By Melissa Pistilli-Exclusive to Uranium Investing News

Despite heavy losses in the spot price of uranium over the past year, analysts are predicting a gradual recovery over the next two years.

In 2007, global uranium prices averaged $US99.30 per pound, dropping 38 percent to average $US61.80 per pound in 2008.

The downward pressure on the price last year was a result of hedge funds and investors liquidating uranium stocks to make up for losses in the equities markets. These actions drove the price down from about $64 per pound in August 2008 to $44 in October 2008.

But the same fundamentals of strong demand and supply concerns that helped force the price up in 2007 are still in place, especially with governments worldwide turning to nuclear power for its energy needs. Many analysts and agencies are confident that the price of uranium will recover once the shadow of the global financial crisis abates from the market. Bart Jaworski, an analyst at the North American investment firm, Raymond James, expects the uranium spot price to reach $80 per pound by 2010.

The Australian Bureau of Agriculture and Resource Economics (ABARE) has forecast a brighter future for the uranium market as well. “World uranium requirements are forecast to increase faster than world supply in 2009,” said ABARE in a recent report. Increasing demand is expected to way heavy on existing supply, which will experience another deficit for the sixth year in a row for 2009.

“Supported by this deficit, spot prices are forecast to recover gradually in 2009 to end the year at around US$62 a pound,” estimates the agency. Further growth in uranium consumption and decline in supply will no doubt support further price increases into 2010.

Increased production expected from Australia

ABARE has released promising forecasts for the Australia’s 2009 uranium market. The agency estimates that increased output from Energy Resources Australia’s Ranger mine and BHP Billiton’s Olympic Dam will support a 5 per cent increase in the nation’s uranium production for this year. Uranium export earnings in turn are expected to rise 6 per cent to nearly $940 million for 2008-09. Increased production and rising uranium prices brought on by the upsurge in demand will drive up Australia’s uranium export earning an additional 31 per cent to $1.2 billion for 2009-10.

Energy Resources Australia and BHP’s production increases, coupled with new mining production from other companies, will place Australia among the world’s top uranium producers Kazakhstan and Africa. “However, the timing of new production may be adversely affected in the short term by current credit conditions brought about by the global financial crisis,” said the agency.

New mines will be coming out of states like Western Australia (WA). Near the end of last year, the newly elected Liberal government of WA lifted the long-standing ban on uranium mining and exports that was enforced by the previous Labor government.  ”The removal of the ban is expected to result in the development of significant uranium deposits in Western Australia,” said ABARE. Projects already underway include Toro Energy’s Centipede-Lake Way project and Mega Uranium’s Lake Maitland project.

There is some speculation that a similar ban in the state of Queensland will eventually be lifted. The Australian-based exploration company Southern Uranium is keeping a close eye on the results of the March 21 Queensland government election, for which uranium mining has been a hot issue.

But, whatever the results the company anticipates positive change for the uranium mining industry. “We believe our exploration and development cycle is a lot longer and a lot more robust than the political cycle,” said Southern Uranium managing director John Anderson. “Because it is a mining state, and it will be sensible for them to allow uranium to be produced.”

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