The Conversation (0)
The price for uranium climbed 4 percent to reach $53.75 per pound, an increase of $2.00 from the spot price for uranium last week. Purchasers of uranium resources over the course of last week have seen demands met with consistently higher prices as the week concluded.
The price for uranium has climbed 4 percent to reach $53.75 per pound, an increase of $2.00 from lat week’s uranium spot price. TradeTech consultants reported that transactions in the spot uranium market were limited during the week with only three transactions recorded, indicating that both supply and demand are extremely thin. A number of uranium suppliers have effectively met short term distribution objectives and have withdrawn from the market. The few active remaining sources have rapidly taken this opportunity to elevate offer prices. Purchasers of uranium resources over the course of last week have seen demands met with consistently higher prices as the week concluded.
Resource Capital Research forecast the spot market price of uranium to trade in the range of between $50.00 $60.00 per pound, with the expectation of downward pressure in the near term. The firm has established a 3 to 6 month fund implied price, positioned for an average spot price for uranium of approximately $48 per pound, reflecting the expectation of prospective additional sources entering the market in the second half of this year from producers. They also suggest a level of uncertainty over the potential surplus disposition from utilities operators in Japan.
Merrill Lynch has also downgraded its average spot price forecasts by 8 percent over the next twelve months; however, it would appear the critical point in time will occur when Russian warhead supply, the Megatons to Megawatts project is due to expire by the end of 2013, at which time the firm implies a trading range in the $75.00 to $80.00 per pound. As the result of the Japanese earthquake and recent policy decisions, Merrill Lynch expects global demand on the price of uranium to decline approximately 5 percent over the next 2 years, exclusive of any Chinese power companies stockpiling uranium.
Recent mining developments
Bannerman Resources Ltd.(ASX:BMN)(TSX:BAN), an Australian based uranium exploration and development company, is considering entering into a joint venture with a Chinese investment conglomerate to develop the Etango uranium project in Namibia after receiving a “highly conditional” acquisition proposition.
The investment subsidiary of the Sichuan Hanlong Group has offered Bannerman 61.2 cents per share for exclusive ownership, which represents a premium of 42 percent based on its current trading range of approximately 43 cents. The market has already responded very strongly to the news development, sending the shares for Bannerman Resources 8 percent higher on a relatively high volume of shares.
The proposal is still in its infancy stage and is described as “highly conditional”, including requirements for due diligence to be completed by the end of the third quarter of this year, the receipt of various Chinese approvals, support from major shareholders, a recommendation from the Bannerman board, and the continuity of Bannerman senior management amongst other stipulations.
Bannerman’s board of directors has indicated that the proposal is an opportunistic bid to acquire a strategic resource at a discounted price which it contends has been adversely affected by global macro issues such as the events at the Fukushima Daiichi reactor and weak global equity markets. The company has declined the request for a three month period of exclusivity for the proposal; therefore, Bannerman says that it will continue with other joint venture discussions in addition to the Chinese consideration.
Bannerman is working to develop its uranium resource in Namibia with the expectation to open a mine in 2015. The company anticipates this operation to produce approximately 2000 tonnes of uranium per year for a forecasted project lifetime of 20 years. Bannerman describes the project as “large-scale and low technical risk”, and has been working to establish a suitable joint venture partner to facilitate financing, development and operation of the project.
Namibia currently hosts approximately 5 percent of the world uranium reserves and last year was responsible for producing 4,496 tonnes of uranium. Rio Tinto’s (NYSE:RIO) Rossing mine and Perth-based Paladin Energy Ltd.’s (TSX:PDN)(ASX:PDN) Langer Heinrich project are the current uranium producers in the country and recent news indicates production has declined this year 23 percent compared to the first 5 months of 2010.
