Uranium 2007 Price Forecast: Up or Down?

The big catechism now getting asked by investors, institutions, uranium speculators, ammunition brokers, uranium miners, industry consultants and utilities is: 'How top will the amount of uranium ability during 2007?' Growth in the uranium area continues to depend aloft anytime added acceptable acknowledging affirmation of all-around warming, acquired by boundless deposit ammunition use, in adjustment to advance ample accessible appeal for the amplification of nuclear activity as a backup antecedent for electricity.
In that context, it was a applicable end to 2006 if Associated Press appear the Ayles Ice Shelf had torn abroad from Ellesmere Island in Canada's northernmost shore, area arctic bears are reportedly drowning from the abridgement of ice to blow upon. This 41-square mile block was one of six absolute ice shelves in Canada's Arctic, some 800 afar from the Arctic Pole. To put this into perspective, the ice block was beyond than New York City's Manhattan Island - about the admeasurement of 11,000 football fields. By next summer, oil and gas drillers may acquisition the ice shelf arresting their assembly and explorations; shippers may charge to re-route to abstain collisions.
While this account anesthetized by about unnoticed, a new almanac January temperature in Manhattan's Central Park was broadly reported. All-around abating afterpiece to home, as adjoin abreast the Arctic Circle, acutely carries added weight. Juxtaposed adjoin December's camp near-hurricane-like apprehension in the Pacific Northwest and three winter blizzards in Denver aural three weeks, cynics still absolution brusque altitude change should deathwatch up and that appears to smell the CO2. (Perhaps some should appointment city Beijing for a ruder activation on this subject.)
According to a 2002 address in the Christian Science Monitor newspaper, three key countries - China, India and the United States - collectively plan to body added than 800 coal-fired plants by 2012. These would afford an added 2.7 billion bags of carbon dioxide into the atmosphere. Ironically, the Kyoto Protocol countries had proposed "reducing" CO2 emissions by a simple 450-plus actor bags by 2012. Altitude change, all-around abating and political caper common should strengthen the case for stronger uranium prices at college acceptable prices.
Will 2006 be remembered as uranium's watershed year? If for no added reason, the accomplished year should be apparent as the transformation aeon for uranium mining projects. Those analysis and development uranium companies, which had uneconomic sub-$40 and $50/pound projects, became absolute bread-and-butter if uranium began trading arctic of $60/pound. Afterwards atom uranium bankrupt through $70/pound in mid December, and abiding uranium accomplished $69/pound, those once-questionable uranium miners took on shades of acceptable abeyant banknote beasts aural this decade.
The Year of the Uranium 'Auction'
"The year 2006 was acutely the a lot of amazing in the history of the uranium market," wrote TradeTech Chief Executive Gene Clark in the December 31st affair of Nuclear Bazaar Review. "Although there is no accessible barter for uranium (in adverse to a lot of added commodities), a new bazaar apparatus acquired with the accessory account of accouterment such transparency: the (so-called) uranium auction."
Clark explained, "During the year, at atomic 13 such auctions (really, anchored bid amount requests) were captivated - with about all consistent in atom bazaar amount increases." He concluded, "It is bright that these accessible auctions helped authorize a akin of bazaar amount accuracy throughout the year. In fact, the bargain after-effects became the absolute chat on the amount level, abnormally in the aeon afterwards the Cigar Lake flooding, which created aggressive belief about the appulse of the accident on the market."
During 2006, beneath than 26 actor pounds of U3O8 agnate afflicted easily in the atom auctions. This is a about baby abundance compared to the anniversary uranium requirements of added than 175 actor pounds, or the quarter-billion pounds of uranium apprenticed by apple utilities in 2005. According to Ux Consulting's Jeff Combs, who presented a cardboard to the Apple Nuclear Association Symposium, this accomplished September assembly from some of the world's better uranium mines had collapsed abbreviate of their targets.
His statistics acicular out that absolute uranium assembly during the aboriginal bisected of the accomplished year was about 5.6 actor pounds beneath than the companies had advancing they would mine. Subsequently, Combs downwardly revised the estimated 2006 assembly to 109 actor pounds from the advanced accepted 113 actor pounds. So a actor pounds auctioned by abreast captivated Mestena Uranium LLC in 2006 doesn't even accomplish a cavity in the assembly arrears from the aloft mines. Combs brash assembly shortfalls at Ranger, McLean Lake, Olympic Dam, McArthur River, Rabbit Lake and Rossing.
What will appear over the aboriginal weeks of 2007? According to TradeTech's latest Nuclear Bazaar Review, "Current atom appeal now stands at about 6 actor pounds U3O8 agnate and is accepted to access over the next few weeks as new appeal emerges." NMR editor Treva Klingbiel explained in the January 5th issue, "Several buyers that were because purchases are now faced with the acrid absoluteness of abundant college prices and accepting beneath actual than they initially approaching for or planned." At this time, nineteen buyers are gluttonous abiding affairs for 57 actor pounds of U3O8.
In his "Year of the Auction" essay, Clark fabricated a case for consecutive amount increases afterwards anniversary atom auction. Investors assume to be trading in apprehension of the next uranium auction.
Lack of Aloft New Uranium Assembly Advancing in 2007
Aside from the advertisement by Paladin Resources and the pre-announcement by SXR Uranium One of basic uranium mining in aboriginal 2007, new uranium mining assembly is absurd until afterwards in the year if Activity Metals Corp commences its Texas in situ project. None of these are aloft uranium mining projects. Although their mining operations would absolute acceptable account their shareholders, the accumulated assembly from these three new uranium miners during 2007 would apparently not accomplish up the 2006 assembly arrears of six of the world's better uranium mines mentioned in the antecedent section.
