Long term uranium price projection lowered again

The market valuation of Australian uranium companies under study in the latest RCR report lifted 12% in the past month and was up 18% for the December quarter but overall the long term and spot prices for yellowcake has slipped.

PERTH - 

The December review of the global uranium scene by Sydney-based Resource Capital (RCR) said that the uranium spot price was now about $US45/lb, down 5% on three months ago.

However, the fund implied price (FIP) was also $US45 which was up on the December 2008 figure of $US41/lb.

RCR's managing director John Wilson said the FIP has generally been a good leading indicator for the near-term spot price performance.

The long term contract uranium price was $US61/lb down from the $US70/lb of December last year.

RCR said the market valuation of Australian companies with one or more uranium projects was up 12% over the past month, up 18% over the past 3 months, and up 353% over the past 12 months.

This compares with Canadian companies with one or more uranium projects, up 4% over the past month, up 19% over the past 3 months, and up 198% over the past 12 months.

There was an increasing number of projects gaining mining licences including Mega Uranium (TSX: MGA) for Lake Maitland in Western Australia, and African Energy Resources (ASX: AFR0 for Chirundu in Zambia.

Uranium majors have been on the share price see-saw in the past month with Cameco (CCO) up 5%, Denison Mines (DML) down 9%, Uranium One (UUU) up 2%, Energy Resources of Australia (ASX: ERA) down 3% and Paladin Energy (ASX & TSX: PDN) down 1%.

"The focus on supply expansion in the uranium sector is shifting from exploration success to permitting and production," John Wilson said.

There was a growing pipeline of solid development projects and advanced exploration projects, and a growing number of mining permits being granted.

"With a typical 10 to 12 year development timeframe from initial discovery to production and technical, regulatory and financing hurdles for pending producers to overcome, development timeframes are far from certain.

"The outlook for the uranium market supply-demand balance remains finely poised through 2015," he added

RCR said there were 436 new nuclear reactors planned or proposed globally as of December, up from 376 a year ago.

There were 436 nuclear power reactors in operation and 53 under construction - eight more than six months ago.

 Other events in the past three months included:

• Forsys Metals Corp (TSX: FSY): The proposed plan of arrangement with George Forrest International Afrique was terminated in August. Morgan Stanley & Co was reviewing strategic alternatives, including financing options. FSY owns the Valencia alaskite project in Namibia.
• White Canyon Uranium (ASX: WCU): Production began at the Daneros mine in Utah. Annual production was targeted at 500,000lb U3O8, with sale or toll treatment to Denison Mines (TSX:DML) mill at White Mesa, 100 km away by road.
• Chinese investment in Australian explorers continues: China Uranium Development Co Ltd (CUD) made a proportional offer for Energy Metals Ltd (ASX: EME) which holds 53.7% of the Bigrlyi uranium project in the Northern Territory. By December 7 CUD held 57.07% of EME. Hebei Mining took a 14.9% in early stage uranium explorer IPO Raisama Limited (ASX:RAI).
• Ifastar JV: Areva (51%) and KazAtomProm (49%) announced a JV to manufacture integrated nuclear fuel assemblages for the Asian market. The JV will assess the economic feasibility of constructing a 400 tpa fuel manufacturing line in Kazakhstan. The deal further underwrites the significance of Kazakhstan as an emerging dominant force in the global nuclear fuels market.
• Energy Fuels Inc (TSX: EFR): Final licence application submitted for the Pinon Ridge uranium-vanadium mill in Colorado. Construction may begin by mid 2011 and would be the first new uranium mill in the US in over 25 years.
• Uranium Energy (NYSE: UEC): It announced conditional acquisition of the licensed and permitted Hobson uranium mill and La Palanga uranium project held in the South Texas Mining Venture (Uranium One, Everest Exploration). UEC intends to use Hobson as a hub for treating loaded resins from its projects, including Goliad and Nichols ISL projects.

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