Uranium Sees Signs of Strength, M&A

After six weeks of weakness, the spot price for uranium is starting to show signs of strength. Market watchers UxC and TradeTech have reported that low priced material looks like it is cleared from the market, at least for now.

“This has purportedly swung the pendulum back into upward price territory,” said Raymond James analyst Bart Jaworski. He noted that Uranium Intelligence Weekly (UIW) is more bearish, with its spot price declining to US$46.88 per pound this week from US$48.03.

The outlook is marred by a potential Department of Energy sale of US$150-million to US$200-million (or roughly 3-4 million pounds) worth of uranium annually to fund decommissioning at its old gaseous diffusion plant in Portsmouth, Ohio.

“Although it is unclear whether these sales fall within the DOE’s already announced inventory disposition plan, we suspect they do (if not, they represent a radical departure from DOE’s pledge not to adversely impact the market),” Mr. Jaworski said in a research note.

This follows the DOE’s refusal to provide USEC a US$2-billion loan guarantee for its American Centifuge Program in Piketon, Ohio. This setback was a big surprise to many and could translate into higher spot uranium prices over the medium term, the analyst said.

“Generally, less enrichment means higher enrichment (SWU) prices, which means utilities would prefer to use less SWU and more natural uranium to produce the same amount of fuel.”

With USEC engaging outside advisors to evaluate its strategic alternatives, Mr. Jaworski thinks Cameco Corp. (CCJ) could be a potential suitor. Meanwhile, his top picks in the uranium space are Denison Mines Corp. (DMLCF.PK), Hathor Exploration Ltd. (HTHXF.PK), Ur-Energy Inc. (URG) and Nufcor Uranium Ltd (NUURF.PK).

Comments

[Mad Hedge F...:]

And there will be more. If we are just on the verge of entering a long term bull market for nuclear energy, as I mentioned in my earlier piece (www.madhedgefundtrader...), then you would have to expect the same for nuclear fuel producers. Last year, the US consumed 55 million pounds of “yellow cake” or uranium oxide, but produced only 4 million pounds. The rest came out of stockpiles or from imports, much if it from the reprocessed Russian nuclear warheads. The new Dept. of Energy under Dr. Stephen Chu has made a big priority of making loan guarantees available to expand nuclear capacity from a lowly 20% of our total grid. The price of uranium is also rising, dragged up by crude, and has bounced 25% from a low this year of $40/pound, to $50. You can take a look at Austin, TX based Uranium Energy Corporation (UEC), which could start production at its Golead mine next year.

Aug 06 11:01 AM

[lance sjogren:]

Uranium resource companies have been in a slump in recent months, in contrast to most commodities.

For a value investor, that spells opportunity.

The primary uranium stock I have been accumulating is Hathor. They are the world's premier junior Uranium exploration company, with a high grade deposit in the Athabasca region. We don't know how many pounds they have though. I believe the stock right now is priced for a worst case scenario- a bear market in Uranium and their Uranium resource coming out at the bottom of the range of expectations. Downside should therefore be small relative to current stock price, while upside is substantial.

Aug 28 12:03 PM