Little Optimism In Uranium Market

This story features ENERGY RESOURCES OF AUSTRALIA LIMITED, and other companies. For more info SHARE ANALYSIS: ERA

By Greg Peel

Olympic Dam is Australia’s largest uranium source but outside of the diversified resource conglomerate that is owner BHP Billiton, Australia’s two “big” pure-play uranium producers are Energy Resources of Australia ((ERA)), operating in the Northern Territory and Paladin Energy ((PDN)) operating in Namibia.

ERA has become basically a binary trade as an investment stock. Having been devastated by floods over past years, ERA’s sole Ranger Mine has been undergoing rehabilitation ever since above ground. That rehab is ahead of time and budget, but ERA’s fortunes depend entirely on whether or not the company decides to proceed with the Ranger Deeps underground mine. If so, well and good, if not, goodnight. In the meantime ERA is simply processing stockpiled ore.

The story is different for Paladin. Once the great Australian uranium hope, Paladin is continuing to burn cash at current uranium prices. The company’s latest quarterly production report showed prices received above spot, but lower than forecast production due to an extended maintenance shutdown at the Kayekalera development. Having already raised fresh funding, Paladin can only pray for a rebound in uranium prices sooner rather than later.

There is little reason for Paladin to feel confident. At the International Uranium Fuel Seminar held in Texas last week, the tone was less than optimistic for uranium sellers, industry consultant TradeTech reports. The international uranium market is currently in balance on a demand-supply basis, despite the Russian HEU agreement coming to a conclusion. Japanese reactor restarts remain the swing factor, but even then there is no great expectation of a significant price rebound given any price improvement will only be met with increased production.

A total of four transactions totalling 400,000 pounds were concluded in the spot market last week, TradeTech reports, and the year to date spot transactions total of 32.2mlbs is ahead of the 23.8mlbs booked by this time last year. Yet there has been little joy in pricing terms, with the consultant’s weekly spot price indicator unchanged on US$35.25/lb.

One US utility looking for 1.3mlbs in the term market selected a supplier last week, and several other term buyers are evaluating offers. The term market is more active than the spot market at present, but TradeTech’s price indicators remain at $38/lb (mid) and US$51/lb (long).

 

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