Australia | May 18 2007
By Chris Shaw/Rudi Filapek-Vandyck
Uranium prices may have stalled at levels around US$120 per pound over the past couple of weeks, but many within the industry suggest there are no reasons for prices to weaken from this peak in the short-term.
Chairman of recently listed Crossland Uranium Mines (CUX), Bob Cleary, speaking at the company’s annual general meeting today suggested strength of demand would prove to be supportive for uranium prices going forward.
His view is with the world now focusing more attention on global warming there will be a corresponding focus on nuclear power, but the long lead time of up to seven years or more between beginning a project and producing uranium will keep the market tight in terms of supply and demand, particularly given the lack of significant exploration activity in the sector in recent years.
Cossland hopes to be a beneficiary of the stronger prices and is moving towards this goal through the recent signing of a joint venture with Canadian company Centram Exploration that will see that company contribute $4m towards exploring Crossland’s Australian tenements.
The first work is expected to start shortly at the company’s Kalabity prospect in South Australia, with aerial geophysical surveys set to start in the next few days. The company has additional prospects in the Northern Territory and Western Australia, with initial development work to commence on these prospects expected to commence during the course of the year.
The company is not committing itself to a fully Australian focus however, as with Centram it has established a joint venture to explore for uranium in other parts of the world, reflected in an announcement yesterday the group was applying for 20 exploration tenements in Burkina Faso in Africa.
Having been previously listed on the Newcastle Stock Exchange the stock transferred to an Australian Stock Exchange listing only last month following an issue of shares at 25c. It has since traded in a range of 39c to 72.5c and in a weaker broader market today is down slightly, as at 2.00pm the stock was trading 2c lower at 46.5c. At this price the company has a market capitalisation of just more than $40 million.
On the other side of the globe, in Canada to be more precise, Toll Securities, one of the equity researchers and stock brokers who has started to specialise in uranium, has noted the sector has globally suffered from a pronounced sell-off this week.
Toll believes this downward spiral may well continue into the summer months. Having said so, Toll also believes this rather gloom-ish outlook comes without any particularly significant changes within the sector. The specialists suspect the flat US$85.00/lb Term uranium price relative to the US$120.00/lb Spot price “has burst some investors’ hopes for a much higher long-term price”.
The fact that larger cap uranium stocks have fallen off just as much as the junior stocks may indicate, says Toll, “a possible shift in the market’s expectations for the sector”.
As one would expect, the broker sees “an excellent buying opportunity”, for selected stocks, although “investors are advised to temper their return expectations if the uranium Spot price fails to increase significantly over the coming months”.
Toll suspects investors have started to lift their demands, looking for “economic grades at reasonable depths”, not just for any form of radiation under the ground.
Despite all this, Toll notes the nuclear industry continues to show signs of growth with the Brazilian Ministry of Mining and Energy calling for the construction of between four to eight new nuclear power plants by 2030.
FNArena also noted that promising uranium junior, Bannerman Resources (BMN), has hired Canada based Haywood Securities to facilitate a listing on the Toronto Stock Exchange. It was the same Haywood that was part of the team that assisted Paladin Resources (PDN) achieving the same in the second quarter of 2005.