The Uranium Bull Market: Only The Second Inning, Significant Upside Ahead

Published on Sunday 30th November 2014 (AEST)  

An article published on Seeking Alpha November 24th titled "Uranium Spot Prices Plummet as Buyers Exit the Market" is somewhat misleading and overlooks the nuances of the uranium spot market. 

The spot market is thinly traded, driven primarily by one off transactions which can be very volatile (hence the 5% rebound last night bringing U308 spot prices back above $40/pound, after the 8% drop on Friday). Heightened focus on the spot move - on the pages of Seeking Alpha and elsewhere - spurred uranium equities such as Cameco Corp. & Denison to sell-off sharply, despite the fact that their uranium contracts are long term, and not directly related to the spot price on any given day. 

The most important points to focus on when analyzing this market are the trajectory of uranium prices (higher), the long-term supply-demand imbalance (and why recent news regarding Japanese restarts is extremely important) and how much uranium-related equities are positioned to benefit given current valuations. 

As stated above, the uranium market is not very deep - the buying trends of utilities is critical to the price and can drive large swings in the price on a one-off basis. Our channel checks suggest that most utilities are behind in striking new contracts supplying them with uranium, just as in aggregate, global utilities enter the biggest contract role cycle of the last several years (see Chart 1). Most contracts are executed on a five or ten-year basis, and as the chart shows, 2005 and 2010 were the heaviest volume years going back to 1990. We believe natural buyers will be in the market to support any dip in price (again, see last night's strong rebound) starting now through the first two quarters of 2015 to secure the supply they are behind in contracting.

(click to enlarge)

Most uranium-watchers are extremely focused on Japan, but why? The Fukushima disaster was responsible for the start of the uranium bear market, and many bulls have hung their hopes on Japanese restarts as the primary driver of uranium equity prices. Earlier in November, two reactors at Japan's Sendai plant received approval for restart (the first since the 2011 Fukushima event). Though important from a sentiment perspective, the restart of two reactors in and of itself does not move the demand needle. The approval is however, a game changer, but not for the reasons commonly discussed. The decision to restart removes one of the biggest short-term oversupply concerns affecting the market (another catalyzing factor for global utility buying demand).

Prior to the Sendai announcement, many uranium market participants feared that an estimated 100mm pounds of Japanese inventory would be supplied to the market if Japanese officials failed in their campaign to restart. The likelihood of this event is now dramatically reduced as it would be illogical to sell necessary uranium reserves ahead of what will be a multi-year restart effort. As a sidenote, a successful snap election for Prime Minister Abe and his LDP party bodes well for an acceleration in the restart program. The LDP party has been firmly behind nuclear restarts, but their junior coalition partner, the Komeito party, has been an opposition force. Abe looks to be in a good position to secure an outright majority, and the implicit uranium catalyst is not often cited by the market.

While Japan is a popular component of the uranium trade, its contribution to future demand becomes less significant when compared to the growing number of reactor builds in the rest of the world, which in aggregate are a much more important source of demand. Industry consultants and uranium company management teams alike project the uranium market going into deficit over the course of the next several years excluding the demand impact of Japanese restarts (see Chart 2). As has been pointed out many times by various sources, until spot uranium reaches some ~$75/pound, it is uneconomical for uranium supply to come online. We believe that a clearing price level of at least $75/pound will be achieved in Q1 or Q2 2015.

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While the recent move in Uranium equities since the Sendai reactor announcement may seem significant, it only brings equities back to where they were trading at the end of September of this year. Perhaps more surprising, is the general divergence between the spot price and related uranium equities since the summer, which has only partially closed (see Chart 3).


(click to enlarge)

Though daily fluctuations in the spot price do not affect the operations of uranium miners such as Cameco and Denison, long-term price increases do impact the Net Asset Value ("NAV") of the companies. We believe the divergence in pricing between the commodity and equities reflects skepticism in the market about the sustainability of the underlying price move. 

Our discussions with bigger market players suggest that uranium demand is strong, while supply has been surprisingly thin. Meanwhile, both Cameco and Denison trade at significant discounts to NAV - upwards of 50% based on internal calculations based on given current pricing. We believe that higher spot prices, plus an eventual normalization of NAV multiples for the sector offers 100%+ upside to several names from today's prices.

Current equity prices reflect worst-case scenarios, just as the macro tailwinds for the industry are the strongest in several years. The buying behavior of utilities coming into their contract roll cycle, in addition to the positive sentiment catalyzed by Japan's restarts is underestimated by the market. Our top pick in the sector is Denison Mines based on the prospects of its Wheel Lake Gryphon zone drilling site, 22.5% joint venture stake of the Cigar Lake asset (operated by Cameco) and possibility of a near -term non-core asset sale (assets which currently have zero value in the NAV calculation). Internal one-year price target is C$ 2.20, implying greater than 75% upside from November 25th's closing price.

