TORONTO (miningweekly.com) - Uranium prices still will need to firm significantly to justify the development of many of the mining projects being considered around the world, Jean Nortier, the CEO of Vancouver-based Uranium One, reiterated on Monday.
Nortier said that he believes the market is underestimating the volume of uranium that will be needed to fuel new reactors being built or planned, especially in Asia, and overestimating the supply, both from mines and other sources, that will be available over the coming decade.
"In our view, current prices are much too low to provide the incentive needed to bring on sufficient new supply to meet the medium- and long-term demand for uranium," he said on a conference call.
The comments echoed similar statements Nortier made in August this year.
Uranium One produces the nuclear fuel from mines in Kazakhstan, and also has projects in Australia and the US.
Nortier said he has been looking at potential acquisitions, but that there are only very limited opportunities out there, even fewer of which would be likely to add value for the company.
"In many of the jurisdictions that we have looked at in some detail, such as Southern Africa, it is very apparent that much higher uranium prices are going to be required to provide the economic incentive needed to move many of the new projects currently being contemplated into the construction stage and ultimately to provide a return for investors," he said.
In Kazakhstan, which is now the world's top uranium producing country, many of the new projects tend to be deeper deposits, requiring more well maintenance and greater volumes of sulphuric acid, Nortier said.
Elsewhere, in places like the US and Namibia, there have been “world class” discoveries made, but the grades are often low.
Uranium oxide concentrate for immediate delivery dropped $2,50 to $43,50/lb last week, Bloomberg reported on Monday, citing market watcher TradeTech.
Currently, primary supply of uranium from mines actually falls short of demand, but the balance – around 50-million pounds a year - is made up by uranium supplied into the market from inventories held by governments, mainly the US and Russia.
However, these supplies are expected to decline over the next ten years, as Russia reaches the end of its programme to recycle highly-enriched uranium from nuclear warheads into low-enriched-uranium fuel for sale to US nuclear power plants.
The so-called 'Megatons to Megawatts' programme is scheduled to conclude at the end of 2013.
Further, although the US Department of Energy has created an overhang on the market by threatening to sell its substantial uranium stockpile – just over 150-million pounds – the department has now indicated that it will manage the inventories in a “responsible” way, Nortier said.
All things considered, Nortier said he estimates that primary supply will need to almost double over the next ten years to satisfy nuclear reactor requirements.
Nortier said he also expects that the growth in global power generating capacity from nuclear will surprise many people over the coming decade.
“In our view, the market continues to underestimate the extraordinary growth already under way in the current nuclear industry build-out, and the impact that this will have on the demand for uranium.”
Part of the reason for this, is that the additions to nuclear generating capacity to a large extent are not coming from the Western world, but from China, Russia, India and Japan, he said.
There are currently 34 reactors under construction in these four countries alone, and they account for over 50% of the 482 reactors globally in the construction, planned or proposed categories.
Earlier on Monday, Uranium One reported that it has received approval from the Kazakh Ministry of Energy and Mineral Resources for its acquisition of a 50% joint-venture interest in the Karatau uranium mine, from Russia's Atomredmetzoloto.
Nortier said he expects the deal will close by December 15.
The company is also still working on closing a C$270-million private placement transaction with a Japanese consortium, as well as its acquisition of the Irigaray in situ recovery central processing plant, the Christensen Ranch satellite ISR facility and the associated uranium resources in the Powder River Basin, in Wyoming.
Both transactions are awaiting regulatory approvals.
On Friday, Uranium One reported that it lost $11,9-million in the third quarter, compared with a $2-billion loss a year earlier, when the firm recorded a massive write-down mainly related to its Dominion project.
Shares in the company rose 5,6% on Monday, to C$3,56 apiece by 16:18 in Toronto.