Sydney-based Resource Capital Research (RCR) believes that a perceived recovery in the uranium price in the next quarter is linked to signs of improved market sentiment for uranium equities both on the Australian and Canadian bourses.
RCR said the industry average, long term uranium price was now estimated at $US90/lb, down $US5/lb from where it had held firm for nearly 12 months to March 2008.
RCR's senior analyst, John Wilson, said positive market sentiment has returned, driven by indications the spot uranium price is about to head up, combined with relative stability in the equity markets following the sub prime rout.
Forward indicators (fund implied price) currently indicate an expectation for an upward correction to the uranium price to around US$75 (+25%). In the past 3 months the fund implied price has ranged from US$57/lb to US$90/lb. According to recent market commentary by Trade Tech [uranium] buyers are beginning to venture back into the market and sellers are less willing to cut prices.
RCR said the market valuation of Australian companies with one or more uranium projects (266 companies) is up 23% over the past month, up 12% over the past 3 months, and down 8% over the past 12 months.
This compares with a selection of 289 Canadian companies with one or more uranium projects, up 7% over the past month, down 6% over the past 3 months, and down 32% over the past 12 months. The RCR report covers explorers operating in Australia, North America, South America, southern Africa and Mongolia.
RCR echoed a point made several times recently by Mineweb that the Beverley Four Mile uranium project in South Australia -- Heathgate Resources 75%, Alliance Resources (ASX: AGS) 25% -- may beat the Honeymoon in situ recovery (ISR) project in the same region into production. (This is looking more certain now that Honeymoon's troubled owner Uranium One (TSX: UUU) has admitted it may sell Honeymoon so it can focus on remedying problems at its Dominion mine in South Africa and on developing its Kazakhstan projects).
In the past month the majors have mostly demonstrated positive share price performance. Cameco (CCO) is up 10%, Denison Mines (DML) up 21%, Uranium One (UUU) down 3%, Energy Resources of Australia (ERA) up 15% and Paladin (PDN) up 45%.
Planned and proposed construction of new nuclear power reactors worldwide has increased strongly in the past two years. From January 2007 to May this year there was an increase of 89 reactors from 222 reactors to 311 reactors (+40%). This compares with 439 nuclear power reactors currently in operation and 36 under construction.
America's Congressional Budget Office reported that nuclear power would be commercially competitive compared to conventional fossil fuel technologies at a carbon price of $US45/t. Rising prices of competing energy sources - both spot oil and thermal coal prices, which spiked over $US130/bbl and $US130/t respectively, reinforces the commercial potential of nuclear energy.
Major issues in the past three months were:
- NamWater (Namibia) announced plans to construct a second desalination plant to support water needs of the growing Namibian uranium industry - commissioning expected 2010 (capacity 25 million m3 per annum). The other desalination plant is already under construction (Areva and NamWater) - commissioning 4Q09 (capacity 20 million m3 per annum) to serve Areva's Trekkopje heap leach project.
- Kazakhstan's new sulphuric acid plant at Balkhash (capacity 1.2Mtpa) is expected to be commissioned this June. Kazakhmys Corporation is building the plant adjacent to its copper smelter. Capacity is expected to be sufficient for KazAtomProm's planned ISR uranium mining needs.
Key corporate developments in the past three months included Bluerock Resources Ltd (TSXV: BRD) starting ore production from the J-Bird project in Colorado in the United States and Hathor Exploration (TSXV: HAT) reporting a significant discovery in the Roughrider Zone at its Midwest NE project in Canada's Athabasca Basin. Intercepts include 15m @ 10% U3O8 and 9m @ 10% U3O8.
Zambia is expected to issue uranium mining licenses in July. Companies with advanced uranium projects in Zambia include Equinox Resources (ASX: EQN) which released its updated feasibility study for a stand-alone uranium plant at Lumwana and African Energy Resources (ASX: AFR) which released a pre feasibility study for its Chirundu uranium project.
RCR said an enhanced scoping study is expected at Bigrlyi in Australia's Northern Territory, while a market positive on the ASX was the listing of Energy and Minerals Australia (ASX: EMA) with exploration focus on the Mulga Rock Deposits in Western Australia, which had been a major discovery dropped by PNC of Japan about 20 years ago.
Extract Resources (ASX:EXT) expects to announce an initial resource at Ida Dome (Namibia) 2Q08. Globe Uranium (ASX:GBE) expects to complete a scoping study at the Kanyika uranium/specialty-metal project (Malawi) 2Q08. Significant resource upgrade at Kvanefjeld (Greenland, Greenland Minerals - ASX:GGG) May '08 (to 229Mlb U3O8, up 104%). An initial resource is expected at Bennet Well (WA, Scimitar Resources, ASX:SIM) 2Q08. Toro Energy (ASX:TOE) expects to complete a PFS at Lake Way/Centipede mid '08 and drilling in Namibia starts 2Q08. Uranex (ASX:UNX) has scoping studies and resource statements expected at Thatcher Soak (WA) and Bahi (Tanzania) 3Q08. West Australian Metals (ASX:WME) expects the next resource statement at Marenica (Namibia), adjacent to Trekkopje, July '08, targeting 35Mlb to 50Mlb U3O8.