Uranium Spot Market Spike on the Horizon

Uranium Spot Market Spike on the HorizonActivity in the uranium spot market remained flat for most of May, closing out the month at $40.40 per pound U3O8 reported TradeTech. The industry consultancy firm attributed the flat market to “a lack of ‘have-to’ demand combined with few aggressive sellers.” The terrorist attack at Areva’s (EPA:AREVA) Somair uranium mine in Niger didn’t put much pressure on the supply side as the company reports it will still be able to honor its delivery commitments.

The majority of buying interest is now for delivery in 2014, and with prices still remaining weak analysts aren’t expecting a market rebound in the near-term. JP Morgan has moved its target date for a spike in the uranium market to 2016 from 2015 citing sufficient supplies for near-term utility requirements, reports the Financial Post. The firm has also lowered its spot price forecasts to $43 per pound U3O8 in 2013, $58 per pound U3O8 in 2014, and $70 per pound U3O8 in 2015.

TradeTech estimates that 210 million pounds of U3O8 will be needed by 2025 to fill the looming supply gap brought about by production cutbacks under the current low pricing environment. JP Morgan analysts are calling for a spot price of $90 per pound U3O8 in 2016. “Despite this push out, we have a favorable outlook for uranium over the long term due to relatively predictable demand and high inducement prices, which are limiting supply growth,” said Tyler Langton, a metals and mining analyst at JP Morgan.

New reactor builds

China’s Ministry of Environmental Protection reported Tuesday that the country’s 15 operational nuclear power reactors are in a safe status. The government also noted that construction of the 29 nuclear power reactors being built is well-controlled to ensure safety and security. China is targeting 2015 to bring all nuclear facilities up to the regulations outlined in the October 2012 national plan on nuclear security.

Last week, construction began on the United Arab Emirate’s second nuclear power reactor at Barakah in Abu Dhabi. The work is under the direction of a Kepco-led consortium that won the bid in 2009. Construction on units 3 and 4 will begin in the coming years and start up of the four APR-1400 reactors will begin in 2017 with full capacity expected to be reached by 2020, reported World Nuclear News.

Company news

Cameco (TSX:CCO,NYSE:CCJ) and Areva have signed a $600 million deal with the English River First Nation of Saskatchewan which includes business contracts and employee wages over the next ten years. The deal “supports [the companies’] mining operations and drops a lawsuit over land near the proposed Millennium project,” reported the Globe and Mail. The Millennium project is estimated to contain more than 50 million pounds of U3O8. Under the agreement the First Nation agrees to drop a 2008 lawsuit against the Saskatchewan government involving a disagreement over land that includes the Millennium underground mine project. However, several band members are opposing the deal and considering launching a complaint with the Human Rights Tribunal saying they were not properly consulted and important information concerning community impact was not properly disclosed.

The proposed mine still requires environmental approval and Cameco plans to submit the final environmental impact application to regulators later in the year.

Last week, JP Morgan cut back its 2013 earnings per share (EPS) forecast for Cameco to $1.04 from $1.12 and its 2014 EPS to $1.47 from $1.55; analysts also introduced a 2015 estimate of $2.22. The firm kept its neutral rating and target price of $22 on Cameco shares.

Areva reached an agreement this week with Hitachi-GE Nuclear Energy to work together on the design, fabrication and installation of filters containment venting systems (FCVS). The partnership hopes to use this technology to improve the safety of nuclear power plants in Japan. Areva has already installed FCVS in more than 50 plants worldwide, reports PennEnergy. The technology is essential in the prevention of damage to the primary containment vessel under circumstances resulting in pressure rises.

Junior company news

Alpha Minerals (TSXV:AMW,FWB:E2GA) and its joint venture partner Fission Uranium (TSXV:FCU) shared the final assay results from the winter 2013 program at the JV’s 50/50 Patterson Lake South (PLS) property in the Athabasca Basin. Highlights include hole PLS13-066 which returned an interval of 63.5m at 1.15-percent U3O8, including 2.0m at 9.51 percent. This and other holes show continuous areas of broad uranium mineralization at shallow depth in all three PLS zones.

