Uranium revival approaching

Delegates at this year’s Australian Uranium Conference say that despite the tough ride the metal has seen in recent years, a boom in price is imminent as world energy demands increase.

The spot price for uranium remains sluggish and in early June fell below $40 a pound for the first time since 2009, to $39.87 a pound.

However with 66 nuclear plants under construction around the world, and 266 planned or proposed over the next 15 years, the dent in the market created by the Fukushima nuclear disaster is tipped to shift – compounded by Japan’s recent decision to develop its reactor restart program which is expected to be open for business in twelve months.

Chief of uranium explorer Energy and Minerals Australia, Julian Tapp, said when the price does rebound it will be significant.

"When (the uranium market) turns, it's likely to go quite a long way," Tapp told The Australian.  

"My estimate is somewhere in the range of $US120-$US140 (per pound) for the spot price."

Tapp said with the impending uranium shortfall predicted, the uranium market is set to become "iron ore on steroids".

As Australian Mining recently reported, demand for uranium is set to outstrip supply by more than 11,000 tonnes this year, creating more opportunities for investment in the Australian sector.

"Not only is there a shortage coming, it seems there will be a sustained shortage. Even if all the current projects on the drawing board get up, it's difficult to see how there's going to be enough supply to keep up with demand," Tapp noted.

Australian Mining recently talked to Vanessa Guthrie, managing director of Toro Energy, who was also had a bullish outlook on the future of the market.

“The uranium price in the market is positioned on the cusp of a growth spurt and is on the edge of something that’s very exciting,” Guthrie told Australian Mining.

“There are some clear signals right now that we think will shift sentiment.”

She predicts the market will rebound by 2016-2017 and with no new mines set to come into production before then, Toro’s proposed Wiluna mine is well-placed to supply the shortfall expected around the globe.

“Because there’s no new production you get to 2016 – 2017 and you see this increase in demand but no new supply available that is not already committed,” Guthrie explained.

 In 2012, production from Australian mines rose more than 17 per cent to top 8000 tonnes. However, the level is well below the period between 2003 and 2009 when it was 9000 to 11,000 tonnes.

The Australian Uranium Association predicts that if the uranium industry was able to reach its full potential, exports would increase from 9,000 tonnes a year to 28, 500 tonnes a year. This would equate to between a $14.2 billion to $17.4 billion net value to the Australian GDP. 

But before this is viable prices need to increase, and in the meantime analysts say companies with deep pockets can take advantage of opportunities in the current market.

Adam Myers, a corporate finance partner with BDO, told the conference that with some junior companies running low on funds, mergers and acquisitions would become more likely.

"There's certainly opportunities to pick up good-quality projects because companies are really running out of cash," he said.

"It's worth looking at the market and seeing if there is a strategic deposit you can pick up."

Argonaut Securities analyst Matthew Keane also tipped that cashed-up companies would be seeking projects in the sector.

"We are now 2 1/2 years into a post-Fukushima decline in the uranium price, and a number of junior uranium companies are now really feeling the strain in terms of their balance sheet. The average cash balance across the junior balance in around $2.1m,” he said.

"For those companies that do have cash, there is the opportunity for the cash-meets-project type acquisition."

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