Uranium Market Showing Signs Of Improvement

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By Chris Shaw

While oil has been at record levels it has been a different story for another major source of energy, as uranium prices have fallen 15% since the end of March to US$60 per pound. This remains well down from last year’s record levels of US$136/138 per pound.

The news is not all bad though as Resource Capital Research’s June quarter report into the sector shows forward indicators suggest the price is likely to increase to around US$75 per pound in the shorter-term. Further gains are expected longer-term as the group notes the industry benchmark long-term contract price is US$90 per pound, down from US$95 per pound as at the end of March.

Growing demand should support higher prices longer-term as Resource Capital Research notes there are now 311 new reactors either planned or proposed, up from 222 a year ago. Currently there are 439 nuclear power reactors in operation around the world and a further 36 under construction.

The continued increase in oil prices also bodes well for the competitive position of uranium as a source of energy, as the Resource Capital report points out the USA’s Congressional Budget Office has estimated nuclear power would be commercially competitive at carbon prices of just US$45 per tonne

Adding weight to the group’s view sentiment in the sector is beginning to improve is the improved performance of uranium equities, as the market valuation of Australian listed uranium plays has gained 23% in the last month. Share prices are up 12% over the past three months, though in year-on-year terms the sector is still down 8% from a year ago.

This compares favourably to the performance of Canadian listed uranium plays, which are up 7% over the past month but down 6% over the last quarter and 32% over the past year.

The group’s report highlights Alliance Resources ((AGS)) as an emerging player of note in Australia given the company’s Beverley Four Mile project coule be in production as early as 2009/10 if conditions including a JORC resource statement are met. The resources statement is expected in the September quarter this year.

Energy Metals ((EME)) is also considered a stock to watch given an enhanced scoping study at the group’s 53% owned Bigrlyi project is expected in June, while Extract Resources ((EXT)) is due to announce an initial resource at its Ida Dome project in Namibia sometime this quarter.

Globe Uranium ((GBE)) is also due to complete a scoping study at its Kanyika project in Malawi before June 30, while Scimitar Resources ((SIM)) should have an initial resource at its Bennet’s Well project in Western Australia soon and Toro Energy ((TOE)) is due to start drilling prospects in Namibia this quarter.

West Australian Metals ((WME)) is also on track to deliver an updated resource statement at the Marenica project in Namibia by July, with Resource Capital noting a resource of 35-50 million pounds of uranium is the target. This would follow on from an expected successful increase in resource by Greenland Minerals ((GGG)) at Kvanefjeld in Greenland.

Uranium Equities ((UEQ)) is to undertake a large scale exploration program around the former high grade Narbalek Mine in the Northern Territory over the remainder of this year, while the group also notes Aura Energy ((AEE)) is drilling in Sweden and White Canyon Uranium ((WCU)) is likely to begin producing ore from the Daneros project in Utah in the US in the second half of this year.

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