Wednesday, February 26, 2014

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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Saturday, February 8, 2014

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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Thursday, February 6, 2014

Peninsula Energy Begins Setting the Stage for Diversified Uranium Production

Published on Thursday February 06 2014 (AEST)   
With so many uranium companies at play in the current market, it can be difficult to know which ones present investors with the best opportunities. And while investors are strongly encouraged to do their own due diligence, it’s worth having a peek at which companies have landed on our readers’ radar. 
 By - Exclusive to Uranium Investing News

Based on a recent reader request, Uranium Investing News (UIN) reached out to John (Gus) Simpson, executive chairman of Peninsula Energy (ASX:PEN), to learn more about what sets the company apart from other uranium exploration and development companies vying for investor attention.

Peninsula Energy has set its sights on becoming a diversified uranium producer. The company plans to accomplish this feat through the development of its large uranium assets in both Wyoming and South Africa.

UIN: Recently Peninsula Energy was identified as one of the uranium companies our readers are watching. In your opinion, what is it about Peninsula that sets it apart from other companies in its class?

JS: I think two things set us apart. The first is the scale of our deposits. Most teams in Wyoming are looking at production levels of around half a million to a million pounds a year, and we’re looking at 2 to 3 million pounds. We’re licensing our central processing plant to do that.

The second is that we have two project groups. We’ve obviously got Wyoming, as I just mentioned, where we’ve currently got 54 million pounds, but we believe ultimately we’ll have several hundred million pounds.
The other project group is a very large South African projects in the Karoo where we have about 8,000 square kilometers of mineral tenements, 100 million pounds of resources — we believe that there’s probably close to 300 to 350 million pounds within the tenement holding. The scale of that project — if and when it gets into production — will be 3 to 4 million pounds a year for production.
Our projects are big and not something typically you find in a junior. We’ve been fortunate enough to have enormous exploration success in Wyoming, and we’ve discovered 50 million pounds for less than a dollar a pound.

As for South Africa, post-Fukushima AREVA (EPA:AREVA) was unloading of a lot of assets around the world due to a combination of factors, the largest one being the performance of uranium. When they tried to get rid of them in early 2012, there wasn’t much interest, so we managed to do a good deal with them.

UIN: Peninsula has assets in both the United States and Africa. Can you share a little about how these jurisdictions compare?

JS: Obviously the United States is a much more regulated environment but a much more stable environment. South Africa, on the other hand, is one of the world’s great mining economies and subsequently has enormously good infrastructure and a very large pool of skilled labor with expertise in the mining field.

UIN: Being in these different jurisdictions, you also have a fair amount of diversification. How important is diversification of assets in the grand scheme of things?

JS: Diversification is very important. We are trying to model the requirements of utilities — end users of products. For them, it’s all about security of supply. Utilities are looking, in my opinion, for producers that have got geographical and jurisdictional diversity. Within that diversity they want long life and low cost, which reside in first-tier jurisdictions. That diversity and those qualifications, in my opinion, make for very stable relationships.

UIN: Peninsula’s main project, Lance, is located in Wyoming. What is it about the state that makes it attractive for uranium mining?

JS: Wyoming is attractive in that it’s been in continuous uranium production since 1951.The big players are there with Cameco (TSX:CCO,NYSE:CCJ) and Uranium One (TSX:UUU) and Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) (but it isn’t actually operating). There have been three new mines that have come into production in the last eigthteen months, and several others are in the final stages of permitting and construction. Overall, it’s a very uranium-friendly environment. There is also a long history of successful production from ISR, which is what we’re doing there.

UIN: Speaking of ISR, Marin Katusa recently said that the success stories in the current uranium market will come from companies with the lowest cost of production, namely ISR operations. What are your average production costs?

JS: Our operation costs are about $11 a pound. Our total all-in costs, excluding capital, are sub-$30.
The difference for us and why costs are low — or expected to be lower — compared to other companies, is due of the impact of capital. Because we have a very large resource, 50 million pounds, we’re amortizing the capital cost over a longer period and more pounds.

UIN: What are some of the key features investors should know about the Lance project? What kind of expansion potential does the project have?

JS: Long mine life, low cost, good grade, first-class production team, very experienced production team, very strong shareholder support from groups like Blackrock, Pala and others.
Our planned production is 2.2 million pounds, ramping up over several years. Central processing facility is licenced for 3 million pounds, and our plan is to look for satellite orebodies — of which there are several — within the Powder River Basin that we can incorporate with a separate ion exchange operation and truck loaded resin to our central processing plant. So that being said, we have about a 30 percent capacity for expansion.

With South Africa coming on as a second project probably three or four years behind it, we have the potential there for another three or four million pounds.

And I think that that is how we are perceived by the utilities. As a potential mid-tier producer filling that space that currently is being vacated by Uranium One as a public company.

UIN: Briefly can you tell us a little more about your South African projects?

JS: They’re the next in line for production. We have to go through feasibility, engineering, financing, but there’s a lot of interest in South Africa to provide the funding and uptake for these.

The projects will be mined through conventional open-pit then underground mining, again with a central processing plant. We have a very big holding there, it’s an amazing project.

If you look at our latest presentation, there’s some scale of it. We’ve got three palio channels where we’ve got mineralization occurring over 50 miles for each of them. It’s very heavily mineralized and high-grade material that is near-surface and open-pittable material that you put a decline in and go into. We’re talking between 1,000 and 1,400 ppm.

UIN: Can you help our readers understand a little more about what the nuclear landscape looks like in South Africa?

JS: South Africa only has about two nuclear power stations, and they intend to build another six — which I believe the Russians are lead contenders for.

There’s a requirement of Eskom if they purchase South African fuel. That’s a regulatory requirement in South Africa, but that will not restrict us where we sell it. What’s more important is that South Africa is very well versed in the mineral recovery and mineral sales and has all the infrastructure to facilitate the growth of mining, and specifically uranium. It’s a very good place to be operating.

UIN: So, Peninsula is strategically placed to take advantage of several markets?

JS: I’d say so.

UIN: What else do you have planned for the future?

JS: Our intention is to acquire and build a project in Australia and look into the growing Asian market as well.

One of the biggest assets that we have outside of our projects is our strong production team in the United States, which has unique skills in ISR. We’ve also got a very strong global exploration team in South Africa and Australia.

These teams and these people are going to turn opportunities into success. That’s overlain by a strong board and financial expertise within the group. We think that we are very well positioned to become a major player in the game as the market improves for uranium and for us to have a significant increase in value. We believe that we can ultimately become a multi-billion dollar company and that’s the plan.

UIN: Well, that wraps up my questions. Thank you for taking the time to speak with me.

JS: Thank you.

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