The Conversation (2)
The current spot market price rebounded resiliently 13 percent on strong volumes, as 21 transactions involving a total of more than 3.6 million pounds of uranium were concluded last week, which removed the most aggressively priced supply from the market.
The daily uranium spot market price, as reported by TradeTech, rebounded 13 percent in one day to $60.00 per pound as the uranium market continues to respond and reposition to the unfolding nuclear situation in Japan, following the powerful earthquake and tsunami.
After news broke over the weekend about the severity of the conditions at the station, the spot market price for uranium fell sharply. Several sellers immediately entered the market anxious about the impact of the accident. As the week progressed and the news about the condition of the reactors worsened, sellers wishing to dispose of material quickly were forced to offer significant discounts in order to complete a sale. On Friday, the volatile spot market price was reported to drop more than 20 percent from the previous valuation to close at $53.00 per pound.
The current spot market price rebounded 13 percent on strong volumes as 21 transactions involving a total of more than 3.6 million pounds of uranium were concluded last week, which removed the most aggressively priced supply from the market. The price was also supported by unanticipated discretionary demand and positive reports from Japan that electricity has been partially restored at the Fukushima station from an off-site power supply.
Some analysts and observers anticipate that the psychological effects of the accident at Fukushima could result in a period of uncertainty with uranium spot market prices fluctuating based on news flow sentiment and the success of efforts and ongoing challenges to stabilize the reactors.
TradeTech President Treva E. Klingbiel said, “considering the apparent severity of the accident and the worldwide public reaction, a period of uncertainty and resulting price volatility is inevitable. Ultimately, if the actions of regulators in the aftermath of the accident result in additional plant delays or cancellations, both the spot and long-term uranium markets for uranium will be adversely affected.”
Business as usual: international merger and acquisitions resume
After several days of concentrated negotiations between executives, bankers and lawyers for Atomredmetzoloto JSC (ARMZ) and Mantra Resources (TSX:MRL) (ASX:MRU), the two sides have agreed to new terms, with the cash offer price per share reduced from A$8.00 to A$7.02.
Mantra had been engaged in the mineral exploration for uranium in Africa, including the commencement of a Definitive Feasibility Study (DFS) on the Mkuju River project in Tanzania. Additionally the company held direct and joint venture interests in a portfolio of uranium exploration tenements elsewhere within Tanzania and Mozambique.
Last week, ARMZ threatened to invoke the “material adverse change” clause in a decision to walk away from a previous agreement with Mantra Resources. It was argued that the future of Mantra’s financial prospects were being undermined as a number of countries warned that nuclear power expansion plans were temporarily suspended as authorities and regulators will be re-examining safety measures following the series of failures at Japan’s Fukushima power plant. The Russian group also said it was prepared to renegotiate the Mantra deal.
Industry observers will be quite familiar with vacillating agreements and litigation as a routine matter of business for ARMZ, the large subsidiary of former Russian ministry Rosatom, converted into a state corporation in 2007. An arbitration tribunal seeks to settle over $200 million in compensation for losses and damages on behalf of Khan Resources Inc. (TSX:KRI) from ARMZ, in a saga of operational impediments which resurfaced last month as they have been developing and escalating for more than a year.
Currently Rosatom reportedly accounts for 20 percent of new reactors under construction worldwide and 17 percent of global nuclear fuel fabrication. Until recently, nuclear power had offered a big opportunity for Russia to diversify its economy away from oil and compete in a select area of high technology in which it has world-class expertise.
The newly agreed deal, even at a reduced price point, should provide a welcomed piece of positive news for global uranium explorers and miners, whose share prices have been compromised by the recent events in Japan.