Uranium 2007 Price Forecast: Up or Down?
- Date: 2007-01-31 - Word Count: 2018
Share This!
The big question now being asked by investors, institutions, uranium speculators, fuel brokers, uranium miners, industry consultants and utilities is: 'How high will the price of uranium reach during 2007?' Growth in the uranium sector continues to depend upon ever more convincing confirmatory evidence of global warming, caused by excessive fossil fuel use, in order to accelerate broad public demand for the expansion of nuclear energy as a replacement source for electricity.
In that context, it was a fitting end to 2006 when Associated Press reported the Ayles Ice Shelf had broken away from Ellesmere Island in Canada's northernmost shore, where polar bears are reportedly drowning from the lack of ice to rest upon. This 41-square mile block was one of six remaining ice shelves in Canada's Arctic, some 800 miles from the North Pole. To put this into perspective, the ice chunk was larger than New York City's Manhattan Island - about the size of 11,000 football fields. By next summer, oil and gas drillers may find the ice shelf interrupting their production and explorations; shippers may need to re-route to avoid collisions.
While this news passed by generally unnoticed, a new record January temperature in Manhattan's Central Park was widely reported. Global warming closer to home, as opposed near the Arctic Circle, obviously carries more weight. Juxtaposed against December's bizarre near-hurricane-like winds in the Pacific Northwest and three winter blizzards in Denver within three weeks, cynics still dismissing abrupt climate change should wake up and smell the CO2. (Perhaps some should visit downtown Beijing for a ruder awakening on this subject.)
According to a 2002 report in the Christian Science Monitor newspaper, three key countries - China, India and the United States - collectively plan to build more than 800 coal-fired plants by 2012. These would emit an additional 2.7 billion tons of carbon dioxide into the atmosphere. Ironically, the Kyoto Protocol countries had proposed "reducing" CO2 emissions by a mere 450-plus million tons by 2012. Climate change, global warming and political tomfoolery worldwide should strengthen the case for stronger uranium prices at higher sustainable prices.
Will 2006 be remembered as uranium's watershed year? If for no other reason, the past year should be marked as the transformation period for uranium mining projects. Those exploration and development uranium companies, which had uneconomic sub-$40 and $50/pound projects, became very economic when uranium began trading north of $60/pound. After spot uranium broke through $70/pound in mid December, and long-term uranium reached $69/pound, those once-questionable uranium miners took on shades of becoming potential cash cows within this decade.
The Year of the Uranium 'Auction'
"The year 2006 was undeniably the most extraordinary in the history of the uranium market," wrote TradeTech Chief Executive Gene Clark in the December 31st issue of Nuclear Market Review. "Although there is no open exchange for uranium (in contrast to most other commodities), a new market mechanism evolved with the secondary benefit of providing such transparency: the (so-called) uranium auction."
Clark explained, "During the year, at least 13 such auctions (really, fixed bid price requests) were held - with nearly all resulting in spot market price increases." He concluded, "It is clear that these public auctions helped establish a level of market price transparency throughout the year. In fact, the auction results became the definitive word on the price level, especially in the period after the Cigar Lake flooding, which created rampant speculation about the impact of the event on the market."
During 2006, less than 26 million pounds of U3O8 equivalent changed hands in the spot auctions. This is a relatively small quantity compared to the annual uranium requirements of more than 175 million pounds, or the quarter-billion pounds of uranium contracted by world utilities in 2005. According to Ux Consulting's Jeff Combs, who presented a paper to the World Nuclear Association Symposium, this past September production from some of the world's largest uranium mines had fallen short of their targets.
His statistics pointed out that actual uranium production during the first half of the past year was about 5.6 million pounds less than the companies had anticipated they would mine. Subsequently, Combs downwardly revised the estimated 2006 production to 109 million pounds from the previously expected 113 million pounds. So a million pounds auctioned by privately held Mestena Uranium LLC in 2006 doesn't even make a dent in the production deficit from the major mines. Combs reviewed production shortfalls at Ranger, McLean Lake, Olympic Dam, McArthur River, Rabbit Lake and Rossing.
