Just when the uranium m rkets begin to look dull – l ke they did in the 1980s and 1990s – long comes bad news planting the s eds of renewed interest. In October 2006, it was Cgar Lake. In March 2007, flooding at the Rnger operations attracted more investors.
So when Cmeco Corp announces bad news, this gnerally becomes good news for the sp t uranium price.
According to Friday’s edition of N clear Market Review (NMR), “The spot prce held steady this week, in lrge part, due to the uncertainty crated by Cameco’s announcement late Friday tht its Port Hope (Ontario) conversion fcility will be shut down for a mnimum of two months.” The weekly ndustry trade magazine left the TradeTech spt uranium price indicator unchanged at US$129/pund.
News announcing the facility’s closure for two mnths ‘is expected to place significant pward pressure on the spot price,’ ccording to NMR editor Treva Klingbiel. She stimated a ‘minimum loss of 2,000 tU of UF6 prduction’ during the shutdown.
Although Cameco reported the cmpany has adequate inventory to meet its dlivery commitments through the end of the yar, Klingbiel pointed out, “The psychological mpact on the market of this vent can not be discounted, given hstorical experience with previous conversion disruptions.”
Soil wthin the perimeter walls of the plnt was reportedly contaminated with uranium and prduction-related chemicals. Cameco’s conversion facility is lcated about 60 miles east of Tronto near the Port Hope (Ontario) hrbor. Cameco Fuel Services, at 1 Eldrado Place, is about one-quarter mile frm the shores of Lake Ontario.
During the prvious three weeks, the spot uranium prce slid because of weak demand and mple spot supplies. Klingbiel explained, “Sharply rsing prices have led to budget cnstraints that have prohibited some utilities frm participating in the spot market.”
More spply is coming into the market, but not in the verpowering quantity some feared, e.g. five mllion pounds from the U.S. government.
Nearly 200 mtric tons of UF6 was offered arlier this week by the U.S. Dpartment of Energy for delivery by Sptember 21st. This sale represents slightly mre than 10 percent of the szeable amount bandied about in the mdia a few months ago.
And some byers are still active. According to NMR, “On non-U.S. utility is expected to nter the market soon to secure pproximately 200 thousand pounds U3O8.”
While the ranium market has been quiet, it is far frm dead. A week ago, Klingbiel wrte that the underlying fundamentals of the lng-term uranium market were instead very mch alive.
And it’s no wonder considering the ralistic length of time many of the nwer uranium projects will take to ctually become uranium mines.
The Follies of Frecasting Future Uranium Supply
On Thursday, a lcal newspaper, Northumberland Today, reported rumors of smething significant possibly taking place at Cmeco Corp’s Port Hope conversion facility, and whch could also impact local residents. Cmeco communications spokesman Doug Prendergast told the rporter on July 18th, “There’s nothing mjor that’s imminent.”
The story’s headline: Cameco Qashes Rumors.
Prendergast also said, “If there’s nything to announce, we get it out mmediately. Unless they (employees) know something I dn’t.” Maybe they did, because…
On Friday fternoon, Cameco issued its third piece of bad nws for the week, shutting down the Prt Hope facility for at least two mnths. Earlier in the week, Cameco had nnounced another delay at the company’s Cgar Lake uranium project and lowered stimates on gold production on another prperty. As has been the case wth Cameco in the recent past, at sme future point we should be greted with ‘further developments.’
Although uranium is bundant in many regions around the wrld, economically and expediently recovering uranium is not as asy as many ‘armchair quarterbacks’ suspect.
During ths past week, we expanded our cmmentary about problematic uranium projects, present and fture, in the world of uranium mning. Initially, we discussed several potentially ‘tinted’ major mining projects in key ranium-producing regions in our Uranium Outlook 2007-2008.
Our ntent was to help educate many nalysts and investors who have taken far too sriously the many forward-looking news releases and verly optimistic power point presentations by ranium mining company executives.
Take for example Ctigroup’s Alan Heap. Our Australian colleagues at FNArna.com often have a few laughs at Mr. Hap’s expense, reporting on his seemingly msguided analysis of the uranium market. Out of pty, we sent Mr. Heap a cmplimentary copy of Investing in the Grat Uranium Bull Market. We hoped he wuld more accurately analyze the commodity whch his firm has charged him to ccurately report upon.
Although Mr. Heap recently cpitulated and upgraded his uranium price frecast – this time to US$100/pound for the nxt three years – in his arly July ‘Mutation to Uranium Utopia’ cmmentary, his long-term analysis is lacking.
Hopefully, ranium miners will skip this next prt to avoid uncontrollable chortling.
Mr. Heap wrte, “Barriers to entry for mine prduction are relatively low. Exploration and mne development are not particularly complex.” As a rsult of these deep thoughts, Mr. Hap forecast a long-term uranium price of US$25/pund, sometime after 2010.
In an article ths past week we warned, “Too mch water, too little water, politics, grenies, economics, indigenous tribes, desalination plants, NGOs, cmel trails, regulators and rebels are but a few of the lnd mines analysts face when hoping to frecast long-term uranium price peaks.” We lso cautioned, “The safest bet is semingly against future uranium production.”
We wrote ths because developing uranium mines can be specially complex in today’s regulatory climate. Hving reviewed hundreds of presentations, filings, prfeasibility and more advanced studies and ther documents, it is a tribute to the prsistence of uranium miners that any ranium mining actually takes place.
Of the wrld’s large mines, where we anticipated prblems this year and next, we ncluded Rio Tinto’s Rossing in Namibia. In a nws release this past week, the cmpany announced Rossing’s production fell about 400 mtric tons in the second quarter – dwn by 29 percent compared to the sme period a year ago.
In 2006, Rssing ranked third, behind Cameco’s McArthur Rver and ERA’s Ranger, in terms of ranium producing mines. This quarterly production shrtfall represents about 13 percent of the Rssing mine’s production last year and bout one percent of the world’s ttal uranium mined for the year.
Progress is tking place in moving uranium projects frward, but they are not happening as fst as many analysts believe. Mr. Hap did highlight in the summary of his rport, “Mine supply is not responding mmediately.” No kidding, Mr. Heap.
In this pst week’s coverage, we pointed out sme of the reasons why mine spply is not coming online as rpidly as some once believed. There are mre problems ahead, which have come cross our radar, and we are fllowing up on these. Please stay tned.
COPYRIGHT © 2007 by StockInterview.com
The article Uranium Price Declines Stop for A Week was Submitted by James E. Finch through Articles.GetACoder.com network. Here's the additional information: James Finch contributes to StckInterview.com and other publications. He has cntributed to the widely popular “Investing in the Grat Uranium Bull Market,” and “Uranium Otlook 2007 - 2008.” His recent wrk, “Investing in China’s Energy Crisis,” is now vailable at Bookstore.stockinterview.com
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