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Uranium Week: False Dawn

Commodities | Oct 20 2015

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

By Greg Peel

Japan restarted its second reactor last week, with Kyushu Electric’s Sendai unit two firing up to join unit one.

The Chinese president will visit the UK next week and is expected to sign a deal for China and Electricite de France to build the country’s first new nuclear reactor in a generation.

On the other side of the coin, Swedish power companies have decided to close a total of four reactors in the country while a 43-year old reactor in the US will also be shut down.

On the supply side, Energy Resources of Australia ((ERA)) increased production at its Ranger mine in the September quarter but will now conduct a review of its business, given traditional landowners have indicated they would not support any extension of Ranger in the future.

ERA earlier decided to shelve its Ranger Deeps underground extension plans for the time being in response to low uranium prices, but had hoped to one day be able to proceed with construction were prices to improve. With traditional owners against the project and the company having no immediate plans to pursue it, a rethink is an obvious option. ERA’s two-thirds shareholder Rio Tinto ((RIO)) indicated its lack of enthusiasm for the project earlier in the year, suggesting only if the numbers could beat Rio's strict return criteria would the expensive project receive support.

After a burst of fresh demand from intermediaries sent the spot uranium price surging the week before last on strong volume, last week saw a lack of follow-through and a reluctance from either buyers or sellers to engage, industry consultant TradeTech reports. Spooking the market were reports of aggressive offers being made to a utility seeking 800,000lbs U3O8 for delivery next year.

By week’s end only four transactions had been completed in the spot market totalling 600,000lbs and TradeTech’s weekly spot price indicator has fallen back by US75c to US$37.75/lb following the previous week’s US$1.90 price jump.

One transaction was reported in the term market last week totalling 600,000lbs. TradeTech’s term price indicators remain unchanged at US$39.50/lb (mid) and US$44.00/lb (long).

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