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Accident at BHP's Olympic Dam will curtail Uranium output for ~ 6/12

October 21st, 2009

Lots of stories about BHP’s major accident involving the semi destruction of it main mine shaft by a couple of rogue skips that damaged the lifting mechanism, the overhead fly-wheel as well as the shaft itself are now in the media.

BHP now has to rely on a much smaller secondary shaft to bring mined material to the surface… consequently BHP has declared force majeure – a declaration of not being able to supply to its customers due to circumstances beyond its control.

This coupled with ERA’s problems has lead to a situation where emerging uranium producer Paladin has risen markedly. Another likely to benefit is Australia’s Extract ASX:EXT that is proving up a multimillion pound deposit that some say will reach 500m pounds of uranium at quite exciting grades in Namibia. Paladin is of course just about to produce substantial uranium and consequently well placed as seen by its share price rise over the last few days.

Namibia is a uranium hot spot with several Australian compnaies having major uranium prospects and projects underway. These include BMN, TOE, EXT, DYL.

Below is a story from Reuters….

Uranium miners’ shares leap on Olympic Dam force majeure
By Cameron French of Reuters
TORONTO – Shares of uranium producers have raced higher, as an apparent declaration of force majeure at the massive Olympic Dam mine in Australia suggested uranium prices could jump.

Shares of Canadian uranium major Cameco Corp climbed more than six per cent, while those of other international producers climbed between seven per cent and nearly 10 per cent.

According to The Australian newspaper, mine owner BHP Billiton plans to advise copper and uranium customers the mine will be down for an extended period because of damage to equipment at the main shaft earlier this month.

The mine produces about 4,000 tonnes of uranium annually, which accounts for a bit less than 10 per cent of global mined production. The damaged Clark shaft handles about 80 per cent of Olympic Dam’s production capacity.

Such a loss of production would be expected to drive up prices in the thin uranium spot market as BHP’s customers would have to seek alternative sources of supply.

“It looks like the market’s assuming the worst,” said Simon Tonkin, an analyst at Thomas Weisel Partners Canada.

Weekly spot prices UX- were last calculated at $US46 a pound, according to Reuters data.

Late in the session, Cameco shares were up 6.7 per cent at $C32.48 on the Toronto Stock Exchange, after touching a year high earlier in the session.

Australian-based Paladin Energy was up 9.7 per cent at $C5.10 on its Toronto listing, while Uranium One , which is focused in Kazakhstan, rose 7.5 per cent to $C3.31, and Denison Mines surged eight per cent, to $C1.90.

In the options market, the volume on Cameco was six times the average daily turnover with about 16,000 call options traded at mid-afternoon. This was seven times the number of its puts, according to option analytics firm Trade Alert.

Call options let investors buy a company’s shares at a fixed price within a specified time period, while put options are options to sell.

BHP is expected to provide an update on damage to the mine on Wednesday in Australia.

In addition to the uranium production, analysts have estimated the global copper market stands to lose up to 50,000 tonnes of supply this year due to the incident.

Extract ‘Inundated’ by Potential Uranium Partners 15m pounds per annum potential

October 16th, 2009

Extract ‘Inundated’ by Potential Uranium Partners (Update1)

By James Paton

Oct. 16 (Bloomberg) — Extract Resources Ltd., a uranium explorer whose shares have surged almost eightfold in Australia this year, said it has been “inundated with requests” from companies proposing to join or take over its Namibian project.

“We’re looking at options to see whether one of the big players would want to come in on a strategic partnership level,” Chairman Steve Galloway said in an Oct. 13 telephone interview from Namibia. Extract is being advised by Rothschild, the largest family owned bank, and may ask shareholders in November to consider proposals to bring its Rossing South mine to production, he said. He didn’t name any potential partners.

Extract, 15 percent owned by Rio Tinto Group, has gained more this year than any other stock in Australia’s S&P/ASX 200 Energy Index as investors bet countries will turn increasingly to nuclear power, using fuel derived from uranium, in response to climate change. Drilling at Rossing South suggests it could become one of the world’s largest uranium mines, Galloway said.

