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Uranium Week: Drifting Away

Weekly Reports | Jul 07 2020

This story features PALADIN ENERGY LTD. For more info SHARE ANALYSIS: PDN

Uranium prices continue to drift lower on lack of utility interest while the virus continues to add extra uncertainty

-Kazakhstan moves to re-close
-Uranium market volumes falling
-Paladin has a plan

By Greg Peel

As the virus continues to wreak havoc or reaccelerates in many countries, leaders are choosing to reinstate preventative measures in order to control the spread. Witness a move in many US states to pause re-openings or enforce re-closures, as well as the state of New South Wales in Australia deciding to close its border with Victoria for the first time in the pandemic.

Virus concerns have led to the shutdown of uranium production in the likes of Canada and Kazakhstan, and last week the president of Kazakhstan instructed the government to consider re-imposing a strict quarantine.

While this will have the ongoing effect of constraining uranium supply, there is no suggestion in the uranium spot market this should by default lead to higher prices. On the contrary.

Average transaction volumes declined in the month of June following high levels of activity witnessed in March and April. Industry consultant TradeTech reports 41 transactions totalling 5.2mlbs U3O8 equivalent in the month. While transaction numbers remain above average, volumes in June were lower than average.

The close of the June quarter saw sellers anxious to offload material and demand appeared at lower prices, TradeTech reports, although utilities remained absent as producers, traders and speculators dominated the buying. TradeTech’s weekly spot price indicator fell -US20c to US$33.00/lb in the week ending July 4.

This was also the closing price on June 30, down -US85c from the May close.

Activity in the mid-term market also waned in June, with only two transactions reported for the 2021-23 delivery window. With utilities again showing little interest, given ongoing uncertainty over the Russian Suspension Agreement, TradeTech’s mid-term price indicator has fallen to US$36.50/lb at end-June from US$37.25/lb at end-May.

Producers are anxious to secure deals in term markets and have been going directly to buyers to try to drum up some interest, but with end-users reluctant to make commitments at this time, sellers have been unable to agree on suitable prices that sufficiently cover the cost of future production.

Financing is tight in a covid world, TradeTech notes. TradeTech’s long term price indicator remains unchanged at US$39.00/lb.

Hope Springs

Paladin Energy ((PDN)) has announced a restart plan for its Langer Heinrich mine in Namibia, of which it owns 75% and the Chinese own 25%. The announcement marks the completion of an extensive package aimed at delivering a reliable mine restart to reinstate production.

The mine was opened in 2007 but put into care & maintenance in 2018 due to low uranium prices. And therein lies the catch.

Paladin has not set a date for restart, as it will depend on the right uranium pricing environment.

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