Dawn of a New Uranium Bull?


". . .uranium equities have rebounded nearly 225%. . ."

Recent market and industry reports suggest that the uranium sector may be on the verge of a new bull market cycle as the spot price for U308 rises slightly to $44 per pound.

"We believe the uranium market is in the early stages of a bull market rally that could last three or four years," says a report by RBC Capital Markets.

In the report, analyst Adam Schatzker notes that uranium equities have rebounded nearly 225%, although they are still around 68% under their historic peak. Schatzker believes the market is probably two years away from reaching those peaks again.

The most important factor contributing to Schatzker and other analyst's recovery forecasts is what many see as a developing supply/demand shortfall as nations around the world turn to nuclear power as a greener alternative to fossil fuels and utility companies move to acquire dependable supply lines. UX Consulting estimates 2009 uranium demand at 171 million to 184 million pounds with production at only 125 million pounds.

"We think the uranium market will be facing substantial deficits and that utilities will have to pay higher and higher prices to secure both spot and long-term supplies. We also believe that the longer the spot price remains depressed (e.g. below US$70/lb), the more dramatic the price run-up will be," said Schatzker.

Others believe uranium prices could rise as much as 35% in 2010 on energy demand out of Asia and Western Europe. "By historical standards, the current price is pretty high and I imagine they'll be trying to lock in as many sales contracts as they can," said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management. "Energy will be a key commodity and especially for Asian economies."

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