A strategic uranium processing plant in Southern China has
been scrapped following public protests over safety concerns. Now
state-owned China General Nuclear Power and China National Nuclear are
on the hunt for a new site for the much-needed processing plant, reported Reuters.
Without the $6.5 billion-facility, the country will be hard pressed
to fuel its growing nuclear reactor program. China plans to build 30
plants over the next three years, adding 29 GW of nuclear power to its
current installed capacity (12.57 GW) by 2016.
Nuclear power safety strengthening globally, says IAEA
In its annual review of nuclear safety worldwide, the
International Atomic Energy Agency (IAEA) said that “the world nuclear
community has made noteworthy progress” despite many aging reactors. The
disaster at Fukushima more than two years ago prompted many nations to
conduct safety stress tests on their nuclear power plants, with several
initiating additional safety measures, said Reuters. The biggest challenge to global nuclear energy safety continues to be “long-term operation and ageing of nuclear power plants.”
Uranium market facing supply challenges
The troubled uranium price, lack of investment capital and
greenfields development, coupled with the increasing number of nuclear
reactors worldwide, have created a looming supply crisis in the uranium
market, according to John Borshoff, CEO of Paladin Energy (TSX:PDN,ASX:PDN).
“[T]he uranium industry is definitely in crisis, I believe, and is
showing all the symptoms of a mid-term paralysis if this situation does
not demonstrably change,” he said, speaking at the Australian Uranium
and Rare Earths conference this week. On Wednesday, the company posted
production results showing a record year with overall production rising
20 percent, to 8.25 million pounds, on increased output from the Langer
Heinrich and Kayelekera operations.
Market watchers remain confident that the uranium market is on the
verge of a significant turnaround, despite spot prices dipping below $40
per pound last month for the first time in four years. A total of 66
nuclear plants are under construction worldwide and another 266 are
planned or proposed over the next 15 years, notes Australian Mining. The publication estimates that demand will outpace supply by more than 11,000 tonnes in 2013.
The coming supply shortage has uranium market gurus like Jeb
Handwerger taking a bullish stance on uranium mining stocks. Uranium
spot prices may be on a downward slide, but “uranium miners such as
Cameco [TSX:CCO,NYSE:CCJ]
are up over 30% since the November low … this outperformance of Cameco
versus the uranium spot price may be signaling a potential bullish
reversal for the sector,” said the mining analyst and editor of Gold
Stock Trades in a recent article.
Junior company news
Brades Resource (TSXV:BRA) signed
an agreement to acquire the Lorne Lake uranium property in
Saskatchewan’s Western Athabasca Basin. The property comprises
approximately 97,500 acres with regional proximity to Cameco’s
Centennial deposit to the east and the Patterson Lake South discovery to
the west. The geology of the property consists of faults and lineaments
that, according to the news release, “parlay over favorable magnetic
geophysical data, a combination which has been highly conducive to past
uranium discoveries in the Basin.”
Forum Uranium (TSXV:FDC) acquired
a strategic 100-percent interest in the Highrock South property in
Saskatchewan’s Athabasca Basin. The 1,381-hectare property is located 15
kilometers south of the Cameco/AREVA (EPA:AREVA)
Key Lake uranium processing facility and is a continuation of the
prospective key Lake/Black Forest conductive trend that hosts the Key
Lake uranium deposits.
A $6.95-million summer drill program has commenced at the Patterson Lake South property, a joint venture between Alpha Minerals (TSXV:AMW) and Fission Uranium (TSXV:FCU)
outside the Athabasca Basin in Saskatchewan. The program will consist
of approximately 11,000 meters and will focus on testing for continued
expansive delineation of the three high-grade uranium mineralized zones
discovered during the 2013 winter program. The partners announced
partial results from the first hole drilled. “Hole PLS13-072 … has so
far returned a broad 85.5m interval (62.0m – 147.5m) of variably
radioactive mineralization including a total of 18.93m of off-scale
(>9999 cps) radioactivity in numerous narrower intervals throughout,”
states the press release.
Fission also reported that it has filed
a patent application for an invention related to an airborne system and
method for detecting and mapping locations of radioactive geologic
deposits such as boulders and rock clusters. The invention allows for a
high-resolution survey, improving upon current airborne surveying
methods for radioactive deposits. Fission used the system and method to
discover the high-grade uranium boulder field at its Patterson Lake
South property.
