Resource Capital Research (RCR) of Australia has again taken a look at the global uranium market and producers for its quarterly report. The spot price is US$40.75/lb and the long-term contract price if US$58.00/lb. The report also singles out Kazakhstan’s growing, low-cost production as a factor in further downward price pressure.
RCR then compared market valuation changes in Australian and Canadian producers. In both countries, uranium mining companies suffered shrinking value in the past month and three months. However, over the past 12 months, these companies have increased in value 48% and 29%, respectively. (www.RCResearch.com.au/documents/uranium/reports/0/australia/)
Less encouraging is the Merrill Lynch Uranium Equity Index that follows the same one- and three-month dips, but the 12-month figure is down 16%. (http://www.MLinvest.ml.com/Ch/Disclaimer.aspx?ReturnUrl=%2fch%2fparticipation%2fasset-class-index%2fml%2fml%2ftracker-certificate%2fproducts%2f025281f9-398c-4268-adda-5e28dfb59928.aspx)
Will the major producers continue to grow or will their market values track downward, following the index?
Saskatoon-headquartered Cameco (www.Cameco.com) has seen a 24% dip in share price over the past 12 months. Now management is taking steps to turn that situation around.
Cameco signed a long-term co-operation agreement with China Guandong Nuclear Power Holding Co. for the supply of fuel for its power plants. Guandong operates two nuclear power plants and has 14 more under construction. Reports from China indicate the country plans to increase its nuclear capacity from the current 9 GW to at least 70 GW by 2020. A further increase to 120-160 GW or more is planned by 2030.
“The announcement … moves Cameco one step closer to supplying uranium to one of the fastest growing nuclear companies in the world,” said Jerry Grandey, Cameco’s CEO. “Our plan to double uranium production by 2018 aligns well with China’s vigorous reactor construction program.”
Another supply agreement has been signed by Cameco and China Nuclear Energy Industry Corp., a subsidiary of China National Nuclear Corp. (CNNC). Cameco will supply of 23 million lb of uranium concentrate through 2020.
CNNC is China’s largest nuclear power provider. The company operates seven reactors with 5.1 GW capacity and is building 10 more with a total capacity of 9.1 GW.
Sad to say, Canada recently lost the distinction of being the world’s largest uranium producer. Kazakhstan, which produced 13,820 tonnes of elemental uranium in 2009, has that honour. The output of Canadian producers last year was 10,173 tonnes.