RBC Analyst: Lower Uranium Prices Could Turn Away Investors

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Over at Canaccord Adams, analyst Scott Finlay said lower-than-expected prices in Q1 and Q2 have wreaked havoc on his U308 forecasts, forcing him to reduce price assumptions through 2011. Still, Mr. Finlay's new $69 price assumption for 2008 remains 16% higher than the current spot price and his 2009 forecast of $80 is 35% higher.

If low uranium prices persist, investors may turn tail from the industry jeopardizing important future exploration and development, says RBC Capital analyst Adam Schatzker.

In our opinion, the current spot market price level will likely have far reaching implications if it remains at such low levels for too long, most importantly, in our view, will be disinterested equity markets that might cease funding uranium exploration and development.

We believe that the absence of equity market participation in the uranium industry would constrain the ability of uranium supply to meet the growing demand, which, in turn, could threaten the ability of global utilities' new reactor build programs...

Over at Canaccord Adams, analyst Scott Finlay said lower-than-expected prices in Q1 and Q2 have wreaked havoc on his U308 forecasts, forcing him to reduce price assumptions through 2011. Still, Mr. Finlay's new $69 price assumption for 2008 remains 16% higher than the current spot price and his 2009 forecast of $80 is 35% higher.

He wrote:

In the absence of a supply shock, our base case foresees a supply/demand balance over the next two years and a return to surplus in 2011.

The analyst added that uranium prices will begin strengthening following the quiet summer period and into 2009 on the back of new buying from utilities.

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