a few remarks from readers this week about my uranium story earlier this week (see “A Death Cross For Global Uranium Stocks”). The main complaint was that if two leading consultants to the uranium industry lower their spot price benchmarks to the same price level, this is not something that is “remarkable” - as I labelled it in my story.

Maybe not, but this week again shows that having Ux Consulting and TradeTech on one and the same price level has become more of an oddity than anything else. I suspect commercial motivations are behind this, but that's all I can do from my chair: assuming and speculating.

Fact is that after TradeTech lowered its weekly spot price to US$40.75/lb last week, UxC has responded by lowering its own weekly spot price indicator a tad lower: to US$40.50/lb from US$41.75/lb the previous week.

As I noted in my earlier story this week (see above) the long term price indicators as set by both consultants have now converged to US$60/lb. I haven't exactly gone through our archive, but it has been a long time since both consultants were on similar price levels for both long term and spot price benchmarks – I'd say more than a year, at least.

As a matter of fact, it now appears it lasted for a very short time only.

AUSTRALIA NEEDS MORE URANIUM MINES

AUSTRALIAN uranium production for the next 15 years is already allocated and new mines are needed, a conference was told.

Uranium explorer Toro Energy, which operates in WA and the Northern Territory, said very little of the nation's uranium resources are available to sell into future markets.

Toro's managing director, Greg Hall, today told delegates at the first day in Adelaide of the Paydirt 2010 Australian Uranium Conference that this created a unique opportunity that favoured the development of smaller economic deposits.

There is no doubt long-term uranium demand is there, even with current short term supply and price volatility but demand is double what it used to be five years ago,'' Mr Hall said.

Something like 150 million pounds of uranium is being put into long-term contacts every year and the reality is that a one gigawatt power reactor will come on line every month for about three years from 2014.

This will be a significant time in the global uranium market and Australia has a place to play.

However, most of the Australian production from existing mines or new expansion over the next 10 to 15 years is already allocated with major utilities or customers - and very little domestic uranium can now be termed `unallocated'.

It is an environment that is driving our decision to bring Wiluna into production as soon as possible in the short to medium term as though it is only 700 tonnes a year or so, it is not allocated output and we will protect that position as long as possible against this highly significant global supply opportunity.''

Mr Hall also stated it appeared that recent internal controls in Kazakhastan - which emerged last year as the world's largest uranium supplier - had now swung back to being under Russian influence and away from its western economy leanings of recent times.

This potentially could create a supply scenario for northern hemisphere uranium access similar to what we saw with Russia's control on gas supplies into Europe,'' Mr Hall said.

On long term prices, Mr Hall said their internal market intelligence expected these to swing back towards US75-85 a pound even though there was some persistent softness in the spot market currently.

The Chinese bought about 3700 tonnes of concentrate last year and they bought carefully in the downtime,'' Mr Hall said.

There is a lot of buying going on, however, and this will firm as more reactors come on line and supply is increasingly locked into longer term contracts.''

On Toro's flagship Wiluna uranium project in WA, Mr Hall told the conference that work was well advanced to commence on ground work and mining for a trial resource evaluation pit at the project later this month.

This will actually represent the first uranium bulk sampling mining operation in Western Australia since Rio Tinto undertook similar underground bulk sampling work at Kintyre in 1995,'' Mr Hall said.

As such, that represents a very exciting milestone in the resurgence of uranium exploration and development in Western Australia.''

The pit test work aims to prove up Wiluna's planned mining process, resource parameters and groundwater management controls.

Once in operation, Toro envisages exporting 730 tonnes of uranium oxide per annum from Wiluna through either existing uranium export outlets at Adelaide or Darwin.