Read more: http://www.nasdaq.com/article/the-uranium-bull-market-only-the-second-inning-significant-upside-ahead-cm418184#ixzz3KXTxqDIx

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Will 15% Of Uranium Supply Be Lost On August 28th 2014?

Published on Friday 15th August 2014 (AEST)  

In terms of supply, there's one place that's head-and-shoulders above all others: the Athabasca Basin of northern Canada. With uranium mines here running at grades up to 100 times greater than deposits in most other parts of the world.

And with uranium prices down, Athabasca has become all the more critical for supply. Being one of the few places on the planet where producers are still making money--and continuing to turn out production.
But news this week suggests that problems of a different kind could be brewing here. Labor issues.

Local news sources report that workers at the major McArthur River mine and Key Lake processing facilities may be preparing to strike. With the move coming after the United Steelworkers Union's collective agreement with mine operator Cameco expired in December 2013.

 

Talks since have apparently been unsuccessful in arriving at a new labor deal. And negotiations between Cameco and the workers are now set to conclude on August 28--with the union reportedly having authorized a full strike for its 540 members here if an agreement is not reached by that date.

Such a stoppage could be one of the biggest events to hit uranium supply for a long time. The McArthur River mine alone puts out up to 18 million pounds of uranium each year--equating to nearly 15% of current global supply.

The facility has never seen a strike before, so it's uncertain exactly what the impact on production might be. But Cameco itself has acknowledged a possible knock on output, noting that "there is risk to production if we are unable to reach an agreement and work stoppage occurs."

Of course the two sides still have two weeks to work out an agreement and avert the strike. But if such a solution fails to emerge, things could get a lot tighter in uranium, very quickly.
Here's to high-pressure negotiations,

 

Dave Forest

Company: Pierce Points Daily E-Letter

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Queensland Government's New Uranium Mining framework opens the state to Yellowcake Exploration

Published on Tuesday 5th August 2014 (AEST)  

Between 1958 and1963 a total of 4500 tonnes of uranium were produced. A world oversupply of uranium led to the mine lying idle from 1963. It was reopened in 1974 but closed again in 1976. It was finally closed down in 1982 and the following year everything in the town from the houses to the public buildings and the equipment was put up for auction.

A framework to guide the reintroduction of uranium mining in Queensland is expected to encourage uranium exploration, despite the resource's low price on the international market.

The Queensland Government's regulatory framework that will enable the development and operation of its uranium industry.

The action plan is one of the features of the government’s 30-year plan to develop the state.
Uranium hasn't been mined in Queensland since the closure of the Mary Kathleen mine in 1982. A ban was introduced seven years later.

Audio: Uranium mining framework revealed (ABC Rural)

 

Queensland Natural Resources and Mines Minister Andrew Cripps,says the framework takes into account all relevant issues across the uranium mining life cycle, such as strict environmental standards, transportation and safe handling. 

“Over the last 18 months, since the government announced that we would be removing the ban on uranium mining, we have been working very hard to develop a modern regulatory framework for the development of this industry,” Mr Cripps said.

The framework provides mining companies with a blueprint for their planning if they choose to propose a new uranium mine.

Mr Cripps says it is unlikely mining companies would seek to develop a mine any time soon, as the global uranium price is very low and it will not be commercially viable until the market recovers.

“Any applications that do come forward will be driven by the commercial realities of the day,” he said.
“The whole purpose of having (this) framework in place is that, when there are commercial opportunities that present themselves, Queensland is in a position to take advantage of those opportunities.”
Mr Cripps expects companies will be ready to start exploration and other preparations ahead of any improvements to the market.

Georgetown resident Noeline Ikin sat on the Uranium Mining Implementation Committee, which collaborated with the State Government to create the new framework.

She says her view of uranium mining improved during the process. She also said there would be strong employment opportunities  “There would be two or three of four years of construction (of a new facility) that local people are able to engage in and benefit,” she said.

“Then when the mine starts operating... there will be 400-500 employees for an average mine.”
Townsville deputy mayor Vern Veitch, a critic of uranium mining, says the new framework does nothing to ease concerns about the safety of reintroducing the industry.

“There is very strong concern in Townsville about the possibility of a mine reopening just over the Herveys Range ridge at Ben Lomond (mine site).

"The reason for that is that the Burdekin River is the back-up water supply for the Townsville community.
“We simply cannot take the risk that this water could be contaminated with radiation poisoning from a severe storm, heavy rain that would see tailings go into the Burdekin River,” Mr Veitch said.

Applications for uranium mining projects will be lodged with the Coordinator-General for assessment and a Uranium Mining Oversight Committee has been established.

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GoviEx Uranium (CSE: GXU) New TSX Listing

Published on Wednesday 25th June 2014 (AEST)

The Company's principal objective is to become a significant uranium producer through the continued exploration and development of its Madaouela Project and its other uranium properties, in Niger.

