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Uranium Week: Held To Ransom

Weekly Reports | Mar 05 2019

The US section 232 investigation is curtailing demand in the uranium market and leading to price consolidation.

-Section 232 slows activity in US uranium market
-Sellers becoming anxious
-Paladin Energy looks to a restart

By Greg Peel

Uncertainty surrounding section 232 has “frozen” the US uranium market, noted Cameco CEO Tim Gitzel at least week’s Global Metals & Mining Conference in Florida, with US utilities generally reluctant to enter into new purchase agreements.

To recap: Two US uranium producers have petitioned the White House to force US utilities to purchase 25% of their requirements domestically, rather than (cheaper) foreign imports, as a matter of “national security”. This comes under section 232, the same act implemented in imposing tariffs on foreign imports. Nuclear power utilities are already struggling to compete in US electricity markets even with cheaper uranium on offer.

The US Department of Commerce is investigating, and has been now for over a year. The petition was filed in January 2018. Most recently the DoC sent out an extensive questionnaire which has been described by various parties as “onerous” and “intrusive” as well as time-consuming. The deadline for return of the questionnaire was end-February.

The DoC is scheduled to issue a report and any recommendations to the president by April 18, and he then is permitted months to ponder his response.

232 uncertainty has been hanging over the uranium market for over a year yet it was in April last year uranium prices began their steady climb, given the extent of investor interest and producer purchases required to make up for curtailed production. It has only been this year, with the questionnaire being issued and the deadline approaching, that activity has stalled.

In the meantime, several leading uranium industry participants, including utilities and producers (but not the petitioners) are looking to draft their own proposal for the government’s consideration.

With utilities preoccupied, the upward momentum seen in prices in 2018 has waned in 2019. A fall-off in demand has led sellers to become more urgent, hitting buyers are lower prices as last week progressed. By the last day of February industry consultant TradeTech’s spot price indicator had fallen to US$28.00/lb. A slight bounce on the Friday saw the weekly indicator at US$28.15/lb, down -US75c from the week before.

Five transactions were concluded in the week, totalling 800,000/lbs U3O8 equivalent.

Month on month, the spot price ended February down -US90c from end-January.

TradeTech’s term market indicators remain unchanged from end-January at US$30.00/lb (mid) and US$32.00/lb (long).

Restart

Australian-listed uranium miner Paladin Energy ((PDN)) last week commenced a pre-feasibility study for the restart of its Langer Heinrich mine in Namibia, which was shut down due to uneconomical uranium prices.

The company has identified multiple options that could reduce operating costs, improve processing reliability and potentially recover a saleable vanadium bi-product.

The options were identified in a concept study begun in September last year, which concluded the company is in a strong position to restart Langer Heinrich “when there is a sustained recovery in uranium prices”.

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