What will happen over the early weeks of 2007? According to TradeTech's latest Nuclear Market Review, "Current spot demand now stands at almost 6 million pounds U3O8 equivalent and is expected to increase over the next few weeks as new demand emerges." NMR editor Treva Klingbiel explained in the January 5th issue, "Several buyers that were considering purchases are now faced with the harsh reality of much higher prices and securing less material than they initially budgeted for or planned." At this time, nineteen buyers are seeking long-term contracts for 57 million pounds of U3O8.
In his "Year of the Auction" essay, Clark made a case for subsequent price increases after each spot auction. Investors seem to be trading in anticipation of the next uranium auction.
Lack of Major New Uranium Production Coming in 2007
Aside from the announcement by Paladin Resources and the pre-announcement by SXR Uranium One of commencing uranium mining in early 2007, new uranium mining production is unlikely until later in the year when Energy Metals Corp commences its Texas in situ project. None of these are major uranium mining projects. Although their mining operations would very likely benefit their shareholders, the combined production from these three new uranium miners during 2007 would probably not make up the 2006 production deficit of six of the world's largest uranium mines mentioned in the previous section.
It is no wonder the research analysts are bullish about the uranium price. Vicky Binns and Daniel Hynes of Merrill Lynch forecast an average price of $75/pound in 2007 and $80/pound in 2008. The analysts stated, "We don't see a major trigger on the horizon that will force spot prices down." Adam Schatzker of RBC Capital Markets remarked, "There is not a lot of mine production. The inventories being sold into the market are disappearing and we're actually in a supply-demand deficit." He predicted the uranium price would average $100/pound in 2007.
Canada's Scotiabank Vice President of Economics Patricia Mohr, who told us at the Platts Energy Conference in September of a secular change in the global energy markets, forecast $80/pound average through 2007 and a year ending price close to $90/pound. She commented, "There has been little improvement in mine production."
In September, Mohr told us the uranium price would end above $60/pound, but in light of the Cigar Lake episode, she has joined other analysts in ratcheting up her estimates. The same is true of Raymond James analyst Bart Jaworksi, whose latest estimates show an average uranium price of $90/pound for 2007 and an average of $100/pound for 2008 and 2009. But, Jaworski did not budge from his price forecast of an average uranium price of $60/pound for 2010.
Who can accurately and honestly forecast how much new mining production can come online by 2010? We have been warned that Kazakhstan and Olympic Dam should alleviate the tight supply situation. This was after being lectured to, by a Florida Power and Light utility vice president, about how quickly Cigar Lake would come online. In late October, nearly all industry insiders discovered Cigar Lake wasn't the sure thing they expected. Following Sprott Asset Management Market Strategist Kevin Bambrough's guidance on the uranium price, anything is possible during the 2007 to 2010 time frame. Last spring, Bambrough cautioned the Cigar Lake delays might stretch out longer than expected.
There are other troublesome areas which could sustain a higher uranium price. According to John Busby, who writes an energy column for UK-based Sanders Research, utilities should not yet count upon BHP Billiton's Olympic Dam project in Australia. He believes the feasibility study would not be completed until 2009, and if the project goes ahead (which he doubts will occur), it would mean four years of digging to reach the first ores at 350 meters, after shifting three cubic kilometers of rock.
Busby also told us, in a November email, "The project needs Aus $700 million desalination and pipeline, a 400 MW connection, a rail link, and they will have to shift the airport and expand Roxby Downs." Busby also explained BHP's current underground mine production is down with falling grades. As others also believe, Olympic Dam is dependent upon the strength or weakness of the U.S. economy and the copper price. Busby believes there might not be new Australian uranium until 2014 at the earliest.
