Posted: Friday , 06 Jun 2008
RENO, NV -
In their Uranium Industry Report published Thursday, Haywood Securities forecasts primary uranium production at 113.5 million pounds this year, which is well below reactor demand as secondary uranium sources dwindle.
Haywood predicts that the second half of 2008 will see a rejuvenation of the spot price.
Meanwhile, demand continues to outstrip primary supply, while a sustained injection of capital is needed to meet required primary production increases, according to Haywood.
In the report, Haywood analyst Geordie Mark noted that production costs have increased across the sector with the uranium price representing only a small fraction of operating costs.
The World Nuclear Association had earlier forecast uranium production of 124.8 million pounds of U3O8 this year, which had been projected to be a 16.5% increase on 2007 production. However, Mark said that, "based on the stilted flow of supply to venture on stream thus far due to various technical and infrastructural impediments, it is anticipated that 2008 production will rise only moderately above 2007 production."
Mark attributed the drop in production to: 1. ongoing production pressure within the sector; 2. Uncertainty of power and acid supply; and, 3. Technical nuances of bringing new production on-stream. "Consequently, these factors provide greater potential for upward pressure on the spot price."
Haywood asserted that 2008 primary production "will continue to fall short of future reactor demand. Thus, the entire sector will be ever more reliant on dwindling secondary supplies that progressively become more expensive, as well as technically, and politically difficult to extract."
"These factors will continue to support uranium prices into the future, where geopolitical interests will become ever more focused on security of domestic supply," Mark suggested. "This is particularly pertinent given that the major producers (Canada, Australia, and Kazakhstan) have little domestic demand."
"Primary uranium production has failed to deliver at estimated forecast rates over the last few years, and 2008 appears to be no except with Q1 production data being lower than either the forecast estimates and/or the previous quarter for a range of operations owned by Cameco, BHP Billiton, Denison Mines, Energy Resources, Australia, Paladin Energy, AngloGold Ashanti, Uranium One and Uranium Resources.
LONGER TERM OUTLOOK
Haywood asserts that the public's quest for a cheap, cleaner alternative to hydrocarbon-based energy production is being met "with a measurable change in view and broader acceptance of nuclear power generation by the general populace.
"Popular acceptance equates to a shifting political outlook on nuclear policy leading to potential changes in nuclear power production policy in both: countries ramping down future production (e.g., Sweden and Germany, as well as those countries considering a nuclear future. These motions are leading to a shift, a rebalance in sources used for future energy supply leading inexorably to a greater role for nuclear energy; and a sustained nuclear renaissance."
Nevertheless, Mark acknowledged that "future growth is at a bottleneck that continues to narrow and lengthen due to infrastructural impediments, political and NGO engagement, and an over reliance on second source material."
Haywood advises that, in the midterm, increased uranium production capacity is going to be largely derived by the expansion of current mines, or the exploitation of deposits in currently producing countries, such as Kazakhstan, the United States, Canada and Australia. "This is primarily due to infrastructural, regulatory and community support that is in place to expand and/or develop mines in locations with a ready draw on personnel currently engaged in mining," Mark suggested.
New long-term nuclear capacity will be driven mainly from China, India, Russia, and the United States, Haywood suggests. The Gulf States, mainland Europe, Africa and other counties will also increase nuclear generating capacity at a smaller rate
In their report, Haywood predicts that the next uranium companies to move to producer status within the next three years will originate from U.S. operations. "The rationale is that the USA was the primary producer of the world's uranium, and thus is a producer with a regulatory framework and a well established infrastructure that can be employed to bring projects into production rapidly," according to Mark.
The U.S. uranium projects may be small at under 2 million pounds of U3O8 of annual production. The mostly likely states that will experience increased production are Colorado, Utah, Wyoming and Texas, Haywood predicts. Despite this production, the U.S. will still have significant need for uranium.
In the meantime, Haywood forecasts that primary production to 2015 will continue to rely on secondary supplies, "which is unsustainable, and particularly acute in an environment seeking to expand nuclear energy capacity."
