The uranium spot price has dipped sharply in the face of the current global economic crisis, plummeting from the $90/lb reached in January to the current level of $46/lb.
This is some way off the all-time-high spot price of $136/lb reached in 2007, when fears of a supply shortage loomed large, and the nuclear industry moved back in vogue as the world continued to move to energy sources with a smaller carbon footprint.
Murchison United MD Mark Reilly says while the spot price has declined over the past 12 months, the long-term contract price is still at a much higher level, reaching $80/lb to $90/lb.
“In addition, the spot price is only representative of approximately 10% to 15% of the supply, with the rest of the supply secured under long-term contracts.”
The Australia- and London-listed uranium and copper explorer has a portfolio of emerging projects in West Africa and Australia.
Despite current economic conditions, Reilly remains upbeat about the prospects for uranium, used as fuel in nuclear power stations.
“It is our view that there will still be a supply deficit for some time to come, and we don’t believe that countries such as China and India will be scaling back their development plans for nuclear power,” he notes.
According to a September report by Australia-based equity research company Resource Capital Research (RCR), the number of planned and proposed nuclear power reactors worldwide has risen substantially over the past two years, much of this increase coming from fast-growing econo- mies, such as China.
RCR notes that there were 222 reactors on the drawing board in January 2007, and that this had increased to 318 reactors by August this year.
This compares with 439 nuclear reactors currently in operation, and 36 under construction.
A total of 60 new reactors are expected to be commissioned by 2014.
Murchison has three uranium exploration projects in the West African country of Guinea, namely Bohoduo, Sesse and Firawa.
The company’s maiden drilling programme, conducted at its 100% Firawa project, was completed in May last year, with results from this drill programme confirming the presence of ura- nium mineralisation over what the company terms a “highly prospective 2-km section of a previously identified 5-km-long uranium anomaly”.
A 4 000-m diamond core drilling programme has now also started for the second drilling campaign at Firawa.
Comprising about 50 holes of up to 200 m in depth, the programme is predominantly infill drilling aimed at enabling an initial Joint Ore Reserve Committee (Jorc) code-compliant uranium resource to be delineated.
“Subject to drilling results, we expect a Jorc resource at Firawa in the first half of next year.
“Development decisions will be clearer when we have a better idea of the size of the resource,” says Reilly.
Murchison’s other projects are located in another West African country, Mauritania, and in Western Australia and Queensland, in Australia.