 

The Company's principal asset is an advanced-stage exploration property located in close proximity to the Somair and Cominak mines in the Agadez region of north central Niger in the heart of a historically prolific uranium-producing district (the "Madaouela Project"). 

The Madaouela Project consists of the Company's ownership interest in seven brownfields exploration permits known as Madaouela I, II, III, IV, Agal, Era and Anou Mellé.

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Nuclear Boom Overwhelms China Watchdog

Published on Saturday 21st June 2014 (AEST)

June 20 (Bloomberg) -- China is moving quickly to become the first country to operate the world’s most powerful atomic reactor even as France’s nuclear regulator says communication and cooperation on safety measures with its Chinese counterparts are lacking. Zeb Eckert reports on "First Up." (Source: Bloomberg)

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Alexander Molyneux Speaks On Record Uranium Demand Expected for 2016

Published on Thursday May 15 2014 (AEST)  

 Alexander Molyneux, chairman at Azarga Resources Ltd., talks about the company's agreement to merge with Powertech Uranium Corp. and the outlook for the uranium mining industry.

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Design/Build for Lance In-Situ Uranium Extraction Project

Published on Tuesday May 13 2014 (AEST)  

The last year construction began on a nuclear power plant in the United States was 1977, but that is about to change. 

The Department of Energy announced in February that it is backing the construction of two new nuclear power plants, and TREC, a Woodard & Curran company, is working on a major uranium mining project to provide the fuel that these and other plants will need. After four years, the Nuclear Regulatory Commission (NRC) recently gave initial permitting approval and released the final environmental impact statement for the first phase of the project where TREC will play a leading role.

Strata’s Lance In-Situ Uranium Recovery Projects in northeastern Wyoming encompass at least 190 combined miles of uranium mineralization and more than 53 million pounds of triuranium octoxide compound. TREC is leading the pre-construction activities for the uranium processing plant under a design/build contract and providing conceptual designs, detailed engineering design support, procurement, and construction services.

“Designing the system is an exciting challenge for our team,” said Brian Pile, a Regional Operations Manager at TREC. “This project is made even more significant because it will be such an important source of fuel for clean, low-carbon energy production in the future. We are committed to the efficient design of a low-impact system that protects the local ecology and creates long-term benefits for both Strata Energy and the local economy.”

The TREC team completed each component of the facility design, including mass balance, piping and instrumentation diagrams, and process layouts, as well as structural and instrumentation and control engineering. TREC also managed the laboratory, plumbing, HVAC and architectural design work for the facilities and generated specifications for the building, construction, equipment, pumps, tanks, and process, mechanical, structural, and electrical controls. Woodard & Curran is assisting TREC with the electrical and instrumentation and controls aspects of the project.
Prior to construction, TREC developed performance specifications that were provided to vendors for pricing and associated structural, safety, and ventilation designs, which were then incorporated into the facility design. This approach significantly reduced design costs and will expedite the building process.

Production at the Lance Projects

The Ross Production Site, the first phase of the Lance Project, is the area where Strata is currently focusing development and will use in-situ recovery (ISR) to extract the uranium, rather than an open pit or underground mine. ISR at the Ross project involves a number of injection wells that pump a solution of groundwater mixed with oxygen and sodium bicarbonate (lixiviant) into the sandstone that holds the uranium. The lixiviant oxidizes and dissolves the uranium, which is then drawn up by recovery wells. The solution is pumped to a central processing plant, where the uranium is extracted through an ion-exchange circuit, elution, precipitation processes, and drying for an initial annual production rate of 1.2 million pounds of “yellowcake” by 2017. The water used to bring the dissolved uranium to the processing plant is then re-fortified and returned to the aquifer in the closed loop process.

The entire wellfield is surrounded by a series of perimeter monitoring wells to guard against the migration of mining solution outside of the recovery area. ISR requires minimal surface disturbance, and the affected area—including the groundwater—is restored when the mining operation is concluded.

The Ross site will contribute a significant portion of the total United States production of uranium. According to the U.S. Energy Information Administration, 2013 domestic uranium production totaled roughly 4.8 million pounds. Strata is targeting 1.2 million pounds of triuranium octoxide produced at the Ross site per year through the years 2014 – 2017 and later plans to increase production to 2.3 million pounds per year.

The uranium will be extracted through an ion-exchange circuit, elution, precipitation processes, and drying for an initial annual production rate of 1.2 Mlbs of “yellowcake” by 2017.

Construction Underway

Ground breaking commenced in October of 2013. Phase I construction has been completed to the point feasible during the winter months. TREC and Strata have begun procuring equipment and the pre-engineered steel buildings to allow for the rapid continuation of construction in the spring. Strata anticipates that the NRC will issue the Source Material License in early April 2014, which will allow the construction of the processing plant and initial wellfields.

