Price collapse sees junior miner ditch uranium to focus on property development

In a clear sign of the affect the historically low uranium price is having, one company has decided to ditch its hopes of developing a mine and instead focus on property development.

United Uranium holds several exploration licences in Western Australia including the Mt Danvers and Bremer Basin projects.

The company, which only listed on the ASX in 2007, was targeting early stage exploration at its tenements and seeking joint venture partners to help develop the resources.

However an extended lag in the price of uranium forced the junior to reconsider and it undertook a strategic review.

“The strategic review underlined a consistent theme, that junior resource companies and in particular uranium focussed companies, are currently ‘unloved’ by the investment community,” the Perth-based company said.

With a view to increase shareholder value, United Uranium announced it would shift away from resource exploration and move into the property market.

It said this will help it generate revenue and profit that would not be possible should it remain in the resources sector.

The latest figures from the Australian Bureau of Statistics (ABS) for Mineral and Petroleum Exploration Australia – March quarter 2014 show a consistent decline in expenditure on mineral exploration. 

The figures show there was a 25 per cent decrease in expenditure and a 35 per cent decrease in metres drilled on total deposits as lower commodity prices hampered access to the cash need to undertake such activity.

The case for uranium fares the worst, with spot prices at historical lows of $US28.25 per pound.

Long-term contractual prices are not much better, hovering around $US45.00 per pound.

The sector is still reeling from the Fukushima disaster in 2011 which saw prices plummet and with no recovery in sight, many operations around the world have shut down.

Predicted supply shortfalls and a subsequent price rise were expected in 2017 as Japan restarts its nuclear reactors following the meltdown.

It was also thought an end to the former military sourced secondary uranium processed under the HEU (Highly Enriched Uranium) Agreement between Russia and the United States, would create a supply gap.

Pouring cold water on these theories yesterday, RBC Capital Markets Analysts said worldwide supply currently exceeds demand, and with excess inventories accumulated since Fukushima, is not expecting things to improve until at least 2021.

Uranium mining stocks, already battered in recent times, were sent lower on Thursday off the back of the report.

Most in the industry maintain a rebound is more likely in 2018 when an expected 60,000 tonne shortfall is predicted to come into play.

Industry insiders say hundreds of nuclear power plants under construction will also help to kick up the value of yellowcake.

But with 2018 still years away, it remains to be seen whether the juniors, and indeed some majors, will be able to ride out the glut.

For United, a move to property development will require it to re-comply with several listing rules on the ASX.

It was also need to secure a positive shareholder vote in order to change the direction of its activities.

Shares in the company have been suspended until this occurs. 

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