Monday, September 17, 2007

Utilities Disagree Over Spot Uranium Price

According to Fridays Nuclear Market Review (NMR), two off-market transactions were reported this past week for more than 500 thousand pounds U3O8 equivalent. NMR editor Treva Klingbiel wrote, Both transactions were in negotiations prior to the steep price rise last week and reflect prices below the currently published levels. NMR did not provide exact details of the sales price(s). The weekly spot uranium price indicator remained unchanged at US$113/pound.

No transactions took place in the long-term market. No new demand emerged. Uranium transaction volume for 2007 year-to-date remains the third lowest for the past decade. Only transaction volumes in 1997 and 2001 were lower at this point of the annual cycle.

NMR also reported on the World Nuclear Fuel Cycle conference which took place this past week in Budapest, Hungary. MITs Center for International Studies senior researcher Thomas Neff discussed whether it was still possible to substitute enrichment for uranium. Neff concluded, Given existing prices there is not sufficient enrichment capacity currently available for utilities to truly optimize the tradeoff between enrichment and uranium. In recent presentations in Geneva and Zurich, Neff expressed concern about the uranium mining and enrichment industries providing sufficient nuclear fuel to utilities to meet the demands of the ongoing nuclear renaissance.

Others expressed similar concerns. Synatoms Fuel Supply manager Gerard Pauluis told conference attendees, As the market matures, we will experience uncontrollable price spikes. Urenco senior executive Maurice Lenders told the conference, Suppliers and customers must be open about what they have and what they need so that supply will be available to meet demand. Urenco supplies enriched uranium to the market. The European consortium is currently constructing the first new U.S. enrichment facility in New Mexico.

Uranium Mining Stocks Analysis

Matthew Smith of TheInvestar news service reported, I think that a correction may be underway in the uranium sector right now as the index tried and failed two times to break through the 325 level and hold. Smith explained, A correction is due, and it seems that many of the stocks with Australian exposure may at this time be overbought on the speculation of the vote on the countrys Three Mines Policy.

We asked about Peter Farmers comments on the day before the company announced Denison Mines would be trading on the American Stock Exchange. Smith speculated, I believe they indicate he is simply trying to talk down prices. Smith pointed out the Denison chief executive was referring to properties in the early development stage.

Smith added that oil executives have been making these statements since the uranium price was in the $15/pound range all the way up. Earlier this week, Exelon Corps Jim Malone had voiced similar concerns the uranium price was unsustainable in a guest commentary for Fuel Cycle Week magazine. Malone also wondered in his editorial whether speculators were intentionally driving the uranium price higher to bolster the value of uranium mining stocks. Both appear to question the speculative value of the hundreds of uranium juniors which have jumped on the bandwagon over the past year. These sentiments agree with the conclusion of Yellowcake Mining director Dr. Robert Rich we found in a previously published interview.

Smith explained, It is simply the conservative nature of the executives not to let expectations get out of hand. These are sentiments expressed over the past few months by Uranium Ones Neal Froneman and Paladin Resources John Borshoff. As a market watcher, but not a registered investment advisor, Smith counseled, When markets begin to look as though they may be overbought, it is best to go to those companies with good valuations.

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Julie Ickes and James Finch co-authored this article. James Finch contributes to and other publications. His focus on the uranium mining and nuclear fuel sector resulted in the widely popular Investing in the Great Uranium Bull Market, which is now available on and on