Fission Uranium announced Monday that it has acquired three new properties in the northwest and northeast Athabasca Basin regions of Canada. Encompassing 15,373 hectares, the properties are referred to as Beaver River, Thompson Lake and Manitou Falls. Beaver River property includes most of the known EM conductors in the area and a number of uranium showings including surface outcrop sample assays of 3.66-percent, 3.37-percent, and 2.93-percent U3O8. Previous exploration at Thompson Lake has identified numerous uranium showings including outcrop grab sample assays of 2.23-percent and 0.11-percent U3O8. The Manitou Falls property benefits from a large amount of historical data from surveys and ground prospecting work that has identified six radiometric anomalies and multiple conductors.

Kivalliq Energy (TSX:KIV) has reported its second drilling discovery of this season, the twelfth since 2010. Uranium mineralization associated with the ML Zone conductor located 650 metres north east of the J4 Zone at the company’s Angilak Property in Nunavut Territory, Canada. “Holes 13-ML-001 and 002 tested the ML Zone conductor 300 metres west of the 2012 RC hole. 13-ML-001 intersected anomalous radioactivity with values between 200 and 30,000 cps over a true width of 1.3 metres at 60 metres vertical depth,” stated the press release. The Angilak Property hosts the Lac 50 Trend with a NI 43-101 Inferred Resource of 2,831,000 tonnes grading 0.69-percent U3O8, totaling 43.3 million pounds U3O8.

Raymond James analyst David Sadowski recommends Kivalliq on high-grade resource growth potential, strong management, attractive valuation and active news flow. The firm holds a $0.70 target price for the company as well as an outperform rating.

Energy Fuels (TSX:EFR) is set to become one of the biggest uranium companies in the United States with the planned acquisition of Strathmore Minerals (TSX:STM). Both companies have signed a letter of intent under which Strathmore shareholders will receive 20 percent of Energy Fuels shares. Strathmore is constructing a mine in the Gas Hills area of Wyoming (only 45 km from Energy Fuels’ Sheep Mountain project), and operates three more uranium projects in Wyoming and four in New Mexico. Energy Fuels is developing the Sheep Mountain mine and has other properties in Wyoming, Colorado, Utah and Arizona. The acquisition affords the possibility of processing uranium from Strathmore’s 60 percent-owned Roca Honda uranium project in New Mexico at Energy Fuels’ White Mesa mill in Utah.

“KEPCO, which is the largest shareholder of both Energy Fuels and Strathmore, has already expressed its support for the transaction,” reported World Nuclear News. The transaction is expected to be completed by the end of August.

Forum Uranium (TSX:FDC) and joint partner NexGen Energy (TSXV:NXE) have reported drill results from shallow uranium mineralization encountered from drilling at Otis West at the JV partners NW Athabasca project. Grades of up to 1.8-percent U3O8 were intersected in 5 of 9 holes drilled on this target immediately south of the Maurice Bay deposit. The mineralized zone remains open to depth and to the east; future drill programs will continue drilling along the Otis Fault to the east. The project is jointly held by Forum and NexGen (60 percent along with Cameco (27.5 percent) and Areva (12.5 percent).

UEX (TSX:UEX) has completed an updated NI 43-101 Technical Report on the Shea Creek Project located in the western Athabasca Basin of Saskatchewan, Canada. The property is 49/51 split between UEX and AREVA Resources Canada (the project operator) respectively. The report includes a mineral resource estimate showing Indicated Resources of 67.66 million pounds U3O8 comprising 2,067,900 tonnes grading 1.48-percent U3O8; and an Inferred Resource of 28.19 million pounds U3O8 comprising 1,272,200 tonnes grading 1.01-percent U3O8 both at a cut-off grade of 0.3-percent U3O8. Following the announcement of the filing of the technical report, shares in UEX jumped 8.8 percent to 0.495 cents, reported Stockhouse.

Tuesday, UEX announced a supplemental $2 million exploration budget for drilling at Shea Creek, in addition to the $3.1 million program announced in March 2013. A geophysical program began last month and drilling on the Anne Deposit and the Kianna area will commence shortly.

 

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.