Category: Uncategorized

Monday, May 11, 2009
by Melissa Pistilli

Recent market and industry reports suggest that the uranium sector may be on the verge of a new bull market cycle as the spot price for U308 rises slightly to $44 per pound. “We believe the uranium market is in the early stages of a bull market rally that could last three or four years,” says a report by RBC Capital Markets.

In the report, analyst Adam Schatzker notes that uranium equities have rebounded nearly 225 per cent, although they are still around 68 per cent under their historic peak. Schatzker believes the market is probably two years away from reaching those peaks again.

The most important factor contributing to Schatzker and other analyst’s recovery forecasts is what many see as a devloping supply/demand shortfall as nations around the world turn to nuclear power as a greener alternative to fossil fuels and utility companies move to acquire dependable supply lines. UX Consulting estimates 2009 uranium demand at 171 million to 184 million pounds with production at only 125 million pounds.

“We think the uranium market will be facing substantial deficits and that utilities will have to pay higher and higher prices to secure both spot and long-term supplies. We also believe that the longer the spot price remains depressed (e.g. below US$70/lb), the more dramatic the price run-up will be,” said Schatzker.

Speaking at the annual shareholder’s meeting last week (his last official function before stepping down), Denison Mines Corp. [TSX: DML] [NYSE: DNN] CEO Peter Farmer said he expects the spot price to increase through 2009 and to possibly “spike” as worldwide demand rises.

Others believe uranium prices could rise as much as 35 per cent in 2010 on energy demand out of Asia and Western Europe. “By historical standards, the current price is pretty high and I imagine they’ll be trying to lock in as many sales contracts as they can,” said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management. “Energy will be a key commodity and especially for Asian economies.”

Another sign that the uranium market is set to rebound is the latest reports concerning mining giant Cameco Corp’s [TSX: CCO] [NYSE: CCJ] purchasing activity. On Friday, Cameco reported that its quarterly profit dropped 38 per cent on higher production costs. The rise in cost is due to uranium purchases at near-spot prices during the first quarter.

The purchases, said Cameco CEO Jerry Grandey, are a part of a longer-term strategy that will allow the company to take advantage of rising uranium prices. “Down the road, we will realize additional revenue and earnings as we deliver the purchased material to our customers,” said Grandey.

Uranium Mining Stocks

Investors are once again getting excited about uranium miners, especially those companies with viable, advanced projects. “We think consolidation in the uranium business will occur in the coming 12 months, but the number of quality names is limited and should help drive equity prices higher,” said the RBC report.

Some names making the market reports include First Uranium [TSX: FIU] and Deep Yellow [ASX: DYL]. Both have had “strong positive inflows” so far this year, according to Mineweb’s Barry Sergeant. First Uranium has had the “most spectacular price gains . . . up 174 per cent% from prices on 12 January 2009.” Deep Yellow has advanced 86.7 per cent “particularly on more recent drilling results.”

On Tuesday, shares of First Uranium on the TSX reached a 52-week high of $7.68 to close at $7.36.

Shares of Deep Yellow on the ASX closed at .28 cents, down from a 52-week high of .38 cents.

Courtesy of Uranium Investment News a leading provider of business news, financial information and analytical tools on the uranium market.

Renewed interest in Uranium and REEs…. Is this the best value play? IMO yes.

The chart below is taken from ASX listed GGG’s website the company that (ASX Code:GGG) own’s the Greenland deposit. It is from mid 2008. GGG has large amounts of uranium and REEs.
The reason I posted it is to show that Australia is in a good position vis a vis China re dominance in the REE industry. See http://www.australianrareearths.com/current-issues.html

The Kvanefjeld REE deposit in southern Greenland is growing rapidly to become one of the largest deposit of REEs in the world. It has the potential to meet the world’s rapidly growing demand for REEs, and in doing so, can become a major contributor to the Greenland economy for decades to come. At Greenland Minerals and Energy, we believe that Kvanefjeld will be truly world class mineral deposit that can be developed in a responsible, environmentally conscious manner, to become one of the world’s major sources of Rare Earth Elements – “Specialty Metals for a Greener World”.

GGG has almost as much uranium as EXT. Plus they have 2/3 more value in their Rare Earth Element… the looming battle ground for the move to the electron based economy. So for a very small market cap of around $35m you get 200m pounds of uranium and one of the world’s largest REE deposits.