As we have been advised through 2006, Kazakhstan remains the wild card for uranium mining production. In an earlier article we reported upon the important ingredient used to solution mine in Kazakhstan: sulphuric acid. For example, at Cameco's ISL project in this Central Asian country, uranium mining might annually consume about 2200 truckloads of sulphuric acid. That amounts to six truckloads of sulphuric acid, daily driven on what were once camel trails to extract the rich uranium grades found down to 1500 feet. And this is one of many hurdles the country's miners face.
While the potential for superlative uranium mining in this country exists, how quickly can the government and its foreign joint venture partners construct the infrastructure and mobilize the labor force for such mining? In emails exchanged with those on the scene in this country, we have been advised to remain cautious and skeptical.
Kazakhstan has euphorically predicted a goal of producing 39 million pounds of uranium by 2010. Analysts are questioning this time table. In September, Patricia Mohr called the timeline unrealistic. Merrill Lynch forecasts the country's production might climb to 26 million pounds by 2010. This doesn't discount a possible regime change between now and 2010 or later. On Monday, Kazakh's Prime Minister abruptly resigned, possibly because of disagreements and tense relations with the country's strongman, Nursultan Nazarbayev.
Growing Interest in Uranium Mining Sector
Lawrence Roulston wrote in the December issue of his Resource Opportunities newsletter, "Investors in general are becoming increasingly comfortable with the idea that high metal prices are a fixture of the long-term investment outlook. As a result, more money is coming into the resource sector, propelling the uptrend." We agree with Mr. Roulston who expects the extremely bullish ending of 2006 will bridge over into the first quarter of 2007.
One unusual tracking statistic StockInterview has developed since September is the monitoring of investor interest in the uranium sector through book and CD orders for "Investing in the Great Uranium Bull Market". Since the release of the uranium guide, we have been able to not only determine the strength, but also the geographic interest, of the uranium sector. Judging by the large and diverse number of financial institutions across the world ordering this book, we believe the state of the uranium sector remains intact and very healthy.
Since the Cigar Lake disaster, investors and institutions from more than 60 countries have been ordering the book. The strongest interest for this book is in areas where nuclear energy plays an important role. Contrary to what some might have believed there is also very strong interest in this book in nearly all parts of the United States. For many this became an introduction to the uranium sector - some of whom were unfamiliar with mining stocks and the natural resource sector. The feedback about this book has also been overpowering for us.
Accelerated interest in uranium mining stocks and the uranium price is encouraging. According to our research there could be more upside in the uranium price during the first half of this year. But, can the uranium price reach or surpass the century mark in 2007? There could be bumps in the final leg of this journey.
COPYRIGHT © 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.
************
James Finch contributes to StockInterview.com and other publications. StockInterview's "Investing in the Great Uranium Bull Market" has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com
In that context, it was a fitting end to 2006 when Associated Press reported the Ayles Ice Shelf had broken away from Ellesmere Island in Canada's northernmost shore, where polar bears are reportedly drowning from the lack of ice to rest upon. This 41-square mile block was one of six remaining ice shelves in Canada's Arctic, some 800 miles from the North Pole. To put this into perspective, the ice chunk was larger than New York City's Manhattan Island - about the size of 11,000 football fields. By next summer, oil and gas drillers may find the ice shelf interrupting their production and explorations; shippers may need to re-route to avoid collisions.
While this news passed by generally unnoticed, a new record January temperature in Manhattan's Central Park was widely reported. Global warming closer to home, as opposed near the Arctic Circle, obviously carries more weight. Juxtaposed against December's bizarre near-hurricane-like winds in the Pacific Northwest and three winter blizzards in Denver within three weeks, cynics still dismissing abrupt climate change should wake up and smell the CO2. (Perhaps some should visit downtown Beijing for a ruder awakening on this subject.)