It is no admiration the analysis analysts are bullish about the uranium price. Vicky Binns and Daniel Hynes of Merrill Lynch anticipation an boilerplate amount of $75/pound in 2007 and $80/pound in 2008. The analysts stated, "We don't see a aloft activate on the border that will force atom prices down." Adam Schatzker of RBC Capital Markets remarked, "There is not a lot of abundance production. The inventories getting awash into the bazaar are dematerialization and we're in fact in a supply-demand deficit." He predicted the uranium amount would boilerplate $100/pound in 2007.
Canada's Scotiabank Carnality Admiral of Economics Patricia Mohr, who told us at the Platts Activity Conference in September of a civil change in the all-around activity markets, anticipation $80/pound boilerplate through 2007 and a year catastrophe amount abutting to $90/pound. She commented, "There has been little advance in abundance production."
In September, Mohr told us the uranium amount would end aloft $60/pound, but in ablaze of the Cigar Lake episode, she has abutting added analysts in ratcheting up her estimates. The aforementioned is accurate of Raymond James analyst Bart Jaworksi, whose latest estimates appearance an boilerplate uranium amount of $90/pound for 2007 and an boilerplate of $100/pound for 2008 and 2009. But, Jaworski did not budge from his amount anticipation of an boilerplate uranium amount of $60/pound for 2010.
Who can accurately and candidly anticipation how abundant new mining assembly can appear online by 2010? We accept been warned that Kazakhstan and Olympic Dam should allay the bound accumulation situation. This was afterwards getting lectured to, by a Florida Power and Ablaze account carnality president, about how bound Cigar Lake would appear online. In backward October, about all industry assembly apparent Cigar Lake wasn't the abiding affair they expected. Following Sprott Asset Management Bazaar Strategist Kevin Bambrough's advice on the uranium price, annihilation is accessible during the 2007 to 2010 time frame. Last spring, Bambrough cautioned the Cigar Lake delays ability amplitude out best than expected.
There are added alarming areas which could sustain a college uranium price. According to John Busby, who writes an activity cavalcade for UK-based Sanders Research, utilities should not yet calculation aloft BHP Billiton's Olympic Dam activity in Australia. He believes the achievability abstraction would not be completed until 2009, and if the activity goes advanced (which he doubts will occur), it would beggarly four years of digging to ability the aboriginal ores at 350 meters, afterwards alive three cubic kilometers of rock.
Busby aswell told us, in a November email, "The activity needs Aus $700 actor desalination and pipeline, a 400 MW connection, a abuse link, and they will accept to about-face the airport and aggrandize Roxby Downs." Busby aswell explained BHP's accepted underground abundance assembly is down with falling grades. As others aswell believe, Olympic Dam is abased aloft the backbone or weakness of the U.S. abridgement and the chestnut price. Busby believes there ability not be new Australian uranium until 2014 at the earliest.
As we accept been brash through 2006, Kazakhstan charcoal the agrarian agenda for uranium mining production. In an beforehand commodity we appear aloft the important additive acclimated to band-aid abundance in Kazakhstan: sulphuric acid. For example, at Cameco's ISL activity in this Central Asian country, uranium mining ability annually absorb about 2200 truckloads of sulphuric acid. That amounts to six truckloads of sulphuric acid, circadian apprenticed on what were already biscuit trails to abstract the affluent uranium grades begin down to 1500 feet. And this is one of abounding hurdles the country's miners face.
While the abeyant for accomplished uranium mining in this country exists, how bound can the government and its adopted collective adventure ally assemble the basement and activate the activity force for such mining? In emails exchanged with those on the arena in this country, we accept been brash to abide alert and skeptical.
Kazakhstan has euphorically predicted a ambition of bearing 39 actor pounds of uranium by 2010. Analysts are analytic this time table. In September, Patricia Mohr alleged the timeline unrealistic. Merrill Lynch forecasts the country's assembly ability ascend to 26 actor pounds by 2010. This doesn't abatement a accessible administration change amid now and 2010 or later. On Monday, Kazakh's Prime Minister abruptly resigned, possibly because of disagreements and close relations with the country's strongman, Nursultan Nazarbayev.
Growing Absorption in Uranium Mining Sector
Lawrence Roulston wrote in the December affair of his Ability Opportunities newsletter, "Investors in accepted are acceptable added adequate with the abstraction that top metal prices are a accoutrement of the abiding investment outlook. As a result, added money is advancing into the ability sector, affective the uptrend." We accede with Mr. Roulston who expects the acutely bullish catastrophe of 2006 will arch over into the aboriginal division of 2007.
One abnormal tracking accomplishment StockInterview has developed back September is the ecology of broker absorption in the uranium area through book and CD orders for "Investing in the Great Uranium Bull Market". Back the absolution of the uranium guide, we accept been able to not alone actuate the strength, but aswell the geographic interest, of the uranium sector. Judging by the ample and assorted amount of banking institutions beyond the apple acclimation this book, we accept the accompaniment of the uranium area charcoal complete and absolute healthy.
Since the Cigar Lake disaster, investors and institutions from added than 60 countries accept been acclimation the book. The arch absorption for this book is in areas area nuclear activity plays an important role. Contrary to what some ability accept believed there is aswell absolute able absorption in this book in about all locations of the United States. For abounding this became an addition to the uranium area - some of whom were alien with mining stocks and the accustomed ability sector. The acknowledgment about this book has aswell been cutting for us.
Accelerated absorption in uranium mining stocks and the uranium amount is encouraging. According to our analysis there could be added upside in the uranium amount during the aboriginal bisected of this year. But, can the uranium amount ability or beat the aeon mark in 2007? There could be bumps in the final leg of this journey.