Study sees a uranium price lift ahead as buyers venture back
A just-released and detailed quarterly report on the global uranium scene estimates that the current uranium price of $US60 a pound – down 15% from March end – will rebound to around $US75/lb.
Author: Ross LoutheanPosted: Friday , 30 May 2008
PERTH -
Sydney-based Resource Capital Research (RCR) believes that a perceived recovery in the uranium price in the next quarter is linked to signs of improved market sentiment for uranium equities both on the Australian and Canadian bourses.
RCR said the industry average, long term uranium price was now estimated at $US90/lb, down $US5/lb from where it had held firm for nearly 12 months to March 2008.
RCR's senior analyst, John Wilson, said positive market sentiment has returned, driven by indications the spot uranium price is about to head up, combined with relative stability in the equity markets following the sub prime rout.
Forward indicators (fund implied price) currently indicate an expectation for an upward correction to the uranium price to around US$75 (+25%). In the past 3 months the fund implied price has ranged from US$57/lb to US$90/lb. According to recent market commentary by Trade Tech "[uranium] buyers are beginning to venture back into the market and sellers are less willing to cut prices".
RCR said the market valuation of Australian companies with one or more uranium projects (266 companies) is up 23% over the past month, up 12% over the past 3 months, and down 8% over the past 12 months.
This compares with a selection of 289 Canadian companies with one or more uranium projects, up 7% over the past month, down 6% over the past 3 months, and down 32% over the past 12 months. The RCR report covers explorers operating in Australia, North America, South America, southern Africa and Mongolia.
RCR echoed a point made several times recently by Mineweb that the Beverley Four Mile uranium project in South Australia -- Heathgate Resources 75%, Alliance Resources (ASX: AGS) 25% -- may beat the Honeymoon in situ recovery (ISR) project in the same region into production. (This is looking more certain now that Honeymoon's troubled owner Uranium One (TSX: UUU) has admitted it may sell Honeymoon so it can focus on remedying problems at its Dominion mine in South Africa and on developing its Kazakhstan projects).
In the past month the majors have mostly demonstrated positive share price performance. Cameco (CCO) is up 10%, Denison Mines (DML) up 21%, Uranium One (UUU) down 3%, Energy Resources of Australia (ERA) up 15% and Paladin (PDN) up 45%.
Planned and proposed construction of new nuclear power reactors worldwide has increased "strongly" in the past two years. From January 2007 to May this year there was an increase of 89 reactors from 222 reactors to 311 reactors (+40%). This compares with 439 nuclear power reactors currently in operation and 36 under construction.
America's Congressional Budget Office reported that nuclear power would be commercially competitive compared to conventional fossil fuel technologies at a carbon price of $US45/t. Rising prices of competing energy sources - both spot oil and thermal coal prices, which spiked over $US130/bbl and $US130/t respectively, reinforces the commercial potential of nuclear energy.
Major issues in the past three months were:
- NamWater (Namibia) announced plans to construct a second desalination plant to support water needs of the growing Namibian uranium industry - commissioning expected 2010 (capacity 25 million m3 per annum). The other desalination plant is already under construction (Areva and NamWater) - commissioning 4Q09 (capacity 20 million m3 per annum) to serve Areva's Trekkopje heap leach project.
- Kazakhstan's new sulphuric acid plant at Balkhash (capacity 1.2Mtpa) is expected to be commissioned this June. Kazakhmys Corporation is building the plant adjacent to its copper smelter. Capacity is expected to be sufficient for KazAtomProm's planned ISR uranium mining needs.
Key corporate developments in the past three months included Bluerock Resources Ltd (TSXV: BRD) starting ore production from the J-Bird project in Colorado in the United States and Hathor Exploration (TSXV: HAT) reporting a significant discovery in the Roughrider Zone at its Midwest NE project in Canada's Athabasca Basin. Intercepts include 15m @ 10% U3O8 and 9m @ 10% U3O8.
Zambia is expected to issue uranium mining licenses in July. Companies with advanced uranium projects in Zambia include Equinox Resources (ASX: EQN) which released its updated feasibility study for a stand-alone uranium plant at Lumwana and African Energy Resources (ASX: AFR) which released a pre feasibility study for its Chirundu uranium project.
