Uranium Marches South At Double Time

This story features PALADIN ENERGY LIMITED. For more info SHARE ANALYSIS: PDN

By Andrew Nelson

The crack appeared the week before last. Sellers started to buckle under the strain and gave in to lower prices. A US$1.30 drop ensued. That’s the way last week started and from there things only got worse for the uranium spot price.

No fewer than eight utilities entered the spot market as buyers last week. Four of them concluded deals for over 900,000 of U3O8 equivalent. Industry consultant TradeTech reports that with every sale, successively lower prices were offered, sellers seemingly falling over themselves to clear stock. Ever mounting cash flow pressures and the desire to conclude businesses before prices fell even further were cited as the drivers.

The good news was that the action calmed towards the end of the week. Sellers grew less desperate and the downward slide began to slow. The week ended with TradeTech’s Weekly U3O8 Spot Price Indicator sitting at $36.50 a pound, a decline of $1.75 over the prior week’s value. This is the lowest price that has been seen in more than seven years. TradeTech notes the last time the spot uranium price was this low was in January 2006.

The term uranium market also remained active, with three transactions reported last week. Over 1.5 million pounds of U3O8 equivalent changed hands for delivery between 2014 and 2016. There were also four new utilities in the uranium market last week looking for mid-term deliveries for about 3.4 million pounds.

The weakness was not isolated to the spot market and is starting to spill over into the term market. TradeTech reports there are several more US and non-US utilities that are considering potential entry into the term market simply to take advantage of current price levels.

In the meantime, TradeTech’s Mid-Term U3O8 Price Indicator stayed put at US$43.00 a pound and the Long-Term Price Indicator stayed put at US$57.00 a pound.

Sentiment wouldn’t have been helped by news local Chinese authorities cancelled plans to build the Heshan uranium processing plant in response to public protests. The US$6.5bn project would have provided uranium enrichment and fuel fabrication for China’s growing nuclear power program.

As prices slide, the producers keep producing. Last week, Paladin ((PDN)) reported record FY uranium production on higher output from the Langer Heinrich and Kayelekera mines in Africa. By the end of play, total production was up 20%. Fourth quarter output was above nameplate, sales were also at record levels, although revenue wasn’t. The company’s average received price was US$49.48 a pound.
 

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