November 19, 2007 Spot price stalls after recent gains     Publisher: U3O8.biz     Author: Luki Brocki
	This week, the rapid rise of uranium's spot price confused buyers and sellers enough to stall overall market activity. In addition, the rollercoaster ride of developer-turning-producer Uranium One Inc. served as a reminder of the volatility of the uranium sector. After five straight weeks of price increases, the uranium spot price remained unchanged at $93 pounds U3O8. That's according to industry indicator TradeTech, whose price remained fixed since November 9. Rival indicator Ux Consulting raised its price $2 to $92 at the start of the week, but acknowledged overall spot activity has dropped significantly from last month. The indicator said just 500,000 pounds U3O8 were exchanged in November to date, compared with more than two million pounds in October. TradeTech agreed, reporting that some sellers continued to raise offer prices, while others parted with their product at current prices, looking for cash before year-end. Buyers also sat on the fence, with the strongest interest coming from speculators and hedge funds. But, some big auctions are coming up, which could certainly have an effect on the volatile spot price. Bids are now closed for 100 thousand pounds U3O8 offered by a US producer, but no winners have yet been announced. A second sale is in the works, with another American seller looking to unload 260 thousand pounds U3O8 equivalent. It's hard to know where the market is going. While the spot market seems stalled, the long-term fundamentals of uranium remain stable at $95 a pound U3O8 until the end of November. According to UxC, activity on the term market has also stayed stable; with uranium futures trading at a slight discount to the $95 long-term price come 2008. December futures are priced at $110, while contracts for the first quarter of 2008 are worth $80. Now looking at the TSX and one of my favourite indices, the Resource World composite uranium stock index. It's based on the performance of nearly 100 uranium companies and gained 3.75 points Friday, just a fraction of a per cent, to close at 1,455.28. The index is clearly adjusting following the recent Rio Tinto jump--the index itself jumped nearly 17 per cent after Rio stock skyrocketed when that company rejected a takeover bid from rival BHP Billiton. Still, uranium producers dropped more than 10 per cent from last week; with Cameco Corp., Denison Mines Corp., Paladin Resources Ltd. and Uranium One Inc. all posting losses in the ballpark of 10 per cent. But then, come week's end, beleaguered Uranium One found some friends amid the metal's analysts, who stood behind the startup, despite a drop in production forecasts that sparked a major selloff and a stock plunge. The Canadian producer, once looking to emerge as Cameco's leading rival, recently cut its 2008 production forecasts to 4.6 million pounds from 7.4 million pounds--a whopping 38 per cent. The company blamed a sulphuric acid shortage at one of its mines in Kazakhstan. (Sulphuric acid is the main chemical used during in-situ leaching of uranium from its ore.) The news frightened investors and fuelled a gargantuan price drop: Uranium One fell from just shy of $13 to a record low of $8.02. A series of events followed, including an announcement from Uranium One's Kazakh partner Kazatomprom, the world's third-largest uranium producer, who said it plans to build a sulphuric acid plant by 2010 to meet the shortfall. The plant is expected to produce 500,000 tonnes of the acid per year to meet the needs of Kazatomprom and its joint-venture partners. Then, Uranium One attempted to calm stunned investors later in the week, saying it was working to resolve a shortage of sulphuric acid in the short term by looking for other sources of the acid. Finally, all sorts of analysts galloped in to save Uranium One like valiant knights coming to save a damsel in distress. The selloff is way overblown, one proclaimed. Earnings are irrelevant at this stage, given that the company is still largely in development mode, another announced. Uranium One's production outlook is solid and I'd say the stock will climb back above $12, said a third. And it worked, at least for now. Uranium One was up 49 cents on the TSX Friday, or 5.7 per cent, to $9.03. The company is still deep in the hole compared to $12.73, the price it was enjoying before cutting future production late last month, but it's progress. Let's see if it can keep it up.
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