Commodities | Sep 12 2007
By Rudi Filapek-Vandyck
Both TradeTech and Ux Consulting left their weekly spot price indicators for U3O8 (uranium concentrate, otherwise known as yellow cake) unchanged this week at US$85/lb and US$90/lb respectively.
We also received an industry update by analysts at Canada’s National Bank Financial which suggests the overall environment since the first quarter of 2007 has pushed many investors in the uranium sector to the sidelines.
Will they return?
National Bank Financial believes it will require some time before these investors will jump back in the sector and even when they do the analysts remain doubtful the speculative investment activity will reach the lofty heights witnessed earlier this year ever again.
The market has changed, the analysts advocate, and they advise investors should focus on emerging producers and development stories with strong growth potential from now on.
So far this year, the analysts have calculated, spot uranium has averaged US$104 per pound, and that before they knew both TradeTech and UxC decided to keep their prices unchanged this week.
The analysts have scaled back their spot price expectations for the short and medium term, forecasting an average price of US$100/lb for calendar 2007 (from US$120/lb previously), US$120/lb for 2008 (was US$150/lb) and US$125/lb for 2009 (was US$135/lb). The revised forecasts not only suggest that further rises for spot uranium are expected to be more orderly post this year’s heavy price correction, but are also anticipated to last longer (into 2009 instead of 2008 as previously anticipated).
National Bank Financial also revised its long term price forecasts: 2007 stands at an average of US$90/lb, rising to US$105 for 2008, and further to US$110 for both 2009 and 2010 (previous forecasts were significantly higher).
The good news is that the analysts have also increased their long term price forecast, from US$35 to US$40 per lb starting in 2016.
National Bank Financial covers the Toronto listed shares of Australia’s Paladin Resources (PDN). They are neutral on the stock after having lowered their price target to C$6.25 from C$8.00.
(For more info on securities analysts lowering their price forecasts and target prices for uranium producers see this week’s Weekly Analysis “A Healthy Touch Of Realism For Uranium”). FNArena also published a Special Report in pdf on the factors behind the change in market dynamics for the uranium industry. This report can be found on our website.
