Commodities | Dec 19 2006
By Greg Peel
The spot price of U3O8 is up 97% in 2006 to US$72/lb on the reckoning of TradeTech. The other major price-watcher – Ux Consulting – has yet to update its assessment for this week. Last week Ux set the price at US$65.50/lb. Resource Capital Research has used the latter figure to assess the recent performance of Australian uranium miners/explorers.
In the past three months, the share prices of the two majors have increased around 57%. Energy Resources Australia (ERA) and Paladin Resources (PDN) are the only two listed miners producing, or about to produce, commercial quantities of uranium.
By contrast, RCR’s pool of 65 juniors has seen an average increase of 53% over the period, and 186% for the year. At 40% and 143%, Canada’s pool is not quite as spectacular.
This is interesting, given one is actually allowed to mine uranium in Canada, whereas in Australia, only the Northern Territory and South Australia offer such potential opportunity. Most Australian hopefuls are situated in either Western Australia or Queensland where state governments are to date unmoved on allowing uranium mining. Can Kevin Rudd affect a change in policy? We’ll have to wait until at least April to find out.
RCR notes forward indicators suggest a U3O8 price of US$90/lb in 2007 and US$115/lb in 2008. Three months ago, those forward indicators were US$60/lb and US$88/lb respectively.
One doesn’t have to look far to find a reason for uranium’s spectacular run. The World Nuclear Agency reports the number of planned or proposed reactors across the world has grown from 153 in May to 223 in November. There are currently 442 operating. To start a nuclear reaction, one initially needs a lot of U3O8. The bulk of new proposals come from China, Russia and the US.
The beginnings of industry consolidation are also upon us. Denison Mines is trying to take over OmegaCorp (OMC) and IUC (IUC) while Paladin has gone after Valhalla (VUL). Omega will be in a position to announce a project in 2007.
Further down the time scale, RCR reports those companies with advanced (historical) projects, which could advance more rapidly in 2007, include Uranex (UNX), PepinNini (PNN), Berkeley (BKY), Wildhorse (WHE), and Energy Metals (EME).
Those moving ahead on earlier stage exploration projects in 2007 (some with encouraging early results) include Curnamona (CUY), Globe (GBE), Scimitar (SIM), Stellar (SRZ) and West Australian Metals (WME).