Charlotte Mathews
5 May 2008
Johannesburg — NEW uranium investments and expansions were being announced as fast as ever last week, despite the recent slump in uranium companies' stock on a falling uranium price.
Although investors are not taking a long-term view, uranium company management teams are planning for the next decade. Until this year, uranium prices had soared for six successive years on expectations of a shortage. Russian armament stockpiles were sold down and there had been little past investment in new uranium mines, while demand for alternative energy sources rose on global growth and high oil prices.
Last week the uranium price reported by TradeTech dropped to $65/lb, half the peak of $138/lb seen a year ago. London-based securities house Fairfax said market participants were reluctant to conclude deals as a surplus was expected next year. But it warned that supply disruptions could easily reverse this outlook.
Bloomberg reported last week that investment house Macquarie was forecasting an average price of $65,10/lb this year and $60/lb next year, which was a reduction from its previous forecast of $89,90/lb this year and $82,50/lb next year.
Macquarie said after a uranium surplus this year and next year, there would be a "gradual but significant tightening in the market" by 2012 as uranium would be ordered for new nuclear reactors being commissioned between 2013 and 2016.
Investec Asset Management said in a presentation on the outlook for commodities last month that it was positive on uranium in the long term because of the role nuclear energy would play in demand and potential supply shortages, but in the short term it believed the market had become overheated.
Uranium companies are scrambling to bring new projects on stream to meet future demand but have been hit by implementation problems ranging from flooding at Cameco's Cigar Lake project to shortages of sulphuric acid at Uranium One's Kazakhstan mines and technical issues at its Dominion Mine in SA, as well as permit delays in various countries.
Last week Brinkley Mining announced it had been awarded a licence to prospect for uranium and other minerals over a 5000km' ' area in southern Sudan, but it said it would limit expenditure until Sudan had a clear mining law.
In a separate announcement, AIM-listed Kalahari Minerals said it had raised its stake in its Namibian investment, Extract Resources, which is drilling the Rossing South prospect for uranium, after Extract said drilling was confirming a large mineralised system in the area.
Bloomberg also reported that Russian state-owned mining company Uranium Holding ARMZ would treble output to 10 300 tons of uranium a year at a cost of $8,6bn with assistance from Russian billionaire Oleg Deripaska, Canada's Cameco Corporation and Japan's Mitsui .
Reuters reported AngloGold Ashanti's uranium production was expected to rise more than 60% by 2012 compared with last year.
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