Uranium Shares Gain On First Positive News In Months

Published on Saturday May 28 2011 (AEST)-Australia

An announcement by Traxys North America that it will buy the uranium the US Department of Energy (DoE) planned on selling will take out a large portion of the nuclear fuel that would have ended up on the spot market, pressuring prices.

The first bit of good news for the uranium sector since the Japanese disaster in March sent share prices higher, and analysts said it was a “very positive” development.

“They’ll (Traxys) probably roll that material out of the spot into long-term contracts,” an analyst said on Friday, asking not to be named.

RBC Capital Markets on Thursday said the agreement amounted to around 11-million pounds of uranium from now until the end of 2013.

“This represents 9,8% of non-mine uranium supply and 2,2% of total uranium supply over the 2011 to 2013 time period,” analysts Adam Schatzker and Fraser Phillips said in a research note.

It equalled around 7% to 8% of yearly spot market volumes, the unnamed analyst calculated.

Importantly, Schatzker and Phillips wrote that many power companies might have planned on buying some of the DoE’s uranium, and would now have to “reassess their uranium purchasing plans”.

Uranium share prices responded to the news positively across the board.

Ur-Energy was up 19.05% on Friday afternoon, trading at C$1,75 a share, while Mega Uranium gained 14.58% to reach C$0,55 a share, Laramide Resources gained 12.10%, Denison Mines gained 9.05%, UEX Corp gained 10.28%

The bigger, already producing companies showed more modest gains, with both Uranium One 2.15% and Cameco adding 1,7% to their share prices on Friday.

The DoE had previously planned to auction the uranium hexafluoride to pay for the cleanup of a decommissioned enrichment facility, which had created an overhang on uranium prices.

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