Commodities | Mar 19 2007
By Rudi Filapek-Vandyck
In what could hardly have been better timed, but nevertheless happened on pure coincidence, our colleagues at Stockinterview.com decided to write a wrap up on the changing political winds across the globe in favour of more nuclear reactors in the near future.
Among the standout conclusions in the story, we found, was the fact that the rest of the world has yet to take into account the nuclear ambitions of Russian president Putin, a point also made by analysts at Merrill Lynch – see our story on Friday Things Can Get A Lot Hotter For Uranium, Still.
Most responses we received following our Friday story, inspired by Macquarie analysts forecasting spot uranium would spike shortly and then fall back to US$46/lb by 2011, were highly critical of Macquarie’s price forecasts.
One of our readers, a keen follower of the uranium industry, again pointed out to us that production of uranium in major producing countries like Canada and Australia has consistently failed to match projections over the past few years. Last year, total uranium production in both countries fell against the previous year.
As a direct result of this, producing uranium is proving a costly activity for BHP Billiton (BHP). As pointed out by our reader, and by several securities analysts in recent research updates, declining production at Olympic Dam has forced BHP management to buy in some product at spot prices to help satisfy its suffering customers. This has pushed the financial performance of the division into the red.
The spot price of uranium did not move over the past week though and that was once again due to the lack of any concluded transactions. We noticed that Ux Consulting has put its weekly spot price at US$91/lb compared with TradeTech’s US$90/lb. We suspect this has more to do with both consultants seeking to step out of each other’s shadow, although some rounding of the figures may well have been in play as well.
Investors and industry participants may well have to wait until the end of this month for further updates on contract pricing. By then Corpus Christi (Texas, US) headquartered uranium producer Mestena is expected to offer another 100,000 pounds U3O8 in a sealed-bid auction from the company’s in situ recovery mining operations at Alta Mesa.
Depending on the content of Cameco’s market update on Cigar Lake, scheduled for the end of this month, and whether Energy Resources of Australia (ERA) has more bad news in store regarding its flooded Ranger mine in the Northern Territory, industry watchers do not exclude that we could be writing uranium prices in three digits from then on.
FNArena contributed to Stockinterview.com’s global political update which can be found in the (more) Sources of Wisdom section on our website.
