Uranium Poised for Strong Rally - RBCCM

Source:

Royal Bank of Canada Capital Markets is telling clients that "we think the sentiment of the uranium market has changed substantially in a very short period . . . our 2008 market balance estimate has shifted to a deficit (from a balanced market) and we think the spot market is set for a strong rally".

Royal Bank of Canada Capital Markets is telling clients that "we think the sentiment of the uranium market has changed substantially in a very short period . . . our 2008 market balance estimate has shifted to a deficit (from a balanced market) and we think the spot market is set for a strong rally".

RBC CM puts its observations down to three recent events: Uranium One (UUU CN, C$4.90 a share) reducing production guidance from its Dominion mine in South Africa by 1.5m pounds a year; AngloGold Ashanti warning it may have to declare force majeure, and, Uranium Participation Corp. (U CN, C$11.65) buying 900,000 pounds on the spot market.

RBC CM's forecast for spot uranium prices over the next two years is $110/lb in 2008 and $100/lb in 2009. Uranium prices moved up from around $7/pound eight years ago to a peak of $136/pound in late June, 2007 and then fell sharply. This week, quotes were around $74/lb (down $1/lb on the previous week), according to Ux Consulting, a specialist uranium consultancy; peer group TradeTech this week quoted $73/lb (down $2/pound). The long term expectation for both Ux and TradeTech remains at $95/lb.

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