TORONTO (miningweekly.com) – The spot price for uranium will likely remain at current low levels in the short term, but market conditions can be expected to improve steadily over the next 18 months, Uranium One president and CEO Jean Nortier suggested on Monday.

He added, as a caveat, that any short term forecasts in the current market would as likely as not turn out wrong, but said that the group's industry sources have indicated that prices will likely remain soft through to mid-year.

“They expect some more buying to come in through the summer, but they see the prices more supported in the $40 [a pound] range, rather than any major appreciation,” Nortier told analysts and investors on a conference call.

Uranium has slumped from around $55/lb in November last year to $44/lb at present, partly as some utilities postpone purchases of the nuclear fuel.

The spot price for uranium touched an all-time high of $138/lb in 2007, before falling back down again.

However, although the short-term outlook remains murky, Nortier said he was “confident” that prices would show a “significant appreciation” in the medium to long term.

“I think that over the next 18 months most of the softness should be sorted out, so if we start looking towards the start of 2011 outwards, we should see a very strong uranium price.”

Most of the world's uranium is sold into long-term contracts, but the spot market has relevance for Uranium One, because a good portion of its supply contracts are market related.

The TSX- and JSE-listed group owns interests in three mines in Kazakhstan, a 50% stake in the Honeymoon project, in Australia, some assets in the US, and the now-mothballed Dominion mine in South Africa.

The firm expects to produce 3,5-million pounds of yellowcake this year from its Kazakh operations,, 2,8-million pounds of which will be sold on an attributable basis.

About 700 000 lb of the group's contracted uranium sales for this year have weighted average floor prices of $43/lb, Nortier said on Monday.

He added that the company's low-cost production profile would position it well to weather any period of prolonged price weakness.

The group also enjoys a strong balance sheet position, after Mitsubishi Corp bought 50% of the Honeymoon asset last year, and Uranium One recently agreed to sell a 19,95% stake in itself to a Japanese consortium for C$270-million.

Shares in the uranium miner declined 2,67% on Monday, to C$2,19 apiece by 13:52 in Toronto.

NO FATAL FLAWS

The firm's 70%-owned Akdala and South Inkai mines are operating well, but there are some teething problems that are still being dealt with at the Kharasan project, in which Uranium One owns 30%.

A detailed study was launched in December to tackle the lower than expected flow rates and uranium in solution concentrations, COO Steve Magnuson said in a presentation.

A new, experienced GM has also been appointed at the mine.

However, Nortier emphasised that the operation itself remained economically viable, even if there were some “regrettable” operational decisions that had been made.

“We certainly have seen absolutely none of what we term 'fatal flaws',” he assured on Monday.

The company still expects the mine to meet production targets.

Analysts may well be concerned by a warning from Uranium One about start-up troubles at an operation, with the Dominion mine debacle still fresh in many minds.

The project, which started production under then-CEO Neal Froneman in mid-2007, repeatedly missed targets and had yet to achieve commercial production when it was put on care and maintenance in October last year.

Uranium One took a $1,8-billion writedown on the asset last year, and will likely still record further charges when it finally sells the mine.

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