The quarterly report typically reviews companies listed in Australia, Canada, USA and UK and active in established uranium districts globally, including Australia, Canada, USA, Argentina, Peru, Mongolia, Zambia, Tanzania and Namibia.
To access the free summary report or to purchase the complete 80 page comprehensive report, go to www.rcresearch.com.au/reports. RCR has also published gold and tin sector reports for 1Q09.
Equity market performance
The market valuation of Australian companies with one or more uranium projects is up 11% over the past month, up 19% over the past 3 months, and down 56% over the past 12 months. This compares with Canadian companies with one or more uranium projects, up 8% over the past month, up 43% over the past 3 months, and down 62% over the past 12 months.
In the past month the majors have had positive share price performance with the exception of Denison: Cameco (CCO) is up 16%, Denison Mines (DML) down 27%, Uranium One (UUU) up 43%, Energy Resources of Australia (ERA) up 11% and Paladin (PDN) up 18%.
Uranium price outlook
The uranium spot price is currently trading at US$42.50/lb, down 19% from US$52.50/lb at 31 December 2008. This compares with the Fund Implied Price (FIP) which was around US$40/lb at calendar year end and has been a good leading indicator of near term spot price performance.
The spot price has remained under pressure from concerns of fund selling and postponed utility discretionary purchases. TradeTech (March 20) indicates the bulk of utility buying remains predominately discretionary and highly price sensitive.
The FIP is currently US$35/lb indicating market expectations of near term downside price risk. The FIP over the past few months has traded between US$30/lb to US$45/lb and has traded in the low to mid US$30's/lb throughout March.
The long term contract uranium price is US$69.50/lb down from US$70/lb Dec '08, and relatively stable since peaking at US$95/lb in 2007/08.
World planned and proposed nuclear power reactors
Currently there are 436 nuclear power reactors in operation and 43 under construction. There are 374 new nuclear reactors planned or proposed globally as of Feb '09, up from 318 (+56 units, +18%) Aug '08. A total of 71 new reactors are expected to be commissioned by 2015.
Juniors nearing production:
- Alliance Resources (ASX:AGS) targeting 1Q10 start-up at the Four Mile Project (SA, AGS 25%, Heathgate 75%). Environmental and mine permits pending. Independent scoping study and resource upgrades expected 2Q09. Initial production rate 3 Mlb pa U3O8;
- White Canyon (ASX:WCU) expects mine permits 1H09 for Daneros (USA) - production 2H09 with sales to White Mesa Mill.
- Honeymoon (SA) is now expected to be in production mid 2010 (Uranium One, TSX:UUU).
Multiple projects continue to advance through economic assessment/BFS:
- Berkeley Resources (ASX:BKY) at Salamanca (Spain) DFS possible by mid 2010; Energy Metals (ASX:EME) PFS expected at Bigrlyi (NT) 3Q09; Energy Resources (ASX:ERA) Ranger initial options assessment 1H09 and Ranger 3 Deeps PFS mid 2009; Greenland Minerals and Energy (ASX:GGG) PFS at Kvanefjeld (Greenland) expected late 3Q09; Paladin Energy (ASX:PDN) Isa Project (QLD) PFS expected 2Q09; Toro (ASX:TOE) - Napperby (NT) scoping study March-April '09, and Lake Way/Centipede (WA) optimisation study mid '09; Uranex (ASX:UNX) Thatcher Soak (WA) scoping study 2Q09 and Manyoni (Tanzania) PFS 4Q09.
Resource upgrades expected:
- Alliance Resources (ASX:AGS) Four Mile Project 2Q09; Berkeley Resources (ASX:BKY) at Salamanca (Spain) March-April '09; Black Range Minerals (ASX:BLR) Taylor Ranch (CO, USA) 1Q-2Q09; Deep Yellow (ASX:DYL) targeting 100 Mlb U3O8 in Namibia by mid 2009; Energy Metals (ASX:EME) Bigrlyi (NT) April '09; Extract Resources (ASX:EXT) targeting >250 Mlb U3O8 in Namibia 3Q09; Uranex (ASX:UNX) Manyoni (Tanzania) 2Q09; White Canyon (ASX:WCU) Daneros (UT, USA) 1H09.
Events of the past 3 months include:
- Strategic investments - Mega Uranium (TSX:MGA) announced (Feb '09) a deal to sell 35% of Lake Maitland (WA, 23.7 Mlb U3O8 @ 0.03%) for US$49m to a Japanese consortium (JAURD and ITOCHU) - valued at US$5.90/lb resource. The price implies valuation using the long term uranium price (US$69.50/lb); Uranium One (TSX:UUU) announced (Feb '09) three Japanese companies have taken a 19.95% stake in the company and signed a strategic relationship agreement; Western Prospector (TSX.V:WNP) announced (March '09) an all cash offer (C$31m, US$25.3m) from a Chinese subsidiary of CNNC. WNP's main asset is Gurvanbulag (Mongolia); Rio Tinto (ASX:RIO) stake in Extract Resources (ASX:EXT, extension to Rossing, Namibia) has risen to 15.5% (from 15.2% three months ago); Uranium Equities (ASX:UEQ) announced (March '09) Vale (Companhia Vale do Rio Doce) is earning up to 80% in the early stage Headwaters Uranium Project (formerly called Mt Evelyn, NT) located in the prospective East Alligator region; Bondi Mining (ASX:BOM, Dec '08) JV with Japanese JOGMEC at the early stage Murphy Project (NT) targeting unconformity style uranium.
"The current divergence of spot and contract prices likely reflects the negative impact on the spot price of supply (fund) and demand (utility) responses to the global financial crisis. Industry fundamentals, however, remain strong, underpinning support for the contract uranium price, with anticipated growth in nuclear reactors and risk of supply shortage mid term (4-8 years)," John Wilson, Managing Director of RCR said.
About Resource Capital Research
Resource Capital Research ("RCR") (www.rcresearch.com.au) was founded in 2004 and is based in Sydney. RCR provides investors with in-depth reports on current investment opportunities in the mining sector both in Australia and globally. The focus is on small and mid cap resource companies, within the gold and uranium sectors, ranging from exploration stage through development and production. John Wilson the principal of the firm and analyst has over ten years' experience analysing mining companies in Sydney and on Wall Street including for major investment banks.
The report is available at www.rcresearch.com.au. The next Uranium Sector Review will be published in the June Quarter, 2009.
Abbreviations: WNA - World Nuclear Association, lb - pound, Mlb pa - million pounds per annum, U3O8 - uranium oxide.
White Canyon Uranium Limited
Uranium One, Inc.
Toro Energy Limited
Rio Tinto Limited
Paladin Energy Limited
Magnis Resources Ltd
Greenland Minerals and Energy Limited
Extract Resources Ltd
Energy Resources Of Australia Limited
Energy Metals Ltd
Bondi Mining Limited
Black Range Minerals Limited
Berkeley Energia Ltd
Alliance Resources Limited