Uranium Week: Buyers On The Move

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By Greg Peel

After a couple of weeks of low activity, in which buyers and sellers both seemed reluctant to move on price, volumes lifted significantly in the spot uranium market last week. Industry consultant TradeTech reports nine transactions completed totalling 2.3mlbs of U3O8 equivalent, although around half of the transactions involved sales of UF6.

That takes the 2014 year to date volume to 9.6mlbs of U3O8 equivalent, up from 6.7mlbs in the same period last year.

The market has been waiting for some sort of demand-side impact from recent supply-side issues, including operational problems at BHP Billiton ((BHP)) and Rio Tinto ((RIO)) mines and more recently, problems at the Azelik mine in Niger. To that end, buying interest was strong early in the week from both traders and utilities, but by week’s end buyers backed off from paying increasing prices. End-use demand remains discretionary, TradeTech notes, with no sign of pressure to buy at this time.

Prices were thus lower by week’s end than the earlier peak but TradeTech’s weekly spot price indicator is up US50c on the previous week to US$39.00/lb.

There were no transactions completed in the term market last week and TradeTech’s term price indicators remain steady at US$42.50/lb (mid) and US$50.00/lb (long).

It’s been a rocky road these past few years for Australian-listed uranium producer Paladin Energy ((PDN)). Having once enjoyed the benefits of sales at rising spot prices, when long established producers were stuck with legacy longer term contract pricing, the collapse in spot prices post-Fukushima proves what goes around, comes around, and Paladin was soon flying very close to the wind as it burned cash at too-low uranium prices.

Equity raisings and debt restructures have followed, and recent improvement in prices has led Paladin management to consider restarting the Kayelekeera mine in Malawi which the company had earlier been forced to place on care and maintenance. However, spot prices are not yet strong enough for Paladin to enjoy positive cash flow, and in a classic case of “can’t take a trick”, the company had just announced further balance sheet repair when a pre-leach thickener at the flagship Langer Heinrich mine in Namibia failed, forcing an 8-12 day shutdown.

Paladin thus expects a production loss of around 100,000lbs in the quarter and has reduced FY15 production guidance accordingly.

The gods are clearly not smiling on Australian-owned uranium production at present.
 

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