Pluses and Minuses for Uranium Prices

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In a sign that the spot uranium market may at last be beginning to turn, the latest report from Royal Bank of Canada Capital Markets analysts points out that the spot uranium price has recovered by $2 in the past week to $59 a pound, although the term price for uranium, which is the price most of the utilities pay, has fallen by $10 to $80 a pound - the first such fall reported for an awfully long time.

In a sign that the spot uranium market may at last be beginning to turn, the latest report from Royal Bank of Canada Capital Markets analysts points out that the spot uranium price has recovered by $2 in the past week to $59 a pound, although the term price for uranium, which is the price most of the utilities pay, has fallen by $10 to $80 a pound - the first such fall reported for an awfully long time.

Uranium prices are actually reported by two entities - Ux Consulting and Trade Tech - and the two do seem to be diverging a little, although both showed small spot price increases - Ux by the $2 noted above and Trade Tech by $1.

On the term market, Ux's quoted price dropped by the $10 margin, while Trade Tech's, which had been $5 lower to start with at $85, remained unchanged. These are early days yet, but RBCCM reports that Ux thinks that the term price may fall further as buyers, primarily utilities, look to contract term deals with a lesser premium to the lower spot price of recent weeks. Rather than holding to a set spread between the spot and term prices, Ux thinks that more deals will be done using spot, base-escalated prices, or a combination of these.

At current uranium prices this has to perhaps be a negative income-wise for the major established producers but positive for the developing miners and explorers as it suggests spot prices may be beginning to close with term prices. Undoubtedly demand remains relatively high and the spot market sellers are reported to be raising prices and being matched by buyers with active interest in material below $60 a pound. Both uranium trading organisations put 2008 full year offtake at between 30 and 35 million pounds U3O8.

While the above price move is minor, it is unlikely to see a return to the heady days where the word uranium in the name of junior explorer meant an almost immediate stock price escalation. But the price, even at these low levels is still several times above the price which prevailed for several years up until 2004 and there's little doubt that the stimulation in exploration activity the big price increase engendered has thrown up some potentially really profitable deposits even at current price levels. Should the latest price move really suggest a bottom then it is probable that there could be some good bargains to be found in some of the juniors with good deposits, a decent cash position enabling them to ride out the recent downturn in interest, and with oversold stocks.

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