According to a 2002 report in the Christian Science Monitor newspaper, three key countries - China, India and the United States - collectively plan to build more than 800 coal-fired plants by 2012. These would emit an additional 2.7 billion tons of carbon dioxide into the atmosphere. Ironically, the Kyoto Protocol countries had proposed "reducing" CO2 emissions by a mere 450-plus million tons by 2012. Climate change, global warming and political tomfoolery worldwide should strengthen the case for stronger uranium prices at higher sustainable prices.
Will 2006 be remembered as uranium's watershed year? If for no other reason, the past year should be marked as the transformation period for uranium mining projects. Those exploration and development uranium companies, which had uneconomic sub-$40 and $50/pound projects, became very economic when uranium began trading north of $60/pound. After spot uranium broke through $70/pound in mid December, and long-term uranium reached $69/pound, those once-questionable uranium miners took on shades of becoming potential cash cows within this decade.
The Year of the Uranium 'Auction'
"The year 2006 was undeniably the most extraordinary in the history of the uranium market," wrote TradeTech Chief Executive Gene Clark in the December 31st issue of Nuclear Market Review. "Although there is no open exchange for uranium (in contrast to most other commodities), a new market mechanism evolved with the secondary benefit of providing such transparency: the (so-called) uranium auction."
Clark explained, "During the year, at least 13 such auctions (really, fixed bid price requests) were held - with nearly all resulting in spot market price increases." He concluded, "It is clear that these public auctions helped establish a level of market price transparency throughout the year. In fact, the auction results became the definitive word on the price level, especially in the period after the Cigar Lake flooding, which created rampant speculation about the impact of the event on the market."
During 2006, less than 26 million pounds of U3O8 equivalent changed hands in the spot auctions. This is a relatively small quantity compared to the annual uranium requirements of more than 175 million pounds, or the quarter-billion pounds of uranium contracted by world utilities in 2005. According to Ux Consulting's Jeff Combs, who presented a paper to the World Nuclear Association Symposium, this past September production from some of the world's largest uranium mines had fallen short of their targets.
His statistics pointed out that actual uranium production during the first half of the past year was about 5.6 million pounds less than the companies had anticipated they would mine. Subsequently, Combs downwardly revised the estimated 2006 production to 109 million pounds from the previously expected 113 million pounds. So a million pounds auctioned by privately held Mestena Uranium LLC in 2006 doesn't even make a dent in the production deficit from the major mines. Combs reviewed production shortfalls at Ranger, McLean Lake, Olympic Dam, McArthur River, Rabbit Lake and Rossing.
What will happen over the early weeks of 2007? According to TradeTech's latest Nuclear Market Review, "Current spot demand now stands at almost 6 million pounds U3O8 equivalent and is expected to increase over the next few weeks as new demand emerges." NMR editor Treva Klingbiel explained in the January 5th issue, "Several buyers that were considering purchases are now faced with the harsh reality of much higher prices and securing less material than they initially budgeted for or planned." At this time, nineteen buyers are seeking long-term contracts for 57 million pounds of U3O8.
In his "Year of the Auction" essay, Clark made a case for subsequent price increases after each spot auction. Investors seem to be trading in anticipation of the next uranium auction.
Lack of Major New Uranium Production Coming in 2007
Aside from the announcement by Paladin Resources and the pre-announcement by SXR Uranium One of commencing uranium mining in early 2007, new uranium mining production is unlikely until later in the year when Energy Metals Corp commences its Texas in situ project. None of these are major uranium mining projects. Although their mining operations would very likely benefit their shareholders, the combined production from these three new uranium miners during 2007 would probably not make up the 2006 production deficit of six of the world's largest uranium mines mentioned in the previous section.
It is no wonder the research analysts are bullish about the uranium price. Vicky Binns and Daniel Hynes of Merrill Lynch forecast an average price of $75/pound in 2007 and $80/pound in 2008. The analysts stated, "We don't see a major trigger on the horizon that will force spot prices down." Adam Schatzker of RBC Capital Markets remarked, "There is not a lot of mine production. The inventories being sold into the market are disappearing and we're actually in a supply-demand deficit." He predicted the uranium price would average $100/pound in 2007.
