Uranium Week: Paddling Fast

Weekly Reports | Oct 08 2019

Going nowhere. Uranium prices continue to rise and fall but it remains a case of failure to launch.

-Anticipated demand still absent
-Spot prices remain range-bound
-Australia ponders nuclear energy

By Greg Peel

Expectations that sustained uranium demand from utilities and producers would materialise in 2019 are yet to be proven accurate, with several potential buyers pre-occupied with trade issues in the US. The year began as a waiting game with regard the section 232 petition and that game continues on pending the release of Trump's Working Group recommendations and any developments with regard sanctions on Iran and Russia.

The month of September saw a little more activity than prior months, but nothing spectacular. The spot market saw 30 transactions concluded totalling 6mlbs U3O8 equivalent, industry consultant TradeTech reports. Price volatility remains exceedingly low.

TradeTech's spot price indicator closed the month at US$25.70/lb, up US40c from the August close and up 7% over four months. But the US$26.00/lb price level continues to prove a bridge too far.

The spot market stalled once more in the first days of October, with only five transactions concluded up to last Friday. TradeTech's weekly spot price indicator fell back -US30c to US$25.40/lb.

Several utilities concluded transactions in the mid- and long-term term market sectors in September, including a number of off-market transactions. TradeTech's mid-term price indicator has fallen to US$27.00/lb from US$28.00/lb in August, while the long-term price indicator has risen to US$31.00/lb from US$30.00/lb.

Australia in Focus

Australia continues to grapple with the concept of nuclear energy. While the federal government is happy to sell uranium to nuclear weapons-capable nations, it has long dismissed the notion of a home-grown nuclear power industry. Parties of both stripe have for decades seen the prospect as politically unpopular, and thus a no-go area.

As for uranium mining, the federal government has capped the number of permissible mines at four, located in the federal jurisdiction of the Northern Territory and state-government controlled South Australia. Of the four, one is shut down pending better uranium prices and another is only processing stockpiled ore.

While the federal government controls the cap on uranium mines, state governments determine whether uranium mining is allowed or not. Currently it is only allowed in South Australia, with the exception of projects which were underway in Western Australia prior to a change in government which rescinded the lifting of a ban by the previous government.

Investment in uranium in Australia is politically fraught. Most opposed to uranium is Queensland, which boasts Australia's highest concentration of coal mines, and thus coal mine workers.

Which is why it is of some surprise the Australian Workers Union – the country's largest union — is supporting the lifting of the federal ban on nuclear energy. Facing an upcoming significant energy deficit as Australia's legacy coal-fired power stations reach their use-by dates, the conservative federal government, beholden to the powerful coal lobby, is triumphing coal-fired over anything else (despite Australia being one of the world's largest exporters of LNG), particularly renewables. But bowing to internal pressure, the government has recently set up a round table to discuss the possibility of nuclear power.

The majority of Australians, net of coal industry workers, support renewable energy over coal-fired power and the development of new thermal coal mines. Would they support nuclear power? This is the conundrum for the government, which admits there is a certain lack of logic in one of the world's largest sources and producers of uranium itself shying away from nuclear energy.

Meanwhile, Australia's prospective uranium miners plug on. Vimy Resources ((VMY)) last week revealed "excellent geochemical results" at its 78/22% joint venture project with Rio Tinto ((RIO)) in the Northern Territory.

Paladin Energy ((PDN)) is continuing to move towards the restart of its Langer Heinrich mine in Namibia, confident uranium prices will eventually recover, while Deep Yellow ((DYL)) has advanced additional funds towards a feasibility study for its Reptile Project, also in Namibia.

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