The uranium price is regaining momentum

The uranium price is regaining momentum

By: Fat Prophets

Uranium prices rose 7% this week after Cameco Corp delayed a project and both Uranium One and Paladin Resources cut their production forecasts.

Uranium oxide concentrate for immediate delivery, which is used to manufacture fuel for nuclear power plants, rose to US$90 a pound, from US$84 at the end of last week, according to the Denver-based pricing service, TradeTech LLC. Uranium has jumped 20% over the past month.

The advance "gained momentum as news of production shortfalls made its way into the market," TradeTech said in its report. That "prompted sellers to withdraw from the market."

Production delays will worsen a uranium shortage that in June helped propel the price to a record US$138 a pound. The shortfall in supply has already forced producers including Cameco and AngloGold Ashanti to buy material on the spot market this year to meet contracts.

Bloomberg reports that uranium miners last year produced 103 million pounds of the metal, equal to about 65% of world demand. The rest came from government stockpiles and material extracted from decommissioned nuclear weapons.

Cameco has announced that it will delay the start of its Cigar Lake mine to 2011. The mine was originally expected to account for about a 10th of world output from this year. It is the largest untapped source of uranium in the worlds, but was flooded during October 2006.

Paladin, the Australia-based company producing uranium in Namibia, said in late October that it will produce 650,000 pounds at the Langer Heinrich mine in the second half of this year, a third less than expected.

Uranium One, owner of South Africa's biggest uranium deposit, has cut its 2008 production target by 38% because of a shortage of sulfuric acid, an essential component necessary in recovering uranium from the ore.

The company's shares fell by 18% to C$10.49, representing the company's biggest share price fall since Nov 1 2004, and its market value was cut to US$5.17 billion.

The company now expects to produce 4.6 million pounds of uranium oxide next year, down from an earlier forecast of 7.4 million pounds, citing a shortage of sulfuric acid needed to process ore in Kazakhstan.

Uranium One also reduced its forecast for production of uranium oxide this year by 16% to 2.1 million pounds because of delays in commissioning a South African plant.

Uranium rose for the third straight week to US$84 a pound on Oct 26, according to Metal Bulletin. The metal had fallen as low as US$75 a pound during October from the June peak after some nuclear-power operators temporarily withdrew from the market.

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