Uranium Romance to Be Rekindled?

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"Despite the setbacks caused by the global economic crisis, many believe uranium mining will remain lucrative."

Although investment activity in the commodities and energy sectors has cooled over the last six months, there are several reasons why the fundamentals in the uranium market remain strong. "We expect the uranium market to remain fairly robust over the next few years, and to support a price of roughly US$60/lb," said Desjardins Securities analyst John Redstone.

One of the fears circulating in the market is that the current global credit freeze will lead to a halt in nuclear reactor construction. Redstone points out that several of the ongoing nuclear programs responsible for ramping up reactor capacity are backed by government finance and less affected by the crisis, including those programs in China, India and Russia. Programs in Japan and South Korea, he said, are "conservatively funded and should be able to proceed."

Other worries involve concerns over the U.S. Department of Energy's possible plans to sell off excess uranium flooding the market and rumors of rising production in Kazakhstan. Redstone, however, argues that market fundamentals will not be disturbed as adjustments will likely be made.

The spot market price of uranium took a dive like most commodities after recession fears began to grow and hedge funds began selling off their holdings to cover losses. But, analysts forecast investor interest will soon return as the world looks towards alternative energy sources. "Uranium prices could recover faster if the investor segment rekindles its interest," said Gene Clark, Trade Tech Chief Executive Officer.

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