By Melissa Pistilli-Exclusive to Uranium Investing News
Uranium spot prices were once riding high at a record $137 per pound as recently as two years ago. As was true of the entire commodities sector, uranium prices took a huge hit once the reality of the global economic recession took hold, dropping to $70 per pound. Now, prices have remained nearly static at around $42 per pound.
In a recent interview with The Gold Report, George Topping of Blackmont Capital gave his analysis of uranium spot prices and forecasted a recovery in the near future.
According to Topping, the spot price has been negatively impacted by hedge funds selling material into the spot market. And he’s not the only one pointing the finger at hedge funds. “Hedge funds were selling off their uranium to raise cash, and the prices just plunged,” said George E.L. Glasier, chief executive officer of Energy Fuels Inc.
However, Topping expects those actions to “dry up” and for spot prices to move upwards to around $65 per pound this year, $70 in 2010, and then $80 in 2011. He also predicts spot prices rising up to $100 per pound over the next five years. “From there, I would expect it to increase further over the next several years, the main new source of demand being sovereign stockpiling,” he added.
Strong supply/demand fundamentals are behind Topping’s spot price rebound forecast. Prior to the global economic downturn, the spot price for yellowcake was in line with the supply deficit, but once the prices of other commodities began to tank, so did uranium.
Now that nuclear power is quickly becoming an alternative to fossil fuels for an energy-hungry and growing global population, the supply side is falling short of demand once again. All over the world, nations are planning and constructing new nuclear power plants. Reportedly, there will be an estimated 630 reactors operating in 55 countries by 2030, a 43 per cent increase over today.
As it stands now, there isn’t even close to enough uranium above ground to feed that many reactors. ”It takes seven to 10 years to transform a uranium discovery into a fully operational mine,” said Don Miller, associate editor of Money Morning. “With that kind of lag time, it’s clearly almost impossible for supply to keep up with demand.”
Nations like China, India and Japan are well aware of this supply problem and are now on an aggressive campaign to secure uranium supplies around the world. “With the Indians now having access to the uranium markets,” said Topping “I think they’ll be stockpiling a very large dump of U3O8 to power their nuclear programs.”
And with China’s almost zealous plans for power plant construction over the coming years, Topping has said he “he wouldn’t be at all surprised to see China build up a significant stockpile.”
Another factor impacting supply is the coming expiration in 2013 of the Highly Enriched Uranium (HEU) agreement between Russia and the U.S., which will leave a supply gap of 30 million pounds. According to Topping, there is not nearly enough uranium production out of the mining industry to cover that gap. “Right now it looks like there’ll be quite a shortfall,” he said.
When the uranium spot price began to fall, so did uranium mining stocks. With their share prices bludgeoned to the ground, many miners found themselves strapped for cash. Uranium projects and mines around the world have subsequently either been put on hold or scrapped entirely.
But once spot prices catch up with the supply/demand imbalance and the global financial downturn begins to recover, uranium miners are sure to see their share prices take off.
Uranium Miners are Hot!
Uranium mining companies continue to make Barry Sergeant’s selection of the world’s Top 100 “hottest” mining stocks.
Company Stock From From
Price High Low
Ivanhoe Australia AUD 1.19 -41.4% 693.3%
NWT Uranium CAD 0.15 -53.1% 650.0%
First Uranium CAD 6.38 -16.2% 525.5%
Niger Uranium GBP 0.22 -12.7% 493.3%
Extract Resources AUD 3.95 -27.1% 426.7%
Western Prospector CAD 0.53 -60.4% 430.0%
Bannerman AUD 1.15 -55.6% 411.1%
Homeland Energy CAD 0.21 -89.8% 425.0%
Kalahari Minerals GBP 1.13 -11.0% 338.8%
Aurizon CAD 5.13 -17.8% 324.0%
Dragon Mining AUD 0.06 -39.0% 335.7%
Uranium One CAD 2.66 -48.6% 343.3%
Mega Uranium CAD 1.58 -41.9% 305.1%
Mantra Resources AUD 2.25 -43.8% 301.8%
Ivanhoe CAD 7.78 -38.3% 277.7%
Black Range Minerals AUD 0.04 -59.2% 263.6%
Berkeley Resources GBP 0.32 -33.9% 234.2%