“The design/build approach streamlines the process for Strata Energy,” Pile added. “The project benefits by having one contract and entity for design, construction, cost, and schedule management. It really is a true turn-key delivery for the owner, which provides them with the ability to focus on their core business.”

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Fortescues Andrew Forrest pumps $12m into Uranium Junior

Published on Wednesday May 7 2014 (AEST)  

Andrew Forrest’s investments continue to range far and wide, with the mining billionaire today investing millions into a uranium junior just days after he bought a beef exporting company.

Mr Forrest has today pumped $12 million into Energy and Minerals Australia as part of a broader $36 million funds injection for the company.

The investment is a reunion of sorts, with EMA run by two men with prior links to Mr Forrest via his main company Fortescue Metals Group; Julian Tapp and Mike Young.

 
Mr Tapp was government relations advisor for Fortescue until 2012, while Mr Young led iron ore exporter BC Iron into a highly successful joint venture with Fortescue in 2009.


EMA is exploring acreage in the goldfields of WA which are prospective for uranium and base metals.

“My investment is a strong vote of confidence in the executive management team of Mike Young and Julian Tapp with whom I have had a long and successful working relationship,’’ said Mr Forrest in a statement.
Mr Forrest’s investment through his holding company ‘’Forrest Family Investments’’ will give him a stake of just over 27 per cent in EMA, and comes on the same day that Macquarie, Acorn Capital and Element Resources Fund agreed to covert their $24.5 million worth of debt into shares.

Mr Young said the investment would help unlock EMA’s future growth and potential.

It’s the second raising that EMA has completed so far in 2014, despite the deathly environment for uranium.
Mr Forrest’s investment comes just days after he bought WA food exporter Harvey Beef for an estimated $30 million.

But his stake in nickel junior Poseidon is shrinking, after the billionaire declined to participate in another equity raising by the nickel minnow.

Poseidon has today completed its second equity raising in the space of four months, and while the total raised this year – $7.5 million - may be small, it’s a big improvement on last year when the company couldn't raise money on several attempts.

Poseidon boss David Singleton said improved nickel prices were bringing investors back to nickel, and the company could have raised much more over the weekend had it not been prevented by an internal raising cap.
‘‘We were very heavily over-subscribed and we probably would have done more but we have bumped up against our annual raising capacity that we have permission for from shareholders,’’ he said.
‘‘It is unfortunate because having had a few bad years where it was quite hard to raise money, to get to the point where we were so heavily over-subscribed that we could have raised a lot more but to not have the capacity to do it is a little bit frustrating.’’

Nickel prices have improved by more than 25 per cent since January on the back of an export ban imposed by the world’s biggest nickel producer, Indonesia.

Mr Singleton confirmed that Mr Forrest had not participated in the equity raising.
Mr Forrest started 2014 with 33 per cent of Poseidon shares, but according to Bloomberg he now holds just over 27 per cent.

‘‘He will be slightly diluted as a result of today,’’ said Mr Singleton.
Poseidon must pay about $9 million in debts to Mr Forrest by October 1, and Mr Singleton said the company was considering asking shareholders for permission to raise more money, or possibly taking on new debt, to pay back Mr Forrest.

Poseidon is also reviewing quicker and cheaper ways to get its Windarra nickel prospect into production.
The company halted work last year as low nickel prices bit hard, but the improved climate could see preparatory work on site recommence soon.

‘‘The key next step for us is to recommence operations on the ground at Mt Windarra which we bought to a halt in June last year as the nickel market was going strongly against us. We are able to restart now and that will start to open up some other options,’’ said Mr Singleton.

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Paladin Energy Lifts 2014 Q1 Uranium Production

Published on Tuesday April 22 2014 (AEST)  

PALADIN Energy has reaffirmed its full-year production guidance after increasing uranium output in the three months to March. 

The miner produced 2.089 million pounds of uranium oxide across its Langer Heinrich and Kayelekera mines in the March quarter, up from 1.992 million pounds in the March 2013 quarter. Sales were 2.405 million pounds of uranium oxide in the quarter, up from 1.2 million pounds in the previous corresponding period. 

But revenue slipped to $US88.56 million ($94.81m), compared with $US106m in the prior corresponding period, as prices fell. 

Paladin reported an average sales price of $US36.82 per pound, down from an average price of $US55.22 per pound in the previous corresponding period. 

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Interview with David Sadowski re Uranium

Published on Sunday March 30 2014 (AEST)

David Sadowski is a mining equity research analyst at Raymond James, and has been covering the uranium and junior precious metals spaces for the past seven years. Prior to joining the firm, David worked as a geologist in western Canada with multiple Vancouver-based junior exploration companies, focused on base and precious metals. David holds a Bachelor of Science in Geological Sciences from the University of British Columbia. The Energy Report: David, the uranium price remains below the cost of production for many producers and the forecasts for uranium production are flat. Why are you optimistic about the uranium space?  

