Uranium Juniors to Consolidate

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"investors now need to become far more discerning and look at which projects will actually be viable"

While a rising tide of investment earlier in the year lifted prices for most uranium companies, the recent fall, largely in reaction to volatile spot prices, means that investors now need to become far more discerning and look at which projects will actually be viable. Securing a long-term offtake agreement is critical, as only 10% of uranium is traded on the spot market.

Key criteria include project resource and grade, infrastructure (water and power) and jurisdiction. Political uncertainty in Australia, Canada and Kazakhstan means that with predicted supply shortfalls in 2012/13, many end-users are looking to secure geographic diversity of supply now.

However, many existing projects are too small to stand alone and we expect a wave of consolidation to hit the junior sector as license areas are combined. Recent transactions such as those involving Uranium Resources in Tanzania and UrAmerica in Argentina indicate this has already begun. We expect it to continue, especially in Australia, Southern Africa and South America as smaller companies run out of cash and realize they need to merge to survive.

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