Canada's Scotiabank Vice President of Economics Patricia Mohr, who told us at the Platts Energy Conference in September of a secular change in the global energy markets, forecast $80/pound average through 2007 and a year ending price close to $90/pound. She commented, "There has been little improvement in mine production."
In September, Mohr told us the uranium price would end above $60/pound, but in light of the Cigar Lake episode, she has joined other analysts in ratcheting up her estimates. The same is true of Raymond James analyst Bart Jaworksi, whose latest estimates show an average uranium price of $90/pound for 2007 and an average of $100/pound for 2008 and 2009. But, Jaworski did not budge from his price forecast of an average uranium price of $60/pound for 2010.
Who can accurately and honestly forecast how much new mining production can come online by 2010? We have been warned that Kazakhstan and Olympic Dam should alleviate the tight supply situation. This was after being lectured to, by a Florida Power and Light utility vice president, about how quickly Cigar Lake would come online. In late October, nearly all industry insiders discovered Cigar Lake wasn't the sure thing they expected. Following Sprott Asset Management Market Strategist Kevin Bambrough's guidance on the uranium price, anything is possible during the 2007 to 2010 time frame. Last spring, Bambrough cautioned the Cigar Lake delays might stretch out longer than expected.
There are other troublesome areas which could sustain a higher uranium price. According to John Busby, who writes an energy column for UK-based Sanders Research, utilities should not yet count upon BHP Billiton's Olympic Dam project in Australia. He believes the feasibility study would not be completed until 2009, and if the project goes ahead (which he doubts will occur), it would mean four years of digging to reach the first ores at 350 meters, after shifting three cubic kilometers of rock.
Busby also told us, in a November email, "The project needs Aus $700 million desalination and pipeline, a 400 MW connection, a rail link, and they will have to shift the airport and expand Roxby Downs." Busby also explained BHP's current underground mine production is down with falling grades. As others also believe, Olympic Dam is dependent upon the strength or weakness of the U.S. economy and the copper price. Busby believes there might not be new Australian uranium until 2014 at the earliest.
As we have been advised through 2006, Kazakhstan remains the wild card for uranium mining production. In an earlier article we reported upon the important ingredient used to solution mine in Kazakhstan: sulphuric acid. For example, at Cameco's ISL project in this Central Asian country, uranium mining might annually consume about 2200 truckloads of sulphuric acid. That amounts to six truckloads of sulphuric acid, daily driven on what were once camel trails to extract the rich uranium grades found down to 1500 feet. And this is one of many hurdles the country's miners face.
While the potential for superlative uranium mining in this country exists, how quickly can the government and its foreign joint venture partners construct the infrastructure and mobilize the labor force for such mining? In emails exchanged with those on the scene in this country, we have been advised to remain cautious and skeptical.
Kazakhstan has euphorically predicted a goal of producing 39 million pounds of uranium by 2010. Analysts are questioning this time table. In September, Patricia Mohr called the timeline unrealistic. Merrill Lynch forecasts the country's production might climb to 26 million pounds by 2010. This doesn't discount a possible regime change between now and 2010 or later. On Monday, Kazakh's Prime Minister abruptly resigned, possibly because of disagreements and tense relations with the country's strongman, Nursultan Nazarbayev.
Growing Interest in Uranium Mining Sector
Lawrence Roulston wrote in the December issue of his Resource Opportunities newsletter, "Investors in general are becoming increasingly comfortable with the idea that high metal prices are a fixture of the long-term investment outlook. As a result, more money is coming into the resource sector, propelling the uptrend." We agree with Mr. Roulston who expects the extremely bullish ending of 2006 will bridge over into the first quarter of 2007.
