A Commodities World Tour
David Forest
October 14th, 2009

Excerpt:

"Around 90% of global uranium supply can be delivered for $20 per pound. But the remaining 10% of mines need much higher prices in order to turn a profit. These are small and/or low-grade mines. Production costs here run up to $45 per pound. At the upper end of the curve, production gets expensive very quickly.

Which is why the potential loss of production following Olympic Dam's accident this week is so significant. If the mine were to be reduced to 20% of capacity for six months (which some people close to the situation say might be the case), the uranium sector could lose 3.5 million pounds of production. Or 7% of global output.

This could be enough to push higher-cost producers into business in order to meet market demand. In such a case, prices would likely rise significantly in order to cover producers' costs. In the past, such supply disruptions have triggered rapid and steep price movements. And given the still-odd structure of the uranium sector, it could happen again."


http://www.321energy.com/editorials/forest/forest101409.html