RCR said an enhanced scoping study is expected at Bigrlyi in Australia's Northern Territory, while a market positive on the ASX was the listing of Energy and Minerals Australia (ASX: EMA) with exploration focus on the Mulga Rock Deposits in Western Australia, which had been a major discovery dropped by PNC of Japan about 20 years ago.
Extract Resources (ASX:EXT) expects to announce an initial resource at Ida Dome (Namibia) 2Q08. Globe Uranium (ASX:GBE) expects to complete a scoping study at the Kanyika uranium/specialty-metal project (Malawi) 2Q08. Significant resource upgrade at Kvanefjeld (Greenland, Greenland Minerals - ASX:GGG) May '08 (to 229Mlb U3O8, up 104%). An initial resource is expected at Bennet Well (WA, Scimitar Resources, ASX:SIM) 2Q08. Toro Energy (ASX:TOE) expects to complete a PFS at Lake Way/Centipede mid '08 and drilling in Namibia starts 2Q08. Uranex (ASX:UNX) has scoping studies and resource statements expected at Thatcher Soak (WA) and Bahi (Tanzania) 3Q08. West Australian Metals (ASX:WME) expects the next resource statement at Marenica (Namibia), adjacent to Trekkopje, July '08, targeting 35Mlb to 50Mlb U3O8.
Strong growth predicted for uranium as global energy demand could rise 50% by 2030
Australian broking house Southern Cross Equities has reiterated a comment attributed to BHP Billiton chief Marius Kloppers that, driven by China, India and developing nations, global energy demand could grow 50% by 2030.
Author: Ross LoutheanPosted: Tuesday , 20 May 2008
PERTH -
A detailed study on energy issues released by Southern Cross Equities has painted a strong growth pattern for uranium for nuclear power and assumes that if uranium mine production grows only by the current 3% per annum then the shortfall in 2030 could be 30,000 tonnes based on China's unrelenting growth continuing.
Southern Cross said the unprecedented structural increase in commodity demand "has coincided with decades of under-investment in productive capacity.
The Sydney-based broking house cited Kloppers' reported statement that current energy supply "is fully utilised" that has resulted in higher prices that are "structural rather than cyclical."
"The significance of this comment should not be under-estimated. We believe this represents a genuine endorsement of our ‘stronger forever' commodity view," Southern Cross' review said.
The report said there is little doubt energy, water and food are globally scarce and that the security of supply for these vital commodities will become a major issue for governments world-wide.
"In this regard currently we are witnessing China through its sovereign wealth fund (or masquerading State-owned vehicles) taking equity stakes in companies supplying strategic commodities.
"There is no doubt that strategic commodities in the form of oil, LNG or uranium are strategic commodities of the highest calibre," Southern Cross said.
In Australia the Rudd Federal Government has committed to a 20% increase in alternate renewable energy use by 2020, as well as plans to reduce CO2 emissions by introducing a carbon credits trading scheme by 2010.
"We expect (Australian) environmentally-friendly companies with low carbon emissions generating carbon credits will trade at a significant price/earnings premium," the report said.
"Uranium is the ultimate alternate green energy source. It is highly environmentally friendly compared to oil considering that after the initial mining and processing a nuclear reactor emits no CO2 emissions.
"However, even adjusting for mining and processing, the carbon emissions of nuclear power are less than all renewable energy sources with the exception of hydro-electricity.
"In our view the world continues to have irrational fear of nuclear power."
Southern Cross said the World Nuclear Authority (WNA) reported nuclear reactors supply about 17% of global electricity requirements. In contrast to the rest of the world, Asia is a major nuclear power generator. South Korea and Japan generate 45% and 30% respectively of electricity through nuclear power while the global figure is 18%.
WNA reportedly said China, Japan, India and South Korea will account for 36% of the world's new electricity generation out to 2020, of which nearly 40% will come from nuclear power. But at this stage China generates just 1.4% of its power from nuclear plants and India just 4%. "The upside for uranium as an energy source in these countries is huge."