One unusual tracking statistic StockInterview has developed since September is the monitoring of investor interest in the uranium sector through book and CD orders for "Investing in the Great Uranium Bull Market". Since the release of the uranium guide, we have been able to not only determine the strength, but also the geographic interest, of the uranium sector. Judging by the large and diverse number of financial institutions across the world ordering this book, we believe the state of the uranium sector remains intact and very healthy.
Since the Cigar Lake disaster, investors and institutions from more than 60 countries have been ordering the book. The strongest interest for this book is in areas where nuclear energy plays an important role. Contrary to what some might have believed there is also very strong interest in this book in nearly all parts of the United States. For many this became an introduction to the uranium sector - some of whom were unfamiliar with mining stocks and the natural resource sector. The feedback about this book has also been overpowering for us.
Accelerated interest in uranium mining stocks and the uranium price is encouraging. According to our research there could be more upside in the uranium price during the first half of this year. But, can the uranium price reach or surpass the century mark in 2007? There could be bumps in the final leg of this journey.
COPYRIGHT © 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.
************
James Finch contributes to StockInterview.com and other publications. StockInterview's "Investing in the Great Uranium Bull Market" has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com
Related Tags: uranium, uranium price, uranium mining companies, nuclear fuel, uranium mining stocks, utilities
Your Article Search Directory : Find in Articles
Recent articles in this category:
- The Secrets to Getting Low Down Payment Car Insurance
Upon purchase of a new car, there is almost always a requirement to buy an auto insurance policy as - The Wisdom Behind Auto Insurance Comparison Quotes
No one in his right mind would not go for a good deal. In fact, everyone is out on their feet and ru - The Benefits of Auto Insurance Comparisons Florida
Insurance can be expensive. This is something everyone knows about especially in the sunny state of - Auto Insurance Florida: The No-Fault Policy
There are different kinds of car insurance offered by a wide range of providers today. Different sta - Finding the Cheapest Auto Insurance Companies
Everyone is asking and searching for the cheapest auto insurance companies available today. Consider - How do You Compare Private Health Insurance Cover in Australia?
Deciding what is the best and most affordable private health insurance cover can be easy if you take - How Payment Protection Insurance Was Mis-Sold
For over six years the issue of Payment Protection Insurance (PPI) and how it was mis-sold to custom - Finding Quotes For Auto Insurance Online
One of the many concerns when you are shopping for auto insurance is being able to get access to quo - How You Can Find the Best Auto Insurance Online
When it comes to renewing your car insurance you are going to quickly discover that there are a numb - Guidelines For Searching For Auto Insurance Online
The internet can be a great source of discounts and values related to auto insurance. However, many
Most viewed articles in this category:
- Trading Forex With Pivot Points
Forex Pivot Point Trading are used today by Forex Traders and are calculated on the previous days mo - Where To Search For Free Grants
Where do you look for free grants? The search must be thorough or it could be an exercise in futilit - The Connection Between High Blood Pressure and Salt
We are a society of Salt Addicts. It cannot be denied. When you look at the things we do and the pla - Tips For Avoiding HYIP Scams
Before knowing about HYIP Scams, refer to the functioning of HYIP or "High Yield Investment Programs - Getting Credit After Bankruptcy
Consumers do not have to live sans credit following a bankruptcy. By following certain steps consume - Tips For Choosing A Credit Card
Are you looking for that perfect credit card? If so, you may be confused about what exactly to look - Cheap Car Insurance For Teens Online
Many elements determine a car insurance policy. Car insurance companies look at the person's age, hi - What Exactly Is Free Grant Money?
You can apply for free grant money from various government agencies. But where exactly does this mon - Small Business Owners Marketing and Customer Service
Marketing can be time-consuming, but it doesn't have to be hugely expensive now, thanks to the Inter - Apply Online For A Credit Card - How To Choose A Card?
The best type of credit card for you will be dependant on how you intend to use the credit card. Are