Uranium Still Has a Bright Future

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In a long report last week, Merrill Lynch analysts said the spot price of uranium had now fallen close to the marginal cost of mine production, so it should stabilise around current levels. "Uranium's outlook is robust," the investment bank said, citing growing global demand for nuclear power now that it's often seen as "green".

IT'S been a rollercoaster ride for uranium stocks in the past year.

In the heady days of the uranium boom, when the spot price rose to a record high of $US140 a pound last June, investors piling into heavily oversubscribed floats were nearly sure to turn a profit on the first day of trading.

No matter if the explorer didn't have a resource. Or if its tenements were in states which ban uranium mining. Or if none of the directors had any mining experience. Quick and easy profits looked practically guaranteed.

But how quickly things change.

In less than a year, the uranium spot price has more than halved to hit $US60 a pound this week. Add in a shaky equity market and uranium is clearly no longer the flavour of the month. Oil and coal stocks are deemed much better bets these days, and many uranium tiddlers are quickly running out of cash. Even rare producers like Paladin Energy and Energy Resources of Australia have experienced share price plunges.But, according to the experts, the future for yellowcake isn't all gloom and doom.

The spot price may have plunged dramatically, but the spot market for uranium is actually quite small - less than 5 per cent of the total market. The vast majority of yellowcake is sold under long-term contracts and the contract price has held steady for nearly a year at $US95 a pound before recently dipping to $US90 a pound...

In a long report last week, Merrill Lynch analysts said the spot price of uranium had now fallen close to the marginal cost of mine production, so it should stabilise around current levels. "Uranium's outlook is robust," the investment bank said, citing growing global demand for nuclear power now that it's often seen as "green".

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