Is uranium's bullish run over?
Weekly spot U3O8 is developing hiccups in the face of waning buyers' interest and looming over supply.
Author: Rodrick Mukumbira
Posted: Wednesday , 23 Jan 2008
WINDHOEK -
Around this time last year, optimists were anticipating that the spot uranium price would march on to US$200 per pound.
But that bullish run seems to be over as prices fall, sparking speculation that they are likely to plunge further in the face of waning buyers' interest and a looming oversupply of the metal.
In late June last year, uranium spot prices hit the highs at US$136 per pound, from a low of US$7/lb in 2000, bolstered by a tight market and speculative buying. Currently, the prices are down by slightly over 37% from June 2007 spot prices, sending quivers throughout the markets.
Last week alone, uranium dropped 5.6% to US$84 as sellers cut prices to generate business after trading volumes in 2007 fell to their lowest in a decade, according to a Bloomberg report Tuesday. During the week, supplies on the spot market more than twice exceeded demand, with two sales totaling 200,000 pounds of yellow cake concluded.
After weeks of little or no activity, Denver based-pricing service Trade Tech LLC told Bloomberg that one seller decided to adopt a more aggressive approach, offering uranium at deeply discounted prices in an effort to attract buyers. TradeTech LLC added that "supply is ample to meet current requirements.''
Last week, two uranium producers reported record production for 2007. A number of uranium projects are expected either to come on line this year or increase uranium production, raising fears of an over supply that is likely to cap the prices into 2009.
Australia's Paladin Energy Ltd. announced last week that its Langer Heinrich mine in Namibia had exceeded its production target in December 2007, the first since the mine came on line in December 2006. Paladin is now on track to produce 2.6 million pounds U3O8 from the Namibia mine this year.
Paladin produced 650,562 pounds U3O8 in the six-month period ended December 31, 2007, surpassing its production forecast of 650,000 pounds. The company is working on expanding production to 3.7 million pounds per year, with construction on the expansion expected to begin early this year.
During the week, Rio Tinto's Energy Resources of Australia Ltd. also reported that improved operations and an increase in ore grade drove 2007 production at its Ranger mine to 11.9 million pounds U3O8 - a 14% increase over the previous year. ERA said that 2007 production was the second highest annual production on record for the Northern Territory mine.
Rio Tinto's Rössing uranium mine in Namibia has just completed an environmental impact assessment on its production expansion and mine life extension process, which will extend mine life by two decades.
ConverDyn has also announced plans to nearly double uranium hexafluoride (UF6) production at its conversion plant in Metropolis, Illinois, having produced 15,000 tonnes UF6 in 2007.
Kazatomprom, Kazakhstan's National Atomic Company, plans on surpassing Canada's Cameco, the world's uranium largest producer, by 2018 through expanding its uranium production output fivefold.
Uranium One Australia's Honeymoon uranium project was recently approved by the South Australia government, bringing the project one step closer to becoming the country's fourth operating uranium mine. Production at Honeymoon is expected to begin in the fourth quarter of this year with a ramp-up to 880,000 pounds U3O8 per year.
Last week, the French mega-nuclear power plant builder, Areva, signed new agreements with the Nigerian government that will see it develop a multi-billion dollar mine at the Imouraren uranium deposit in the country, believed to be the world's second-largest untapped source of the metal. |
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