Commodities | Feb 26 2008
By Rudi Filapek-Vandyck
So much for the theory that the spot price for yellow cake (uranium oxide or U3O8) won’t fall below US$75/lb. The past week would have seen the uranium spot price decline below US$75/lb, industry consultant TradeTech reports, but luckily for those who have a firm bet that US$75/lb will withstand all pressures and uncertainties, Canada’s Uranium One was forced to announce production problems at its African Dominion mine.
As reported earlier by FNArena, Uranium One’s outspoken CEO Neil Froneman has resigned and the company is not expecting to meet its earlier production guidance for the year. Official production forecasts have been lowered by 32% and 15% for 2008 and 2009 respectively.
The Uranium One supply loss reinvigorated the spot market with sellers immediately raising their prices, TradeTech reports. No new deals were concluded, apart from the one early in the week (which was at a price below US$75/lb) and the consultant thought it would be accurate to leave its weekly spot price indicator unchanged for another week.
Interestingly, for investors in commodities in general is that Uranium One’s problems in Africa seem to be partly caused by South Africa’s Eskom’s problems with supplying enough power for its customers. Eskom’s mining customers are currently running on 90% of their power requirements -with the company stressing this reduction is in place on a “voluntary” basis (as if they’d had a choice)- and the utility is planning to buy back power of some customers through Eskom compensating customers for the loss of production in exchange for the ability to buy back electricity to supply it elsewhere.
TradeTech’s weekly update suggests the spot market for uranium is currently well-supplied with available supply outnumbering apparent demand by more than a factor three.
There were no deals concluded in the long term market and the long term price indicator has thus remained unchanged at US$95/lb.
