Uranium price forecasts

The Australian team for Deutsche Bank's Global Markets Research predicted in September, 2007, that the projected 2007 spot price would average at $US101.35/lb, would then average $US128.75/lb in 2008 and be about $US130/lb in 2009 before tapering to $US95/lb in 2010.

Lower Uranium Price Fails to Deter Miners

Business Day (Johannesburg)

5 May 2008
Posted to the web 5 May 2008
By Charlotte Mathews
Johannesburg

NEW uranium investments and expansions were being announced as fast as ever last week, despite the recent slump in uranium companies' stock on a falling uranium price.

Although investors are not taking a long-term view, uranium company management teams are planning for the next decade. Until this year, uranium prices had soared for six successive years on expectations of a shortage. Russian armament stockpiles were sold down and there had been little past investment in new uranium mines, while demand for alternative energy sources rose on global growth and high oil prices.

Last week the uranium price reported by TradeTech dropped to $65/lb, half the peak of $138/lb seen a year ago. London-based securities house Fairfax said market participants were reluctant to conclude deals as a surplus was expected next year. But it warned that supply disruptions could easily reverse this outlook.

Bloomberg reported last week that investment house Macquarie was forecasting an average price of $65,10/lb this year and $60/lb next year, which was a reduction from its previous forecast of $89,90/lb this year and $82,50/lb next year.

Macquarie said after a uranium surplus this year and next year, there would be a "gradual but significant tightening in the market" by 2012 as uranium would be ordered for new nuclear reactors being commissioned between 2013 and 2016.

Investec Asset Management said in a presentation on the outlook for commodities last month that it was positive on uranium in the long term because of the role nuclear energy would play in demand and potential supply shortages, but in the short term it believed the market had become overheated.

Uranium companies are scrambling to bring new projects on stream to meet future demand but have been hit by implementation problems ranging from flooding at Cameco's Cigar Lake project to shortages of sulphuric acid at Uranium One's Kazakhstan mines and technical issues at its Dominion Mine in SA, as well as permit delays in various countries.

Last week Brinkley Mining announced it had been awarded a licence to prospect for uranium and other minerals over a 5000km' ' area in southern Sudan, but it said it would limit expenditure until Sudan had a clear mining law.

In a separate announcement, AIM-listed Kalahari Minerals said it had raised its stake in its Namibian investment, Extract Resources, which is drilling the Rossing South prospect for uranium, after Extract said drilling was confirming a large mineralised system in the area.

Bloomberg also reported that Russian state-owned mining company Uranium Holding ARMZ would treble output to 10 300 tons of uranium a year at a cost of $8,6bn with assistance from Russian billionaire Oleg Deripaska, Canada's Cameco Corporation and Japan's Mitsui .

Reuters reported AngloGold Ashanti's uranium production was expected to rise more than 60% by 2012 compared with last year.

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Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com).

Uranium fundamentals are strong (Source: Miningmx)

Brendan Ryan
Posted: Mon, 04 Feb 2008

[miningmx.com] -- While some market commentators describe current movements in the uranium price as a “dead cat bounce” the fundamentals for the commodity remain strong and the price could take off again.

That was the assessment given to delegates at the Mining Indaba by Jeff Combs, president of Ux Consulting LLC.

He described trading volatility in uranium during 2007 as “unprecedented.” The price peaked at $135/lb and then plummeted to $70/lb from which it recovered to $90/lb before dipping once more to sit around $80/lb currently.

Combs said a key factor would be delivery on production forecasts by various companies and pointed out that, so far, uranium production expansions were running behind plan.

“The response on the production side has so far been pretty anaemic. There is a tremendous amount of growth in uranium output planned from two regions - Kazakhstan and Africa. You have to ask whether it will be delivered as planned.”

Turning to the demand side, Combs said that, during 2007, five new nuclear reactors entered commercial operation while construction started on ten more reactors and orders were place for a further 22 reactors.

