Market Commentary
Show printable version of '2011 Uranium Market Trends' in a New Window

Search Market Commentary

 December 29, 2011
2011 Uranium Market Trends
    Publisher: U3O8.biz
    Author: Dave Brown


In 2011, the uranium mining industry experienced a number of significant events which had an impact on uranium prices and equity market volatility.

In an interview with Uranium Investing News, Haris Khaliqi at Foster Stockbroking indicated what he believes to be the biggest influence on the uranium mining industry throughout the year. "Clearly the biggest catalyst this year which has hampered the outlook for uranium and weighed heavily on the spot price was the Fukishima disaster. This had a material impact on the sentiment towards the uranium sector which subsequently has resulted in nations reviewing their stance on nuclear powered energy and guidelines and safety rules in commissioning new plants. I believe this will have a long term impact on the long term outlook on uranium prices."

Policy reviews and expansionary mining plans

Germany, Italy and Switzerland have made policy decisions regarding nuclear energy which are not positive for the industry; however, these three countries combined represent a relatively small proportion of global demand for uranium totaling approximately 5.8 percent of annual requirements. Following up with key points on the demand and supply arguments Mr. Khaliqi underscored "Germany's stance to decommission all nuclear plants has also prompted other European nations to review their policies. On the supply side, the biggest news story or catalyst in my view which will have material impact on medium to long term prices is BHP's (NYSE:BHP) planned expansion of Olympic dam. The expansion at Olympic Dam will substantially lift the mine's annual production of uranium from 4ktpa to 19ktpa, adding significant amounts of uranium to global supply."

Another key development this year was the feasibility study of the Husab uranium project, a $1.7 billion uranium venture on the western coast of Namibia. Earlier in this month, Extract Resources Limited (ASX:EXT) was offered $2.2 billion by China Guangdong Nuclear Power Corp (CGNPC) for its Husab uranium project. This is of importance as the Husab project is the largest in-situ, and highest grade, granite-hosted uranium deposit in Namibia. It is also the fifth-largest uranium-only deposit in the world.

The Australian uranium exploration and mining companies may have seen improved regulatory conditions, as Australian prime minister, Julia Gillard, appeared intent to change the current policy which did not permit uranium sales to India. India's new rules to provide liability limitations for uranium producers and equipment suppliers in the case of a serious accident at Indian nuclear power plants saw a positive outcome for all uranium producers.

Earlier this month, the Nunatsiavut Assembly in Eastern Canada, lifted a moratorium on uranium mining on Inuit land in Labrador after three years.

Consolidation and volatility

Speaking with BNN, Brian Imrie, Managing Director and Head of Global M&A at KPMG, discussed the volume of deals in the overall resource sector "in the uranium space, which we did not expect to see active this year you had Cameco (TSX:CCO,NYSE:CCJ) make an original bid for Hathor Exploration, and then ultimately Rio Tinto PLC (LSE:RIO,NYSE:RIO,ASX:RIO) prevailed in that transaction."

The World Uranium Index, serving as an indicator for the top ten global producers of uranium, has declined 42.9 percent since the start of the year and is down 41.1 percent since March 11. The Global X Uranium ETF (NYSE:URA) indicates further weakness for the broader sector with additional exposure to some of the uranium exploration and development equities declining 56.8 percent since March 11. The uranium spot market prices have only declined 16.8 percent since the beginning of the year, despite an eventful year.



You can view the Previous Market Commentary item: Wed Jan 4, 2012, 2012 Uranium market outlook

You can view the Next Market Commentary item: Wed Dec 21, 2011, Uranium mining moratorium lifted on Labrador Inuit lands

You can return to the main Market Commentary page, or press the Back button on your browser.