David Sadowski: In the current price environment, supply won't be able to keep up with demand growth. That's really the core to the uranium investment thesis. The cost of uranium production spans a pretty wide range, from the mid- to high-teens per pound for the cheapest in-situ leach mines in Kazakhstan, to $50–60/pound ($50–60/lb) for some of the lower-grade, conventional assets in Africa, Australia and East Asia. So we're looking at about $40 to produce your average pound of uranium. That number is climbing on cost inflation and depletion of the best mines. The current spot price is under $36/lb, so many operations are underwater right now. That's why we've seen numerous deferrals of projects and even shutdowns of existing mines, the most significant of which was Paladin Energy Ltd.'s (PDN:TSX; PDN:ASX) Kayelekera at the beginning of February. That's on top of operations that are at risk for other reasons. In just the last few months, we've seen four of the world's largest mines owned by Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) and AREVA SA (AREVA:EPA) shut down on operational and political hiccups. Then you look at where the supposed growth is coming from over the next several years— Cameco Corp.'s (CCO:TSX; CCJ:NYSE) Cigar Lake and China's Husab. Those are technically very challenging, too. All of this is occurring in a world no longer benefitting from a steady 24 million pounds per year (24 Mlb/year) supply of uranium from downblended Russian warheads. In short, the supply side is a basket case. Yet demand growth keeps chugging along. European Union (EU) and North American growth perhaps isn't what it was a couple of decades ago. Pressure from competing energy sources like liquefied natural gas (LNG) in the U.S. is causing some operators to switch off their older, smaller reactors. But reactor retirements are being more than offset by new reactor construction not only in the U.S. and EU, but much more important, in Asia and in Russia. China, India, Korea and Russia are collectively constructing 70 reactors right now.  

TER: Japan and the United Arab Emirates (UAE) just announced a program to cooperate in developing nuclear technology. What's the market significance of that?

 DS: There is a push toward nuclear in many of these nations in the Middle East. Not only do they have pretty strong population growth and urbanization, thus electricity growth is strong, but some of those oil-rich nations have cited a preference to sell their petroleum into the international markets rather than domestically. The UAE is a very large potential source of demand growth. It is constructing two nuclear power plants at the moment and is imminently going to break ground on two more. There are an additional 41 new nuclear reactors on the drawing board in the Middle East. So in the context of 434 operable reactors today, that's a very meaningful amount of growth potential. Demand growth remains resilient, and supply is lagging behind. In just a few years, we think this will lead to a deficit that will quickly grow to crisis levels. That's why we're bullish. Uranium prices have to go higher to incentivize more supply to meet this looming supply gap.  

TER: Why hasn't that happened yet?  

DS: There are just a few forces working against the price. Since the Fukushima accident in Japan, there has been a supply glut in the marketplace. There has been a decrease in demand, with a lower level of buying by some countries, like Germany, Switzerland and, of course, Japan. Additionally, some extra supply was coming out of the U.S. government. There is an extra amount coming from enrichment underfeeding. If you add all that up, there has been essentially more supply than is required, and that puts downward pressure on prices. It's caused the utilities to take a step back from the market.  

TER: So do you think conditions in the market itself will materially improve? What will that look like?  

DS: For us, it comes down to when the utilities start getting involved again. While the utilities have been sitting on the sidelines over the last couple of years, high-fiving each other for not buying uranium in a declining price environment, their uncovered requirements in the future have actually risen quite dramatically. At some point, they have to resume long-term contracting to cover all those needs. Japan is a key catalyst. Japan's reactors were slowly shut down after the Fukushima accident. Right now, none of them are operating. The country's inventories have piled up to probably around 100 Mlb. Many of these utilities have asked their suppliers to delay deliveries of fresh uranium. That material ends up in the marketplace one way or another, so it's having a price-dampening effect. In late February, however, the Japanese government announced its final-draft energy plan. Japan will restart at least some of its reactors to stop spending a ludicrous amount of money on imported fossil fuels. There are other economic and environmental benefits, but it’s the country's trade balance that is really driving the restart push. It's these restarts that we think will spur global utilities outside Japan to resume buying. The signal will be sent that Japan won't be dumping its inventories, it won't be deferring deliveries anymore and, by the way, there is not enough supply to go around in just a few years so you better start contracting again. That's what we think is going to support prices.  

TER: That basic energy plan in Japan is a draft, but there is a lot of public opinion against it. You do think its prospects are good?  

DS: Consensus is that the plan is going to be approved by the cabinet by the end of March. The opposition is highly regionalized, and many pockets of the country are actually very pronuclear. Nuclear, obviously, provides a lot of jobs and generates a lot of tax revenue in these regions.  

TER: Raymond James has revised its uranium supply-demand balance and anticipates a growing supply deficit beginning in 2017. What is the case for investing in the industry today with a payoff so far in the future?  

