Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
While thermal coal has embarked on an astounding surge, natural gas has recovered and oil has rallied more than 70% from 13-year low struck in January, uranium is languishing at decade lows.
U3O8 is down nearly 30% in 2016 with the UxC broker average price sliding to $24.40 a pound on Thursday. Current levels are the cheapest spot uranium has been since April 2005. The long term price, where most uranium business is conducted, has fallen to unprecedented levels below $40 a pound.
Uranium’s weakness persists despite strong fundamentals with only reactors already being built – mostly in China – expected to increase the global need for uranium by a fifth from today’s levels.
Last week’s go-ahead for a $24 billion nuclear power station at Hinkley Point – Europe’s biggest energy project and the UK’s first nuclear project in a generation – should also go a long way in restoring confidence in the market.
But in the short term there seems no relief in sight for the battered industry.
“We expected Japan to move more quickly with restarting their reactors but it didn’t happen. Material that would have been delivered to Japan is now coming onto the market and keeping the price down”
Jonathan Hinze, executive vice president at UxC, quoted by Bloomberg paints a picture of the spot price environment where there is simply too much material available to utilities and little prospect of demand improvement, at least in the short term:
“Some producers and other sellers need to move material for cash flow purposes, and thus, we have seen some pretty aggressive selling in the past few weeks. These market conditions are unlikely to change in the near future.”
In an interview with MINEX Asia in June, Tim Gitzel, President and CEO of Cameco, the world’s number one listed uranium producer representing nearly a fifth of global production summed upped the depressing environment for uranium this way:
“We haven’t seen prices this low for many years. There’s not very much activity on the market, small amounts of material, often changing hands among traders. There is a sense among utilities that there is a lot of uranium around and so there is no urgency to be buying. Utilities are well covered for the next few years so the prices are staying low for now. We expected Japan to move more quickly with restarting their reactors but it didn’t happen. Material that would have been delivered to Japan is now coming onto the market and keeping the price down.”
2 Comments
Greg Marlow
Russia’s suspension of the nuclear accord with the US should provide a boost to uranium prices. The weapon’s grade uranium that was being down blended to commercial grade will no longer be providing up to 19% of world commercial reactor fuel. In addition nuclear weapons stocks will be rebuilt.
Robert Hanson
There is no mention here of the restarts of Japanese reactors where only 3 of about 40 to 50 have restarted. While some will never restart, many will and have an influence on the spot price as well.