Uranium Week: Activity Slows Once More

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

By Greg Peel

The US Energy Information Administration last week reported US uranium mines produced a total of 3.7mlbs U3O8 equivalent in 2015, down 24% from 2014. Exploration drilling slowed by 13%, although exploration drilling expenditure rose 2%. Total US uranium concentrate production fell 33% to 3.3mlbs.

Despite the fall in US production, uranium prices continue to wallow. The flurry of activity sparked last month by the announced closure of Cameco’s Rabbit Lake mine and the removal of 5mlbs production from global markets has now died away, although sellers have remained reluctant to engage buyers at lower prices since the announcement.

Around the globe, uranium producers have been curtailing production ahead of hoped for uranium price rises sometime in the future. Energy Resources of Australia ((ERA)) is in the process of closing down its long-running Ranger above-ground mine and at this stage has decided not to go ahead with the development of the Ranger Deeps underground extension until market conditions are more favourable.

ERA last week announced it will fund the closure of the Ranger mine by selling down its uranium stockpiles, a process that is expected to last until 2020. The company’s processing licence expires in 2021, and on that basis management has decided to keep the option of developing Ranger Deeps open, despite a cost to the company of doing so of around $4m per year, and despite non-approval from indigenous landowners and ERA majority shareholder Rio Tinto ((RIO)).

On the demand side of the uranium market, market participants are starting to receive feedback on recently submitted mid and long term delivery contract tenders from utilities, industry consultant TradeTech notes, which could lead to an uptick in activity in coming weeks.

Last week saw five transactions concluded in the spot market totalling 600,000lbs U3O8 equivalent. Sellers backed off on offer prices as the week progressed and TradeTech’s weekly spot price indicator has risen US10c to US$27.60/lb.

There were no transactions recorded in term markets. TradeTech’s term price indicators remain unchanged at US$29.25/lb (mid) and US$42.00/lb (long).
 

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