DS: A shortfall beginning in 2017 doesn't mean prices don't move until 2017. In fact, in a healthy market, they should have moved already. But, again, it comes back to the utilities. They view the nuclear fuel market and their own fuel requirements as a game of risk management. Today, many utilities are sitting on near-record piles of material, so there's not a great deal of risk to the utilities with respect to supply availability over the next couple of years. However, as these groups start to look out beyond that period to 2017, 2018 and so on, they'll realize that it could become more challenging to get the uranium they need. Given that the utilities typically contract three to four years in advance, we're very close to that window where we expect buying to ramp up again and prices to move upward. Again, critically, we expect Japanese restarts to be an important catalyst in that resumption of buying. We expect first restarts in H2/14 with a half-dozen units online by Christmas. So from an investor's point of view, we're already seeing the benefit of this outlook. That's been driving the uranium equities upward over the past couple of months.  

TER: You're forecasting spot uranium prices averaging $42/lb in 2014, but three months into the year, the price is still struggling to break $36. What will drive it over $42? When do you expect that to happen?  

DS: We think the move this year is likely to happen toward the end of this year, as Japanese restarts spark a return of normal buying levels by utilities. The uranium price should really start moving in 2015.  

TER: What indicators should investors look for in watching the uranium price trend?  

DS: One of the best indicators is Uranium Participation Corp. (U:TSX). Since the fund's inception, this stock has been a remarkably accurate predictor of where the uranium spot price is headed. When Uranium Participation's share price is above its net asset value (NAV), the market is baking a higher uranium price into its valuation of the stock because the NAV is calculated at current uranium prices. For even more precision, you can divide the company's enterprise value by its uranium holdings for a rough dollar/pound estimate on what the market is ascribing. So right now, we calculate the fund is implying $40/lb, and that's over $4 above the current spot price. This is by no means a bulletproof measure, but absent a black swan event, history tells us that this could be the destination for the price in the near future.  

TER: You have said you see $70/lb as the price that will incentivize new mining. What should investors do while they're waiting for the price to reach that level?  

DS: Buy uranium equities. It's that simple. We think prices are going higher, so buy uranium stocks well ahead of the upswing.  

TER: Do you have a target time that you expect the price to reach that level?  

DS: We're looking for the price to reach $70/lb in 2016. We forecast prices flat forward at $70 from that year onward.  

TER: Which mining companies are the best investment prospects in this environment? Which are the weaker ones?  

DS: They say a rising tide floats all boats. We think all the uranium stocks are probably going higher, or at least the vast majority of them. But we also believe being selective will provide the greatest rewards. Most investors should be looking at names with quality assets, management teams and capital structures. Among producers, our preferred companies are focused on relatively high-grade projects with solid balance sheets and fixed-price contracts that can buffer them against near-term spot price weakness. After all, we think the spot price could remain weak for most of the balance of 2014. Cheers from G64 conjuring-profits-uraniums-resurgence-david-sadowski .

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Nuclear Industry Hopes Ukraine crisis to boost business in Europe

Published on Saturday March 22 2014 (AEST)  

By Michel Rose PARIS, March 21 (Reuters) - Western players in the nuclear industry are hoping the conflict between Ukraine and Russia could help push countries in Eastern Europe that rely on Russian gas to turn to atomic energy. 

Tension between Russia and the West over the future of Ukraine is spurring the European Union to renew efforts to end decades of dependence on Russian gas, which accounts for about a third of the bloc's supplies. The nuclear industry, whose prospects were hit by the Fukushima disaster in Japan in 2011, has been keen to promote its advantages as a domestically produced source of clean energy by comparison with imported gas and polluting coal-fired plants. "I think it is wise for eastern Europe to be evaluating nuclear, because it forces them to be less dependent on external forces, external politics," Donald Hoffman, president of the American Nuclear Society (ANS), told Reuters on the sidelines of the SFEN nuclear industry conference in Paris. 

Delegates from the French nuclear industry are also keen to export reactors to central European countries such as Poland and the Czech Republic. "It (nuclear power) can bring rethinking in terms of energy independence," said Christophe Behar, director of the French nuclear research centre CEA's nuclear energy division. Moscow has in the past cut supplies to Ukraine when negotiating prices with Kiev, causing shortages for its customers further west, especially in central Europe, which largely relies on Russian supplies to meet its demand. "The first Ukrainian alert had played a role in energy policy decisions in Britain, for example," said Philippe Knoche, chief operating officer at French nuclear reactor builder Areva. 

 Britain went on to award a 19 billion euro ($26.4 billion) contract last year to build the first new nuclear plant in Europe since Fukushima to a consortium made of EDF, Areva and Chinese state-owned companies CGN and CNNC. "In eastern European countries, there could also be a certain number of consequences," said Dominique Miniere, generation and engineering head at French utility EDF. "Gas doesn't have the same place that they wanted to give it six or seven years ago," he said. Gas-fired power plants across Europe have been sitting idle for months because of low demand and competition from cheap coal, which has made it more difficult to cut carbon emissions. NO SHORT-TERM BOOST But other players were more sceptical on the prospects for nuclear energy in Eastern Europe as a response to the Ukrainian crisis. 

