Uranium Spot Prices Sink on Oversupply

slowdownAccording to uranium price and analysis firm TradeTech, U3O8 was changing hands for $39.55 a pound on June 28, a $0.20 drop from the previous week. Rival nuclear consulting firm, UxC, reported that as of July 1 spot prices for U3O8 looked to be at $39.50 per pound. Despite lower prices, TradeTech tracked 6 transactions last week, writing that buyers are looking to cash in on lower spot prices.

Meanwhile, sellers are reluctant to sell large quantities at such depressed prices; however, they are willing to sell smaller quantities at a lower price. Accounting for the majority of the purchases were utilities, who bought from producers and traders. The firm indicates that utilities are still on the lookout for low-priced sales.

Japan’s reactors

An oversupplied market is to blame for the drop in prices for the “other” yellow metal. The ample supply of uranium is a side effect of Japan’s nuclear reactors having been shut down following the Fukushima nuclear accident in 2011. But it looks like the state of Japan’s reactors is expected to change soon as new regulations relating to nuclear energy take effect July 8. In preparation for the new regulations, Tokyo Electric Power Co (TEPCO) has filed with the nuclear regulatory authority to restart two of the idle reactors in Niigata prefecture.

TEPCO is aiming to restart two of the seven reactors at the Kashiwazaki-Kariwa plant, a step that it believes will be “key to improving the struggling utility’s business conditions” by reducing costs spent on importing fossil fuels.

Four other Japanese utilities are expected to follow in TEPCO’s footsteps with their applications in the coming week.

Niger mine restarts

Areva (EPA:AREVA) partially restarted production at its uranium mine in Niger on June 20. The move comes after a May 23 twin-suicide bombing by Islamist groups at the facility damaged the site’s electrical plant and left 26 people dead. Pascal Bernasconi, director-general for Somair, told Reuters that teams have worked around the clock to repair the damage to the electrical plant and are working hard to find a way to bring the rest of the plant online.

Paladin in the news

Near the end of June, pure play uranium miner, Paladin Energy (TSX:PDN, ASX:PDN), announced that it was seeking to sell a minority interest in its Langer Heinrich project in Namibia in order to unlock value from the company’s asset base. Paladin is currently in negotiations with two parties, but was unable to finalize a deal by the end of June. As a result, investors should look for the transaction to complete at some time in the September quarter. Keeping in line with its goal of reducing costs between $60 million and $80 million over the next two years, this transaction could knock off roughly $10 million from the company’s budget.

Most recently it seems like John Borshoff has extended his self-imposed pay cut and hinted at his plans to continue in his role at the top of the company. Borshoff’s contract expires later this year, coinciding with his 20-year anniversary at the helm of the uranium giant. Borshoff has shrugged off rumors of his pending retirement, stating that he will be looking to renew in the next few months.

Company news

Strathmore Minerals (TSX:STM,OTCQX:STHJF) has finalized the sale of the Pine Tree-Reno Creek 5 percent gross revenue uranium production royalty to a privately held company, AUC, LLC for $3 million in cash. Both Strathmore and Energy Fuels — which announced its intent to acquire Strathmore by way of plan of arrangement — believe that the alternative sale of the royalty to AUC is a good opportunity to monetize a non-core asset for significant cash proceeds.

Anatolia Energy (ASX:AEK) released its preliminary economic assessment (PEA) for the Temrezli Uranium project on July 1. The PEA highlights an NPV of US$173.9 million at a discount rate of 8 percent. According to the study, the Temrezeli project looks like it will be in the lowest quartile for uranium production. “At US$ 40/lb U3O8, the NPV (8% DCF) is US$ 68.8M, whilst at US$ 80/lb U3O8 the assessment provides for an NPV (8% DCF) of US$ 279.0,” the company stated.

Forum Uranium (TSXV:FDC,OTC:FDCFF) has confirmed that a fertile conductive trend hosting high-grade uranium (found on the Patterson Lake South project) has been identified on the company’s property. The discovery was made following the completion of an electromagnetic and magnetic survey across the company’s Clearwater project. The discovery was made during the first phase of the company’s summer exploration program.

Ur-Energy (TSX:URE,NYSEMKT:URG) has entered into a uranium supply agreement with a U.S. nuclear operating company for deliveries ranging from 200,000 to 300,000 pounds of uranium concentrate per year for a multi-year contract slated to start in 2017. Per the agreement, the average delivery price is consistent with current published long term U3O8 prices indicators, which stands at $57 per pound. The latest contract makes six supply agreements with four different U.S. utilities at prices that are higher than the current spot price.

 

Securities Disclosure: I, Vivien Diniz, hold no investment interest in any company mentioned in this article.