Small U.S. uranium miners make contrarian bet by ramping up output
U.S.-based UR-Energy and Uranerz Energy Corp are going in the other direction.
They are poised to ramp up production this year, helped by low costs and long-term contracts at prices well above current spot prices.
Utilities locked in prices with the companies to secure near-term supplies, but they did so when prices were higher than now.
The two miners may be making a contrarian move at just the right time. While Japanese demand remains a question mark, it is rising elsewhere as 70 reactors are under construction globally, part of a net increase of 93 expected over the next 10 years, and the most since the late 1970s, according to Canadian uranium producer Cameco Corp . Last year, there were 433 operating nuclear reactors worldwide.
Uranerz' five-year agreements with U.S. utilities such as Exelon Corp price uranium around $50 or more per lb, against the current $35.50 spot price, said Paul Goranson, president and chief operating officer at Uranerz, who was talking on the sidelines of the Prospectors and Developers Association of Canada (PDAC) convention in Toronto.
"We've got contracts that provide us the ability to have good cash flow," Goranson said this week.
Not all low-cost producers can afford the risk of raising output in a slumping market. Texas-based Uranium Energy Corp cut production in its last fiscal year to 250,000 lbs because it did not have long-term sales contracts to hedge the risk of lower spot prices.
http://in.reuters.com/article/2014/03/05/...ium-idINL2N0LF0HL20140305
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