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With a relatively small value of transactions to report, spot market uranium prices have remained stable over the previous period; however, one buyer is considering market entry, which could potentially exert additional upward pressure on uranium prices.
UxC and TradeTech consulting are both reporting a spot market uranium price of $52 per pound, unchanged from the previous period. However, one buyer is considering market entry, which could potentially exert additional upward pressure on uranium prices.
Last week, Standard & Poor’s placed USEC Inc. (NYSE:USU) on “CreditWatch with negative implications.” The action was based on the ratings agency’s evaluation of a delay and uncertainty surrounding the approval of the company’s Department of Energy (DOE) loan guarantee application to fund a new, more cost-effective technology. USEC and the DOE are negotiating a cost share research, development, and demonstration program.
The action was also influenced by a “‘highly leveraged’ financial risk profile and ‘vulnerable’ business risk profile.” The ratings agency believes competitive challenges from the uranium enrichment market are significant, and that uranium supply concentration risk is considerable for USEC as it comprises a single-site uranium enrichment operating facility.
The agency acknowledged that USEC benefits from its position as the US executive agent for the Megatons to Megawatts program, an $8 billion non-proliferation initiative. Investors will also note that the DOE recently confirmed its commitment to nuclear power as an important building block for American industry. It also entered into a collaborative project with USEC prior to which an analysis of the domestic uranium market ensured the transactions related to the project would “not have an adverse material impact on the domestic uranium mining, enrichment, or conversion industry.”
Company news
Last week, the premier of South Australia indicated confidence in BHP Billiton’s (NYSE:BHP,LSE:BLT) Olympic Dam expansion project. The $30 billion plan is awaiting a cost assessment that is expected before the end of the year, in time to meet an early December deadline imposed last year by South Australia’s previous premier. Olympic Dam is one of several multi-billion dollar expansion projects that BHP is considering.
This news is of significance for investors as Olympic Dam is the largest known uranium ore body in the world. Currently, the large, underground mine produces copper, with gold and uranium as major by-products. Uranium production from Olympic Dam represents approximately 57 percent of Australia’s total and 7.5 percent of global production totals. The rate at which the project expands is important to industry stakeholders as it indicates potential uranium supply expansion; it is also a worthwhile metric for the level of confidence in the overall global economic outlook from the perspective of BHP Billiton’s management.
Paladin Energy Ltd. (TSX:PDN,ASX:PDN) has signed an agreement with the labor union at the Kayelekera mine in Malawi to end a strike, facilitating a full return to work by all employees. Under the terms of the agreement, employees have dropped their salary increase demand, while Paladin has agreed to review local salaries within six months. Salaries will be determined by both the consumer price index and the devaluation of the kwacha.
Junior exploration companies
Athabasca Uranium Inc. (TSXV:UAX,OTCQX:ATURF) completed drilling at its Keefe Lake and Volhoffer uranium projects in Canada.
Crosshair Energy Corp. (TSX:CXX,AMEX:CXZ) announced that its 2012 exploration program for its CMB uranium-vanadium project is set to begin in July.
Toro Energy Ltd. (ASX:TOE) released uranium intersection results for its Theseus uranium project in Western Australia. The company also received an Environmental Protection Authority recommendation for approval for its Wiluna project.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.