Commodities | Sep 29 2006
By Greg Peel
Resource Capital Research reports that the analysts’ selection of 67 Australian uranium juniors has returned minus 1% in September, +25% in the September quarter and +47% over 12 months. Canadian juniors (93), by comparison, have returned minus 6% in September, +9% for the quarter and +85% for the year.
Unlike Australia, if you find uranium in Canada you can mine it.
Results were mixed amongst the majors over the quarter, with Cameco (CCO) down 7%, Energy resources Australia (ERA) unchanged and Paladin (PDN), which is about to commence production in Namibia, up 12%.
The uranium spot price continues its merry surge, rising 33% over the quarter from US$40/lb to US$53.25/lb.
In its June quarter review, RCR had forecast a spot price of US$54/lb by the end of 2006 and US$60/lb by May 2007. The roll-forward forecasts have now been increased to US$65/lb by May 2007 and US$88/lb by September 2008.
The long term forecast price has been raised from US$30/lb to US$35/lb to reflect higher capital and operating costs.
The biggest news on the Australian uranium front has been the agreement signed in April to clear the way for sales of Australian uranium to China. (Predictions are that if BHP Billiton (BHP) triples the scale of its Olympic Dam project, as intended, this will still only cover Chinese demand alone).
In addition to the supply agreement, the Chinese have been busy sniffing around for direct investment in Australian uranium exploration and mining, and this quarter saw China’s Sinosteel take a 60% stake in South Australia’s Pepinnini (PNN), and Chinese interest in the pending float of UraniumSA, which combines the resources of Stellar (SRZ) and Marathon (MTN).
Consolidation continues apace across the sector with Canada’s Mega Uranium making an offer for Redport (RPT) and Paladin taking a swing at Valhalla (VUL). The latter is subject to a court battle with Summit (SMM).
Valhalla’s resources lie in Queensland, which currently prohibits uranium mining but might have a change of heart, and Redport’s lie in Western Australia, which will continue to ban uranium mining unless there is a change of state government.
In general news, RCR reports the UK is moving towards the construction of new nuclear power plants, SXR Uranium One’s Honeymoon project in South Australia has commenced its development as Australia’s fourth uranium mine, and Paladin, as noted, is presently commissioning in Namibia.
RCR also states “The Federal leader of Australia’s Labor Party (ALP) announced the intention to repeal the Three Mines Policy at the ALP National Conference April 2007”. FN Arena suggests this comment is slightly misleading.
The leader of federal Labor party has only suggested he is open to the repeal of his party’s long standing policy. Such an action will be discussed and possibly voted on at the April conference, but there are no guarantees the repeal will go ahead.
The significance of such a repeal is not as great as offshore observers appear to have implied. The Labor Party is in opposition federally, and the governing Coalition has already lifted its uranium bans. However, the federal government does not have jurisdiction over state governments, only over the Northern Territory, home to ERA.
All Australian states are governed by state Labor parties, but the federal party has only the power to influence state policy, and not direct it. The Queensland premier has hinted he might be prepared to lift the state ban if the federal party is so inclined, but the Western Australian premier will do no such thing.
That leaves only South Australia with an open mining policy, but this is home to about three-quarters of the countries known reserves.