"The gas issue is very short-term, I don't see how the nuclear industry could help," said Jean Van Vyve, nuclear assets and projects manager at Belgium's Electrabel, owned by GDF Suez. These countries' existing heating infrastructure, mainly based on oil and gas and not on electrical devices, reduces the attractiveness of nuclear energy, he added. Danes Burket, from Czech utility CEZ, did not expect a major boost for nuclear energy either. "I am not optimistic on that," he said, partly because the EU energy strategy focuses more on supporting renewables than nuclear energy. "And there is enough shale gas in the U.S. and in case of high prices in Europe, it can be imported. But it depends of course on the U.S. export strategy. 

Now they want to use the gas for the U.S.," he added.

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Black Range Minerals Enters Permitting Stage On Hansen Taylor Uranium Project Colorado

Published on Sunday March 09 2014 (AEST)

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Nuclear Power in Japan "Start Them Up "

Published on Friday March 07 2014 (AEST

 The government and voters are putting economics before atoms, opening the way for Japan to restart its nuclear power plants

JUST three years on from the catastrophic meltdown in March 2011 of three reactors at the Fukushima Dai-ichi plant, Japan is taking steps to revive its nuclear dream. A rush to restart some of the country’s 48 mothballed commercial nuclear reactors is well under way. Hundreds of technicians from utility firms are camped out in downmarket Tokyo hotels, working at the beck and call of the Nuclear Regulation Authority (NRA), the country’s new nuclear watchdog, in hopes of meeting new safety requirements. On February 25th the government published a draft energy plan which put nuclear power at the core. It is a sharp reversal of the previous energy strategy, devised by a former government in 2012, eventually to eliminate nuclear power altogether.

The sense of urgency is driven, first, by the mounting costs of doing without the nuclear plants. One by one, nearly all reactors were shut down in 2011-12. Utilities fired up conventional power stations to make up for lost electricity generation. But the cost of importing extra oil, coal and gas has been all the steeper with a weak yen. The trade deficit has climbed, along with electricity charges, particularly for businesses. Should nuclear plants be left idle, the programme of Shinzo Abe, the prime minister, to revive the economy could be in doubt.


Second, the establishment fears that time is running out. A fourth summer without nuclear power—but also without any sudden blackout to alarm the public—might permanently shift opinion against switching the plants back on. Shigeru Ishiba, secretary-general of the ruling Liberal Democratic Party (LDP), says that people have noticed the lights are still blazing and the trains running. So some 15 months after returning to power, the government is ready to take the political risk of restarts. But it is wary of being thought ahead of the agency charged with nuclear safety.

This month the NRA is due to choose which few reactors it wants to fire up first. The most modern reactors and those farthest from the Pacific coast and the threat of tsunamis are at the head of the queue, and may be restarted as early as the summer. A favoured candidate is the plant at Oi, on the west coast of the country’s main island. Two of its four reactors were the first to restart once before, in the summer of 2012, only to close again in September 2013. Public demonstrations in Tokyo accompanied their return to the grid. At the time Japan had not reformed its lax regime for regulating nuclear power.

Now the government hopes that the NRA, more independent than its ridiculed predecessor, will allay the public’s fears. The agency is replacing Japan’s shattered myth of absolute nuclear safety with the concept of “defence in depth”, that is, multiple back-up plans against a series of worst cases. Several reactors, such as those at Hamaoka, located near Tokyo above the Nankai trough, where two tectonic plates collide, may never restart. But the regulator, understaffed and still susceptible to political pressure, faces a daunting task.
As for the cosy “nuclear village” of utilities, heavy industry, bureaucrats and pronuclear media and politicians, it remains largely intact. TEPCO, the operator of the Fukushima Dai-ichi plant, still bestrides the electricity industry, though its credibility with the public is gone. Mr Abe can take comfort from the fact that the anti-nuclear movement appears spent as a political force, despite the backing of a hugely popular former prime minister, Junichiro Koizumi. In the Tokyo governor’s election last month, economic concerns trumped nuclear ones.

The very first reactor will be the hardest to switch back on. After that, once the NRA gives the all-clear, local governments hosting nuclear plants will waste no time. During the shutdown their economies have been deprived of generous subsidies from nuclear utilities. The governor of Niigata, which hosts TEPCO’s Kashiwazaki-Kariwa plant, the world’s largest, is a loud critic of nuclear power. But last September even he gave permission for the utility to press ahead with its plan to restart reactors.