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
Uranium Market Volatility Hasn’t Eroded Positive Long-term Outlook
Uranium industry consultancy firm TradeTech is reporting
a U3O8 spot price of $43.50 per pound, up a dollar from the previous
week on “increased buying interest,” although volatility still hangs
over the market.
Bullish sentiment from most industry analysts still dominates any
discussion of uranium’s long-term outlook. News that BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT) is shutting down its uranium division after shelving expansion plans at Olympic Dam earlier this year — on top of production cutbacks from big names such as Cameco (TSX:CCO,NYSE:CCJ), Uranium One (TSX:UUU) and Paladin Energy (TSX:PDN,ASX:PDN) — has only encouraged analysts’ strong belief in a positive long-term outlook for uranium prices.
“Low prices are pushing expansions off or canceling them altogether,
which is negative from a company standpoint but is actually positive
from a long-term supply-demand perspective,” David Talbot, a senior
mining analyst at Dundee Securities, told The Energy Report in a recent interview.
Both Talbot and Rob Chang, metals and mining equity research analyst at Cantor Fitzgerald, spoke
to Uranium Investing News (UIN) last month about the looming supply
deficit. In the coming years, there won’t be enough new production
coming online to meet rising uranium demand from burgeoning nuclear
programs in nations including China, India and Russia. “Mines aren’t
coming online as quickly as reactors are and that is increasing the
likelihood of a nuclear fuel shortage in the coming years,” Talbot told
UIN.
This week, Russian enrichment plant Siberian Chemical Combine — part of state-controlled nuclear company Rosatom — received its first shipment of uranium from Energy Resources of Australia (ASX:ERA).
In 2007, Australia and Russia signed a nuclear cooperation agreement
that allows for the sale of Australia-mined uranium to fuel Russia’s
nuclear power plants. India is also turning to Australia and Canada to
meet its rising demand for nuclear fuel, securing
nuclear cooperation agreements that include uranium exports with both
countries. By 2050, the Southeast Asian nation hopes to generate 25
percent of its electricity from nuclear power.
Company news
Last week, Alpha Minerals (TSXV:AMW) and its joint venture partner (50 percent), Fission Energy (TSXV:FIS), reported
assay results from the recently completed drill program at their
Patterson Lake South uranium property in Saskatchewan. The nine-hole,
1,631.86-meter core drilling program focused on the partially tested
PL-3B EM Conductor. Highlights from the results include hole PLS12-024,
which returned assays of 18 meters at 1.78 percent U3O8 from 65 to 83
meters; 12.5 meters at 2.49 percent U3O8 from 65.5 to 78 meters; 3.5
meters at 4.33 percent U3O8 from 66.5 to 70 meters; and 0.5 meters at
11.1 percent U3O8 from 69.5 to 70 meters.
A 2013 winter drill program is planned and will include additional
core drilling to both define the mineralized area established by these
latest results and test a number of similar targets.
On Monday, Uranium Energy (AMEX:UEC) announced
its fiscal 2013 first-quarter financial and production results, noting
that 29,000 pounds of U3O8 were produced by production areas one and two
at the Palangana mine, while 31,000 pounds of U3O8 were processed at
the Hobson facility. Uranium Energy’s financial review for the three
months ended October 31, 2012 shows recorded revenue of $2.2 million
resulting from the sale of 50,000 pounds of U3O8 at an average sales
price of $43 per pound. Minus the cost of sales including royalties
($1.9 million), the company’s gross profit was $0.3 million.
Uranium Energy also reported that its Goliad ISR project has received
all the required permits from the Texas Commission on Environmental
Quality. The company is now advancing construction at the project in
preparation for production.
Also on Monday, Macusani Yellowcake (TSXV:YEL) reported
further high-grade intersections from the drill program at its Kihitian
property in Southeastern Peru. The ongoing drill work has targeted the
Quebrada Blanca anomaly and 4,511 meters of drilling have been completed
to date. Results from the initial 10 holes were reported in a news release dated October 17, 2012.
“Drill holes PT-QB44-TV and PT-QB36-TV appear to have discovered a
new mineralized horizon occurring at depths between 80 to 100 metres
below manto ‘B,’” states Monday’s news release. “This new mineralized
sequence, also intercepted in hole 42V, has a thickness of 7-8 m and
grades ranging from 0.25 to 0.65 lbs/ton.”
