Uranium Remains Undervalued


"Talbot and Dundee Securities. . .expect demand to surpass supply within the next decade. . ."

The short-term uranium spot price has fallen $2.50 to $42 per pound U308 continuing its three-month downtrend. The biggest factor affecting recent cuts is fear in the market over the U.S. Department of Energy's (DOE) release of 1,200 tons of UF6 into the market next month.

However, some analysts point out that although these fears are influencing the short-term price, long-term prices have not been affected because strong fundamentals in the uranium market as a whole remain in place. Both Ux and TradeTech's longer term price benchmark is still at $65 per pound.

The stockpiles DOE might bring to market would probably only account for barely 2% or less of annual uranium supply and won't make much of an impact on longer term supply and demand, says Dundee Securities analyst David Talbot.

Market analysts at The Royal Bank of Scotland (RBS) recently forecasted uranium prices regaining strength soon and expect this trend to continue through 2011 peaking at $95 per pound with supply tightening as the Megatons to Megawatts program comes to an end in 2013.

Ray Goldie, senior analyst at Salman Partners, has projected uranium reaching a high of $150 per pound over the long term.

While supply factors are what have impacted spot prices as of late, it's the demand side of the equation to which investors should pay more attention. Talbot and Dundee Securities see demand rising around 2.2% each year and expect demand to surpass supply within the next decade as new mines take years to come on line.

RBS expects "a deficit market" as early as 2014 along with rising nuclear energy usage around the globe. As it stands now, current supplies are not consistent with "logistical, statutory and operating bottlenecks" in producing countries like Canada, Namibia and Australia, say analysts.

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