Globally there are 436 reactors in operation today, annually consuming some 168 million
lbs. of uranium to produce 16% of the world’s electricity. A further 151 new reactors
are either under construction or planned, plus 266 more units proposed. Adding only
those being built or planned would yield a dramatic 35% increase in the number
of plants worldwide. If we simplistically assume the average new reactor consumes
as much fuel as those currently operating, the industry must source an additional
59 million lbs. of uranium per year on an ongoing basis — and likely within the next
decade. This represents a staggering 55% increase in mine output from today’s levels.
Moreover, the startup of a new reactor causes a surge in demand as initial cores
typically require 2–3 times annual requirements during the ramp–up phase.

Read more

Where will all this uranium come from? Is it even possible?

Spot Uranium Prices Continue To Rise
BY RUDI FILAPEK-VANDYCK @ FN ARENA NEWS – 24/04/2009

Deutsche Bank analysts have been among the most bullish on price prospects for uranium since the crash from the US$138/136/lb price peak in 2007. As such, their price projections have found widespread attention, both by media and investors. Alas for those investors who took too much guidance from earlier price projections, spot U3O8 prices went their own way, in the opposite direction, hitting US$40/lb earlier this month.

On Deutsche Bank’s earlier projections we should be at US$100/lb, if not US$125/lb by now.

No doubt, were we to ask Deutsche Bank analysts what exactly went wrong last year they would respond with “Lehman Brothers”. Ever since the US investment bank went into receivership last year, its administrators have tried to monetise on the inventory of yellow cake that came with all other assets, but the result has been that a relatively small uranium market was dogged by the impatient overhang of some 500,000 pounds of yellow cake, seeking a willing buyer.

As it turned out, buyers proved too eager to get their hands on the “stuff” at too large a price discount and the Lehman inventory has now been officially taken off the market, indefinitely. Long story short: overall activity in the U3O8 spot market has picked up considerably since March, and prices are now rising again as well.

Last week, industry consultant Ux Consulting was the first to make a small increase to its weekly spot price benchmark. The small price rise marked the first upward move since November last year. Fellow-consultant TradeTech has since followed up with its own price increase. UxC has now followed suit with another increase; spot up US$1.50 to US$42.00 a pound.

It would seem spot uranium prices are back moving upwards and US$40/lb may have been the bottom for the foreseeable future.

Deutsche Bank analysts currently forecast an average price of US$70/lb this calendar year, implying prices should rise a lot further from here (Lehman Bros ambitions notwithstanding). The average price forecast for 2010 currently stands at US$80/lb.

According to FNArena calculations, spot uranium has thus far averaged around US$45.50/lb so far this calendar year.

Deutsche Bank analysts recently attended the World Nuclear Association (WNA) conference (in Sydney this time) and drawn further long term confidence from the fact that governments in Korea and China remain ambitious in terms of increasing power generation from nuclear reactors. They continue to highlight that Australia’s Paladin Energy (PDN) remains the only high growth uncontracted uranium producer without ownership by a government or a utility (though Areva does own a minority stake).

However, the future does not hold bullish prospects only for the sector. The analysts mention in this week’s brief update on the uranium sector that technological developments are now allowing effiency improvements at US utilities (meaning they can generate more power with the same nuclear capacity) and in addition the US Department of Energy (DOE) is expected to push the overall market into oversupply again from 2011 onwards.

On this basis, current price projections are for an average spot price of US$70/lb in 2011 and for US$65/lb in 2012 and a return to US$50/lb from 2013 onwards.

It was a big day for many of the Australian uranium companies.

The underperformance of GGG seems to relate to their share issue at 20c….

“Greenland Minerals & Energy raises A$5 million for Kvanefjeld Project royalty repurchase

Greenland Minerals and Energy Ltd (ASX:GGG) has advised that they have received verbal acceptances to place 25,000,000 shares at 20 cents a share to raise $5,000,000. The funds will be used to increase general working capital and to facilitate a potential repurchase of the royalty outstanding on the Kvanefjeld project. Greenland’s flagship project is Kvanefjeld, a multi-element deposit located near the southwest tip of Greenland. Through focused exploration, Kvanefjeld is rapidly growing to become one to the world’s largest undeveloped deposits of rare earth elements, uranium and naturally occurring sodium fluoride, commodities with long term forecasts for strong demand increases. …”

Greenland Minerals & Energy
http://wotnews.com.au/news/Greenland_Minerals_And_Energy/