Combs added; “China is planning to build two new reactors annually through to 2020 while Russia will build two new reactors annually for the next 15 years.

“Currently there are 31 countries operating 440 reactors while another 55 countries are likely to turn to nuclear energy. Our mid-term case looks for a total of 55 countries to be operating 630 reactors by 2020.”

"Supply constraints to boost uranium price, Froneman says" (Source: Mining Weekly)

By: Matthew Hill
Published: 5 Feb 08 - 16:11

TSX- and JSE-listed uranium miner Uranium One CEO Neal Froneman on Tuesday echoed experts' forecasts that the uranium price would continue to increase over the medium term.

While demand for the nuclear fuel was set for strong growth as countries, like China, rolled commissioned more reactors, supply would underpin prices, he said.

"In the next five to ten years, constrained supply will drive the price increases, rather than the increases in demand," Froneman stated.

"I expect the uranium price to continue increasing over the medium term," he said.

While the uranium spot price had plunged in the second-half of 2007 to levels almost half of its June peak of $138/lb, long-term contracts had stabilised at levels around $95/lb.

The spot price was not truly representative of the long-term fundamentals of the radioactive metal, Froneman commented, addressing an audience at the Cape Town Mining Indaba.

On Monday, US consultancy firm Ux Consulting president Jeff Combs also said that the long-term fundamentals for uranium remained strong.

TOP 10 PRODUCER

Meanwhile, Uranium One had moved into the world's top ten uranium producers in 2007, Froneman said.

"Our resource base is only second to Cameco," he added.

However, it was the firm's business to turn these resources to account, and Froneman said the company was doing just that.

Uranium One was doing two studies at its flagship Dominion Reefs Uranium Mine (Drum) near Klerksdorp, hoping to increase the scope of the project.

By the end of the year, it expected to complete a feasibility study on a possible expansion of the current mine, and it was also starting drilling on possible extension areas to the operation.

"The orebody needs to be expanded," Froneman stated, adding that the focus was to expand the operation along strike, not at depth.

The mine's expansion could see the mill increasing in capacity to as much as 400 t/m.

Uranium One also was already producing at its joint venture projects in Kazakhstan, and was building Australia's fourth uranium mine, the Honeymoon project, which it wholly owned.

Although this was a smaller mine, Froneman said he saw it as a "springboard" into the bean-shaped country.

Cameco, Uranium One estimates cut on uranium price revision (Source: Financial Post)

Posted: February 06, 2008, 8:21 AM by David Pett

Uranium prices will improve over the near term, according to UBS analyst Brian MacArthur, but maybe not soon enough for the likes of Cameco Corp. and Uranium One Inc. investors.

"Global power markets remain highly unstable in our view, with future supply of thermal coal and LNG uncertain," Mr. MacArthur said in a note to clients. "Given this and the growing pressure on carbon emissions and the potential for its increased regulation, we believe the relative attractiveness of uranium as a fuel source will continue to build over time."

However, with uranium prices tracking back to US$75 per pound, UBS revised downward its uranium price forecasts for 2008 from US$95 to US$88 and for 2009 from US$150 to US$100. It's not until 2010 that UBS predicts investors will begin realizing the benefits of uranium's strong long-term fundamentals as prices hit US$110, up from UBS previous estimate of US$50 for that year

Based on UBS' new uranium prices, Mr. MacArthur decreased his 2008 earnings per share estimate for Cameco from $2.48 to $2.35 and his 2009 EPS estimate from $2.92 to $2.47. His price target on the stock falls from $53 to $49, and his "buy" rating remains unchanged.

The analyst also lowered his earnings estimates and price target on Uranium One while maintaining his "buy" rating on the stock. His 2008 EPS forecast goes from 22¢ to 18¢ and his 2009 forecast moves down from $1.26 to 74¢. His Uranium One price target is $10.50, down from $12.50 previously.

David Pett