Investors “are jostling for a piece of the action,” said Gavin Wendt, an independent resources analyst who has followed Extract for three years and met with executives from the explorer in the southwest African country about two months ago. A joint venture, possibly with Rio, may be the most likely scenario, he said, adding that the stock’s “remarkable ride” has driven up the potential acquisition cost.

Extract Resources has told suitors “we’re not for sale,” Galloway said. Rio Tinto doesn’t comment “on market rumors or speculation,” Tony Shaffer, a spokesman for the company, said by phone from Melbourne yesterday.

Shares Rise

The stock gained 0.6 percent to A$10.06 at 12:50 p.m. in Sydney, valuing the company at almost A$2.4 billion ($2.2 billion), compared with about A$311 million at the end of 2008.

Extract said Oct. 9 it found new high-grade mineralization at Rossing South and estimated the total uranium resource could reach 500 million pounds. The deposit is about 7 kilometers (4.4 miles) from Rio Tinto’s Rossing mine and approximately 30 kilometers from Paladin Energy Ltd.’s Langer Heinrich project.

“We keep finding better and better resources,” said Galloway, a former mineral economist with the Namibian government. “We haven’t seen bad news yet.”

Gavin van der Wath, an analyst BBY Ltd. in Sydney who has a “hold” rating on Extract, said A$10 is a fair value for the stock.

Economies of Scale

“A larger resource would enable them to increase their yearly production, which would have economies of scale, and would in turn increase the valuation,” Van der Wath said by telephone today. “But at this point in time, no.”

Extract today named Norman Green head of the unit that will develop Rossing South, a statement to the Australian stock exchange shows. Extract expects to replace Managing Director Peter McIntyre, who stepped down in September, by early next year, Galloway said.

The Perth-based explorer may sell more than $700 million in shares and debt in 2011 to bring the mine into production, Galloway said. That’s in addition to A$91 million raised this year by selling equity.

London-based Kalahari Minerals Plc, which owns about 41 percent of Extract, said Oct. 9 the project potentially could rival the world’s biggest known uranium deposit at BHP Billiton Ltd.’s Olympic Dam.

Potential Risk

While the target of 500 million pounds is “achievable” and would make the mine one of the world’s biggest, the idea of the resource rivaling Olympic Dam isn’t realistic, BBY’s Van der Wath said. He estimates the size of the Olympic Dam deposit at more than 16 billion pounds.

Rossing South may be able to produce more than 15 million pounds of uranium oxide a year, “a huge amount,” Galloway said.

Galloway said a possible risk is that “a lot of other uranium comes on stream,” curbing gains in the price of the nuclear fuel. “But I think, over the long run, uranium will be a very profitable business.”

The uranium market will have a surplus next year for the first time in at least three years as producers increase output faster than demand rises, the London-based World Nuclear Association said Sept. 10.

Uranium prices, which peaked at $136 a pound in 2007, rose 5.7 percent in a week to $46 a pound on Oct. 12, Ux Consulting Co. said Oct. 13.

Extract expects favorable supply and demand conditions when Rossing South is projected to begin production in 2013, Galloway said. “By 2013, 2014 there will be a space for new uranium on the market.”

Some 440 commercial nuclear power reactors operate in 30 countries, with a further 30 under construction and another 90 planned, the World Nuclear Association said on its Web site.

Galloway said Extract “is at a crossroads” as it explores partnership options and considers whether to expand beyond a single project in a single country. For now “we’re trying to get on with developing the resource as fast as we can,” he said.

ext-rossing-ida

To contact the reporter on this story: James Paton in Sydney [email protected]

http://www.bloomberg.com/apps/news?pid=20601085&sid=aM4_PpnX.gFE

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Uranium turning bullish

October 15th, 2009

I have been watching these over the last few months… they turned -ve several months ago and now rather suddenly sentiment seems to have turned positive.
If you click on the picture you can get your own market club analysis of the uranium field just type in Uranium.uranium-turning-bullish1

The Global Uranium fund (GURAF) is also positive.