On Tuesday, Peninsula Energy (ASX:PEN) announced that it has entered into an agreement with ARSA to pay $50 million for its South African uranium and molybdenum assets, including the largest single body of known uranium-molybdenum mineralization in the Karoo Basin.
“The Company has acquired a significant uranium and molybdenum
portfolio which adds substantially to our existing asset base in the
Karoo and our plans to develop a second mining operation in South Africa
following the successful ramp up of Lance,” stated Gus Simpson,
Peninsula’s executive chairman.
Also on Tuesday, Khan Resources (CNSX:KRI) provided
shareholders with an update concerning its international arbitration
action against the government of Mongolia. The company has submitted a
claim for damages totaling US$326 million, including interest from the
July 2009 date of the expropriation of the Dornod deposit by the Mongolian government.
The case is being heard
by the United Nations (UN) Commission on International Trade Law. The
Mongolian government has until April 5, 2013 to respond and then Khan
will have until June 28, 2013 to respond to its defence. The UN Tribunal
will meet in November 2013 to hear the claim and a ruling is expected
in the first half of 2014.
Khan is also pursuing litigation in Ontario’s Superior Court against Russian uranium producer ARMZ over the allegedly illegal expropriation
of the Dornod deposit. Khan has filed a $300-million claim against ARMZ
for “an alleged breach of fiduciary duties and damage to its rights,
reputation, and property,” reported the Russian Legal Information Agency
(RAPSI). Russia’s Justice Ministry refused to serve ARMZ with process, so Khan filed
a motion with the Canadian court to validate the service of process,
according to RAPSI. The court initially held for Khan, but ARMZ
successfully appealed, saying that Khan had not exhausted all process
service options. Khan is now appealing that decision.
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
This past year may have been a sour one for uranium spot prices, but 2012 brought many positive developments for market fundamentals — especially in the second half of the year. Industry analysts see these developments as early signs of a crucial turnaround for uranium spot prices and uranium mining shares.
The uranium market has been on a long and bumpy ride to recovery
since the 2008 financial crash crippled the commodities sector.
Throughout the second half of 2010, investors cheered as the U3O8 spot
price surged more than $30/lb, eventually hitting a pre-crash high of
$72/lb in January 2011. However, the industry fallout following the
Fukushima Daiichi nuclear disaster in March of that year wiped out most of the rally’s gains and spot prices remained range-bound, between $49/lb and $52/lb, for nearly a year.
In 2012, uncertainty was the dominant factor affecting spot prices. Previously nuclear-reliant nations like Japan and Germany signaled
that they might be winding down their nuclear programs, while the
potential that offloaded supply could flood the market made many buyers
hesitant to buy at $50/lb, driving short-term spot prices down to $40/lb
early in the last quarter.
The most significant development in 2012 came last month, with the pro-nuclear Liberal Democratic Party’s landslide victory
in Japan’s federal election. That indicates that there will likely be a
faster-paced restart program for the nation’s 48 inactive reactors.
Uranium gurus like David Talbot, senior mining analyst at Dundee Securities, believe
2013 will herald a return to the global nuclear renaissance. However,
the supply/demand fundamentals leading the recovery won’t begin to have
any realized impact on the spot market until the second half of the
year, when Japan’s idled nuclear reactors begin to come back online.
Uranium demand growth strong
Analysts are betting on a robust long-term outlook for uranium demand
— and with good reason. Nuclear power expansion projects are expanding
in nations around the world, including China, India, Russia, Ukraine, the US, the UK, South Korea and even the United Arab Emirates. Data from the World Nuclear Association shows that 62 reactors will be under construction worldwide in 2013, with another 484 either planned or proposed. China leads the way
with 26 nuclear reactors under construction and a five-year plan for
growing its nuclear program to an installed capacity of between 70 and
80 GWe by 2020; that’s compared to its current capacity of 12 GWe. By
2030, the Asian nation hopes to extend capacity to 200 GWe.
Global demand for the nuclear fuel is expected to increase from 166
million pounds in 2011 to 226 million pounds by 2020, and should total
280 million pounds U3O8 by 2030, according to The Australian.
Aboveground uranium supply deficit expected in 2014
While it’s clear that the demand side of the uranium market will see
significant growth in the years ahead, what’s still uncertain is how the
market will supply that demand.
The not-so-stellar performance of the U3O8 spot price and the
political fallout post-Fukushima have severely depressed share prices
for the entire uranium sector, from explorers to producers. As a result,
many companies have had to shelve crucial development and expansion
projects — that topic has been covered extensively this year by Uranium Investing News.
