Johannesburg — URANIUM One became the first local casualty of slowing commodities prices when it said yesterday it had canned the Dominion uranium mine it has been building outside Klerksdorp for the past two years.

Targets for the mine, originally an ambitious $180m project to produce 3,18-million pounds of uranium a year, have been cut by management in the past year. Earlier this month operations were suspended after a dispute with the workforce.

Announcing that Dominion would be put on care and maintenance, Uranium One said the mine was no longer economic because of prices, inflation-related cost increases and the slower than expected ramp-up in production.

Uranium One, which peaked at R65,50 in January, shed 19% to 900c after the latest news.

Recent weakness in the spot price of uranium on fears of a slowdown in nuclear build programmes has hit most other uranium companies' share prices, already under pressure from general negative market sentiment.

The latest weekly spot uranium price quoted by UX Consulting was $44/lb while Trade Tech was quoting uranium at $45/lb. Trade Tech said demand was extremely weak although there was new demand last week from one non-US utility. Most of the material that came on the market in the past six weeks was from sellers under pressure to raise cash, it said.

Bloomberg reported that JPMorgan Chase cut its uranium price forecasts earlier this month because of the prospect of slowing nuclear power plant development in response to a worldwide recession. JPMorgan said the uranium price could average $65,98/lb this year, $64,75 next year and $71,50 in 2010.

Last year, uranium peaked at $135/lb.

Paladin Resources, which has uranium projects in Australia and Namibia, where it operates the Langer Heinrich mine, was at A$2,19 this week from A$7 in January, while Cameco Corporation, the biggest uranium producer in the world, was at C$18,35 from C$43,80 in June.

On the JSE, First Uranium's shares surged 44% to R65 yesterday after a conference call with investors, recovering from R45 earlier in the week. Its peak for the year was R80 in March.

First Uranium's vice-president of investor relations, Bob Tait, said although fears of global recession were hitting all share prices, and uranium companies were no exception, he was not convinced it was influencing the spot uranium price.

The financial crisis had forced hedge funds, some of whom were holding uranium contracts, to liquidate assets, but this was a short-term event, Tait said. Most uranium was sold on contracts of three years or longer, and contract prices were holding at about $75/lb.

First Uranium's view was that to survive in bad times and prosper in good times, it had to keep control of costs, and it helped that the company mined both gold and uranium in SA. First Uranium had not yet signed any long-term contracts as it wanted to establish a robust uranium operation first.

All uranium companies have launched new or expansion projects in the past couple of years in response to the surge in the price on expectations that energy demand in general would rise as the global economy expanded.

Rio Tinto reported a 42% rise in output from its Rossing uranium mine in Namibia in the third quarter compared with the year before on improved grades, while BHP Billiton yesterday reported a 19% increase in uranium oxide concentrate production to 1110 tons in the September quarter compared to a year ago. Billiton is busy with a feasibility study into expanding its Olympic Dam mine, which contains the largest uranium deposit in the world.