Southern Cross said right now some investors have been spooked by the spot uranium price falling to the low $US60/lb range, however, unwinding of large speculative positions has played a large part in the fall.
"At current levels, we believe the downside risk for the uranium spot price is very limited. The hedge fund selling has abated.
"In fact, we are hearing that speculative short positions have been unwound with the global power disruptions. In addition, supply remains dependent on secondary sources."
"We believe the spot price is now close to the marginal cost of new production," Southern Cross said.
Inside US uranium markets
The latest uranium marketing annual report from the Energy Information Administration suggests flat US buying volumes for much of the next decade.
Author: Barry SergeantPosted: Thursday , 29 May 2008
JOHANNESBURG -
The latest Uranium Marketing Annual Report from the Energy Information Administration (EIA), a US government agency, suggests that US buyers of uranium, some of the biggest in the world, could have played a part in the collapse in spot prices from a manic $138/lb in June 2007, to, eventually, current levels around $60/lb, a level which has not yet demonstrated a bottom.
The latest EIA annual marketing report says that owners and operators of US civilian nuclear power reactors purchased a total of 51m pounds U3O8e (uranium oxide equivalent) of deliveries from US government, US suppliers and foreign suppliers during 2007, at a weighted-average price of $32.78/lb U3O8e.
The 2007 total of 51m pounds U3O8e decreased significantly by 23% compared with the 2006 total of 67m pounds U3O8e. On the flip side, the 2007 weighted-average price of $32.78/lb U3O8e increased significantly by 76% compared with the 2006 price of $18.61/lb U3O8e.
The EIA makes no comment on or analysis of commercial uranium prices, an issue that is compounded, in any event, by parallel term (contract) and spot markets. The EIA defines spot contracts as a one-time delivery (usually) of the entire contract to occur within one year of contract execution (signed date). Long-term contracts include those with one or more deliveries a year following contract execution (signed date), and as such may reflect some agreements of short and medium terms as well as longer term.
Eager to secure maximum possibility of supply, utilities are apparently resigned to holding inventory - stockpiles - of uranium. One factor here is that only 8% of the 51m pounds U3O8e delivered to US buyers in 2007 was US-origin; foreign-origin accounted for the balance. During 2007, 13% of the 51 million pounds U3O8e delivered was purchased under spot contracts at a weighted-average price of $88.25/lb U3O8e. The remaining 87% was purchased under long-term contracts at a weighted-average price of $24.45/lb U3O8e.
As of the end of 2007, the maximum uranium deliveries for 2008 through 2017 under existing purchase contracts for owners and operators of US civilian nuclear power reactors totalled 230m pounds U3O8e. Also as of the end of 2007, unfilled uranium requirements (not under contract) for 2008 through 2017 totaled 264m pounds U3O8e.
These contracted deliveries and unfilled requirements combined, according to the EIA, represent the maximum anticipated market requirements of 493m pounds U3O8e over the ten year period. Simply divided, this is roughly the same annually as the 51m pounds delivered to US buyers in 2007. For 2008, the maximum anticipated requirements of owners and an operator of US civilian nuclear power reactors is 43 million pounds U3O8e. This suggests a good to high level of standing inventories on US soil.
According to Ux Consulting, a specialist trade consultant, with the focus on term deliveries, uncovered needs shift forward by one year. Ux Consulting says that uncovered demand for 2011 stands at 17.4m pounds U3O8e, but jumps to 30m pounds U3O8e in 2012 and reaches its high point of 48m pounds U3O8e in 2016.
Ux Consulting and TradeTech this week reported spot prices unchanged from the previous week at around $60/lb. Ux Consulting has also introduced what it calls the "mid-term" market, typically for deliveries beginning one to two years out with deliveries over two to three years.
Ux Consulting says the average mid-term price starts around the mid-$70/lb range, and features base-escalation or stair-stepped provisions. Ux Consulting believes that the supplies for mid-term transactions come from inventories, rather than from new production as is usually the case for term contracts.
This week the term price for U3O8e was unchanged at $90/lb for both Ux Consulting and TradeTech.
