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Benjamin · 16-04-2006, 22:30

Reactor demand keeping uranium hot
Tough market to track: Utilities face higher costs as many new plants set to open

Drew Hasselback, Financial Post, with files from news services
Published: Wednesday, April 12, 2006

The price of uranium has risen 80% over the past year, but will the momentum continue?

According to The Ux Consulting Co. LLC , which publishes a weekly spot price on its Web site, uranium currently sells for US$41 a pound, up from US$22.50 a year ago.

The bulls see more upside from a surge in nuclear reactor construction. Others see the market remaining in balance as fresh mine supply manages to keep pace with demand.

Ron Hochstein, chief executive of Vancouver-based International Uranium Corp. , can see the price breaking through US$100 a pound. "The uranium market is very tight right now. Prices are going up on almost a weekly basis," Mr. Hochstein said.

Others think a triple-digit price is wishful thinking. The chief executive London-based Rio Tinto PLC , Sir Leigh Clifford, has said a price of US$40 a pound is above the long-term trend.

The uranium market is a tough beast to analyze. It's relatively small, with about 440 nuclear reactors looking for 175 million pounds of uranium each year . Contrast that with the global copper business, where this year more than 40 billion pounds of the metal is expected to change hands annually.

What's more, mine production supplies less than two-thirds of global demand. The remainder comes from other sources, such as recycled nuclear fuel. The amount of above-ground inventory is enormous, the equivalent of anywhere from a quarter to a third of annual demand. This makes it difficult to pin down supply and demand fundamentals . It's therefore little surprise to come across different views of the market.

John Redstone and John Hughes of Desjardins Securities expect uranium demand to grow 13% by 2010. Yet they also see enough new production during this period to keep the market in balance.

On the other hand, Eugene McBurney of GMP Securities predicts global uranium demand will expand to 292 million pounds a year over the long term, up 67% from the current demand.

According to the International Atomic Energy Agency , 27 reactors are under construction around the world, with eight of those in India and three in mainland China. China has even more ambitious building plans down the road, with 40 more reactors expected to come on line by 2020.

David Stein, analyst with Sprott Securities , forecasts uranium prices of more than US$50 a pound over the next few years. "The fundamentals look great. Reactors take a long time to build so we have a lot of visibility on the demand side for uranium over the next 10 years," he said.

Meanwhile, prospects for new mine supply have dimmed. Saskatoon-based Cameco Corp. last week said the production launch of its 50.3% owned Cigar Lake mine in Northern Saskatchewan could be delayed by six months to late 2007. The delay is linked to a flooding problem.

The Cigar Lake announcement follows news that BHP Billiton Ltd. will need until 2013 to complete a planned US$5-billion expansion in Australia of Olympic Dam, the world's largest uranium deposit.

New discoveries could be years away. Several juniors have joined the hunt for new uranium mines, but it could take three to five years before anything is developed into an attractive prospect, said Jerry Grandey, CEO of Cameco.

"We're quite early in the latest exploration cycle so there isn't a lot out there to acquire."

Greg Barnes, analyst with TD Newcrest , estimates the price of uranium will average US$50 next year and US$55 in 2008. The hiccup at Cigar Lake and the timeline for Olympic Dam "are very likely to further heighten concerns about the uranium supply chain -- and lead to higher uranium prices," Mr. Barnes said.

Cameco had a water problem at its flagship McArthur River mine in Saskatchewan three years ago and the mine was closed for three months. At the time, nuclear power producers stockpiled uranium because they were afraid of a shortfall in the uranium market.

While there is a spot market for uranium, it accounts for only 20% of sales. The remaining 80% is sold to reactor operators through sales contracts that fix prices. Energy producers have lately been signing five-year and even 10-year deals because of concerns over future sources of supply.

Indeed, Russia's state-owned uranium supplier is now looking for new sources in Africa, in addition to Russia itself, in order to avoid future supply deficits. Russia worries that its own domestic uranium reserves could be depleted by 2015.

About 6% of the world's uranium comes from decommissioned Russian nuclear warheads. That uranium is supplied to Western nuclear reactors under an agreement that runs until 2013. When that agreement expires, Russia could opt to keep future ex-weapons material for domestic use.

"The question is, where will Western utility companies get the material they need?" Mr. Hochstein wonders. "That's when people start putting things together and get to potentially US$100 a pound."