Industry leaders have said it will take U3O8 spot prices of at least
$70/lb to $80/lb for projects like Olympic Dam, Langer Heinrich, Kintyre
and Cigar Lake to become economical once again. High-profile expansion
and production deferrals coupled with the end of the HEU agreement this
year have the potential to create a significantly tight market in the
medium term. That could lead to a rebound in spot prices as early as the
second half of 2013.
Spot price forecasts
Investors should continue to keep an eye on Japan as any real
improvement in the market isn’t expected until the nation’s newly
elected leaders show they’re serious about restoring its nuclear power
program — once responsible for about 10 percent of global uranium
demand.
Analysts expect demand to start to exceed supply in 2014. In late
2013 or early 2014, we may begin to see the current spot price more in
step with the strong long-term price ($60/lb), Dennis da Silva, a
resource fund manager at Middlefield Capital, told the Financial Post. UBS (NYSE:UBS) is looking for prices to return to $50/lb in 2013 and $55/lb in 2014, while Credit Suisse (NYSE:CS) has issued
a much more bullish outlook, indicating that uranium should trade in a
range of $80/lb to $90/lb for 2013. JP Morgan, equally bullish,
anticipates a range of $78/lb to $85/lb.
Uranium stocks
Uranium mining stocks have taken a serious beating over the past few years, and 2012 was no different. The Global X Uranium ETF (ARCA:URA) — which includes industry heavies such as Cameco (TSX:CCO,NYSE:CCJ), Paladin Energy (TSX:PDN,ASX:PDN), Uranium One (TSX:UUU) and Denison Mines (TSX:DML,AMEX:DNN) — finished the year down nearly 20 percent.
The consensus among analysts is that uranium shares remain highly
undervalued and, in light of the significant looming supply gap, offer
huge upside potential for risk-tolerant investors willing to bet that
nuclear power has a crucial role to play in meeting the world’s growing energy needs.
Below is a selection of uranium companies on the lips of most analysts today:
Cameco is one of the world’s largest uranium producers and nuclear
fuel suppliers, accounting for nearly 16 percent of world U3O8
production from its mines in Canada, the US and Kazakhstan. The company
recently acquired BHP Billiton’s (ASX:BHP,NYSE:BHP,LSE:BLT) Yeelirrie uranium project in Western Australia.
Energy Fuels (TSX:EFR) is a uranium and vanadium
mining, production and development company with production assets in
Utah and Arizona and standby mines and development projects in Colorado,
Utah, Arizona and Wyoming. The company’s primary asset is the White
Mesa mill, the only conventional operating uranium processing facility
in the United States. In June 2012, Energy Fuels acquired all of Denison Mines’ US-based mining operations.
European Uranium Resources (TSXV:EUU)
is an exploration and development company with a portfolio of projects
at all stages of the exploration/development pipeline in Slovakia,
Sweden and Finland. The company’s Kuriskova deposit in Slovakia could
become one of the world’s lowest-cost uranium producers. European
Uranium’s shareholders include global nuclear power industry leader
AREVA (EPA:AREVA).
Laramide Resources (TSX:LAM)
is an exploration and development company with a portfolio of advanced
uranium projects in Australia and the United States. Its flagship
project, Westmoreland, located in Queensland, Australia, is one of the
largest projects currently held by a junior mining company. The
company’s US assets include La Jara Mesa in New Mexico’s Grants Mineral
Belt and La Sal in Utah’s White Mesa mining district.
Kivalliq Energy (TSXV:KIV)
is an exploration company advancing Canada’s highest-grade uranium
deposit outside of Saskatchewan’s Athabasca Basin. The company’s
flagship project, the Angilak property in Nunavut, is host to the Lac
Cinquante deposit. The deposit holds a NI 43-101 inferred resource of
1,779,000 tonnes grading 0.69 percent U3O8, totalling 27.13 million
pounds U3O8.
Uranerz Energy (NYSE:URZ,AMEX:URZ)
is a near-term producer with a large land position in Wyoming’s Powder
River Basin. A company press release states that Uranerz plans
to be “America’s next ISR [in-situ recovery] uranium producer in 2013”
with the commissioning of its Nichols Ranch mine — potentially the
state’s first new uranium mine since 1996. First production is
anticipated in early 2013.
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