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Uranium Week: Hitting The Ceiling

Weekly Reports | May 08 2018

Demand picked up in the spot uranium market last week but every time the sellers back off the buyers lose interest once more.

-Uranium market activity reasonable in April
-Spot price rises in May
-Australian sales to India getting closer

By Greg Peel

Activity in the uranium market in the month of April did not match that of March but was brisk nonetheless, as fuel loading began in several locations (new reactors preparing for start-up, or in the case of Japan, restart-up). Loading began for two Chinese reactors, one in Finland, and one in Japan.

This meant utilities were active on the buy-side during the month, although traders and producers still dominated. In the case of producers, it is currently cheaper for some to simply buy uranium in the market to satisfy long term delivery contracts than it is to produce it themselves.

Industry consultant TradeTech reports 29 transactions were completed in the spot market in April totalling 5mlbs U3O8 equivalent. The last week saw 2m of those 5mlbs change hands as buying stepped up.

TradeTech’s spot price indicator nevertheless closed the month at US$21.00/lb, unchanged from end-March. Only four of the last twelve months have seen an increase in price, and the spot price is down -4.3% year on year.

The consultant’s term market indicators were similarly unchanged at US$25.50/lb (mid) and US$28.00/lb (long).

There was a lull after month’s end before activity picked up again towards the end of last week. Five transactions were reported in the first week of May, totalling 760,000lbs U3O8 equivalent, and prices rose with reach successive transaction.

By week’s end the sellers had backed off far enough that the buyers were no longer interested. TradeTech’s weekly spot price indicator is up US50c at US$21.50/lb.

Production & Sales

Rio Tinto ((RIO)) produced 1.5mlbs U3O8 in the March quarter, down -17% from the December quarter and -4% from the previous March quarter. Rio’s two-thirds owned Energy Resources of Australia ((ERA)) produced 667,000lbs at its Ranger mine in Australia’s Northern Territory and its two-thirds owned Rossing mine in Namibia produced 848,000lbs.

ERA’s production, representing the processing of stockpiles, was down -26% on last March as stockpile grades diminish. Rossing’s production, on the other hand, represents a 26% increase.

Paladin Energy ((PDN)) is preparing to move its Langer Heinrich mine in Namibia into care & maintenance while BHP ((BHP)) increased production at its Olympic Dam mine in South Australia but recorded lower sales. In Canada, Cameco’s strategy of cutting production to reduce costs in the low-price environment is paying off, as the company increased earnings in the quarter compared to last year.

It was back in 2014 when then Australian prime minister Tony Abbott announced the government would allow uranium sales to India, despite India being nuclear weapons capable and not a signatory to the global nuclear non-proliferation agreement. It was July last year when Australia finally sent its first shipment to India – a test sample.

BHP and US-based Heathgate Resources, operator of the Beverley mines in South Australia, are currently in negotiations with the Indian Department of Atomic Energy to come to an actual agreement to supply uranium for power generation purposes. Four other countries are already supplying India.

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