Tight Markets, Utility Buying, Long-Term Prices Determine Uranium Mining Forecasts

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At a recent roundtable, industry experts discussed the outlook for the uranium sector. Gordon Miller, president and CEO of First Uranium, noted that even with the high prices the supply response to date has been slow and in fact primary mine production has been falling because of production issues. Increasing costs for mines and exploration will force prices higher over time, and this will likely help set floor prices.

During a recent National Bank Financial investor roundtable in San Francisco, industry experts identified four main issues for the uranium sector: tight markets due to slower supply; renewed buying by utilities; decline in spot price relevance; and the need for long-term prices to be higher than now forecast.

Industry participants included George Assie, Cameco Senior Vice President Marketing and Business Development, Peter Farmer, CEO of Denison Mines, Gordon Miller, President and CEO, First Uranium, and Fletcher Newton, Executive Vice President, Uranium One.

When asked about price drivers during the next three to four years, Farmer replied that "producer issues will continue to be a factor with lower than planner production resulting in force majeure or buying by the producers to meet contract commitments." He added that the short-term spot market had become "less relevant to utilities. At present there is less utility buying in the spot market and there are more trading companies selling."

Miller noted that even with the high prices the supply response to date has been slow and in fact primary mine production has been falling because of production issues. Increasing costs for mines and exploration will force prices higher over time, and this will likely help set floor prices.

Newton suggested that ongoing permitting and regulatory delays could impact pricing. "DOE inventories could have a short-term impact on pricing... However, this should not be a big deal."

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