16-04-2006, 22:30	#5
Benjamin TBB Family Registriert seit: Mar 2004 Beiträge: 10.374	Reactor demand keeping uranium hot Tough market to track: Utilities face higher costs as many new plants set to open Drew Hasselback, Financial Post, with files from news services Published: Wednesday, April 12, 2006 The price of uranium has risen 80% over the past year, but will the momentum continue? According to The Ux Consulting Co. LLC , which publishes a weekly spot price on its Web site, uranium currently sells for US$41 a pound, up from US$22.50 a year ago. The bulls see more upside from a surge in nuclear reactor construction. Others see the market remaining in balance as fresh mine supply manages to keep pace with demand. Ron Hochstein, chief executive of Vancouver-based International Uranium Corp. , can see the price breaking through US$100 a pound. "The uranium market is very tight right now. Prices are going up on almost a weekly basis," Mr. Hochstein said. Others think a triple-digit price is wishful thinking. The chief executive London-based Rio Tinto PLC , Sir Leigh Clifford, has said a price of US$40 a pound is above the long-term trend. The uranium market is a tough beast to analyze. It's relatively small, with about 440 nuclear reactors looking for 175 million pounds of uranium each year . Contrast that with the global copper business, where this year more than 40 billion pounds of the metal is expected to change hands annually. What's more, mine production supplies less than two-thirds of global demand. The remainder comes from other sources, such as recycled nuclear fuel. The amount of above-ground inventory is enormous, the equivalent of anywhere from a quarter to a third of annual demand. This makes it difficult to pin down supply and demand fundamentals . It's therefore little surprise to come across different views of the market. John Redstone and John Hughes of Desjardins Securities expect uranium demand to grow 13% by 2010. Yet they also see enough new production during this period to keep the market in balance. On the other hand, Eugene McBurney of GMP Securities predicts global uranium demand will expand to 292 million pounds a year over the long term, up 67% from the current demand. According to the International Atomic Energy Agency , 27 reactors are under construction around the world, with eight of those in India and three in mainland China. China has even more ambitious building plans down the road, with 40 more reactors expected to come on line by 2020. David Stein, analyst with Sprott Securities , forecasts uranium prices of more than US$50 a pound over the next few years. "The fundamentals look great. Reactors take a long time to build so we have a lot of visibility on the demand side for uranium over the next 10 years," he said. Meanwhile, prospects for new mine supply have dimmed. Saskatoon-based Cameco Corp. last week said the production launch of its 50.3% owned Cigar Lake mine in Northern Saskatchewan could be delayed by six months to late 2007. The delay is linked to a flooding problem. The Cigar Lake announcement follows news that BHP Billiton Ltd. will need until 2013 to complete a planned US$5-billion expansion in Australia of Olympic Dam, the world's largest uranium deposit. New discoveries could be years away. Several juniors have joined the hunt for new uranium mines, but it could take three to five years before anything is developed into an attractive prospect, said Jerry Grandey, CEO of Cameco. "We're quite early in the latest exploration cycle so there isn't a lot out there to acquire." Greg Barnes, analyst with TD Newcrest , estimates the price of uranium will average US$50 next year and US$55 in 2008. The hiccup at Cigar Lake and the timeline for Olympic Dam "are very likely to further heighten concerns about the uranium supply chain -- and lead to higher uranium prices," Mr. Barnes said. Cameco had a water problem at its flagship McArthur River mine in Saskatchewan three years ago and the mine was closed for three months. At the time, nuclear power producers stockpiled uranium because they were afraid of a shortfall in the uranium market. While there is a spot market for uranium, it accounts for only 20% of sales. The remaining 80% is sold to reactor operators through sales contracts that fix prices. Energy producers have lately been signing five-year and even 10-year deals because of concerns over future sources of supply. Indeed, Russia's state-owned uranium supplier is now looking for new sources in Africa, in addition to Russia itself, in order to avoid future supply deficits. Russia worries that its own domestic uranium reserves could be depleted by 2015. About 6% of the world's uranium comes from decommissioned Russian nuclear warheads. That uranium is supplied to Western nuclear reactors under an agreement that runs until 2013. When that agreement expires, Russia could opt to keep future ex-weapons material for domestic use. "The question is, where will Western utility companies get the material they need?" Mr. Hochstein wonders. "That's when people start putting things together and get to potentially US$100 a pound."