The long-run future of nuclear power is more uncertain. The age of today’s reactors means that new ones must soon be built—a detail the government’s new energy plan skated over. Along with the Tokyo election, a governor’s race last month in Yamaguchi, the southern prefecture from which Mr Abe hails, was closely watched for signs of the mood about new plants. A battle has raged for decades over one to be built in Kaminoseki, a small fishing town in the prefecture. The result, again, was defeat for anti-nuclear candidates. The government has said it may allow three other reactors already under construction before March 2011 to be completed. Just a short time ago, that would have been unthinkable.

From the print edition: Asia

Nuclear power in Japan Start ’em up

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Uranium Stocks Surge as Japan inches closer to Nuclear Restarts

Published on Wednesday February 26 2014 (AEST  

 Uranium stocks jumped higher on Tuesday after Japan unveiled a pro-nuclear energy plan that could lead to restarts of some of its long-idled nuclear reactors.

The restarts are a key catalyst for the uranium sector that investors have awaited for years. Shares of industry leader Cameco Corp. jumped 8% on the news, Denison Mines Corp. rose 9%, and Paladin Energy Ltd. climbed 11.5%. Smaller companies such as Ur-Energy Inc. made even bigger gains (up 18%).

Shinzo Abe’s government released a draft of its long-awaited Basic Energy Plan, which makes a commitment to nuclear power as part of Japan’s energy mix. The plan, which is expected to receive cabinet approval in weeks, could open the door to restarting some of Japan’s 48 idled reactors as soon as this year. The plan also hints at new reactors, according to reports.

The reactors were shut down following the Fukushima disaster in March 2011. It was a devastating event for the nuclear power business, and gutted short-term demand for uranium.


Mr. Abe has pushed a pro-nuclear agenda since becoming prime minister in late 2012. He implemented new safety standards for the industry, which created a framework in which reactors could eventually restart. Currently, 17 reactors are being reviewed for potential restarts.
“Things are lining up nicely as we go along. It’s just taking longer than we thought it would [for the restarts],” Cameco chief executive Tim Gitzel said Tuesday at the BMO Global Metals and Mining Conference in Florida.

Before the Fukushima accident, nuclear power made up roughly 30% of Japan’s energy mix. It is unlikely to play such a large role in the future, but the energy plan provides proof that Japan is committed to nuclear power and will not attempt to phase it out completely as Germany is doing.

Investors lost interest in the uranium sector immediately after Fukushima, and the stocks have performed poorly ever since. However, they have picked up some momentum this year, partly in anticipation of reactor restarts in Japan.

The uranium producers have acknowledged that there is more than enough uranium supply to meet demand in the short term. But they believe the long-term picture remains very positive due to new reactor construction in China and other countries. There are 70 reactors under construction worldwide and another 173 being planned, according to the World Nuclear Association.

“The long-term story for our industry is a growth story,” Mr. Gitzel said.

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Paladin Energy Suspends Uranium Production At Kayelekera

Published on Friday February 07 2014 (AEST)  

 Australian Uranium Producer Paladin Energy, announced Friday that it is suspending production at its Kayelekera uranium mine in Malawi, calling the operation a substantial drain on its cash resources over the last three years. 

The company told investors that the suspension will involve placing the operation on care and maintenance status until the price of uranium recovers. 

The move is expected to preserve the remaining ore body until this time, when Paladin decides that production can resume on a profitable basis. The price of uranium oxide has been depressed ever since March 2011, when the Fukushima earthquake and tsunami hit in Japan. During this period, the spot uranium price has more than halved from US$72.63 per pound prior to Fukushima, to a current price of US$35.50 per pound. 

The government of Malawi holds a 15% interest in Paladin's African subsidiary (PAL), which holds the uranium mine in Malawi. The company said it will work with government authorities to implement the suspension, which is also a result of the "unsustainable" cash burden to maintain the loss-making operation.
"The Kayelekera Mine has performed exceptionally well technically, with production levels recorded at or near nameplate capacity over the past 12 months and significant achievements made in PAL's cost reduction programme," said CEO John Borshoff. 

"Nevertheless, despite these considerable efforts, KM continues to operate at a loss due to the low prevailing uranium price. Paladin is unable to continue to provide the level of financial support that PAL has required in recent years, hence the decision at this time."

Indeed, the company said that based on a uranium price of US$35 per pound, Paladin would have had to inject a further US$20 to $25 million in cash for each of the next two years to maintain the operation.
Paladin is forecasting that putting the mine on care and maintenance will improve its expected cash flow position by US$7 to US$10 million in 2014 and in the range of US$20 to US$25 million in 2015. 

The cost of suspension, estimated at US$12 million per year, will be funded from proceeds to be received from the sale of uranium oxide on hand and produced during the rundown phase, Paladin said. 

The company noted that production and cost estimates for its Langer Heinrich mine in Namibia, which has a significantly lower cost profile than Kayelekera, will not be affected by the suspension.

As a result of the decision, the company revised its production forecast for this year downwards, to 7.8 to 8.0 million pounds of uranium oxide, from its previous guidance of 8.3 to 8.7 million pounds.

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