The uranium market recovery has been gathering momentum in recent months and I have been reading about greater confidence for a more sustained recovery with higher uranium prices in the short to mid-term.
In recent times the spot price for uranium has increased from a low of US$28.00/Lb in May 2014 to the recent close of $42.00/Lb, an increase of 50%! See UxC chart below:
There are many reasons to explain the recovery including a lot of positive media announcements. Reports of new nuclear plant builds (USA, Iran, Middle East, etc.), the US-China climate change deal, the threat of Russian sanctions, North American labour disputes, the approval to restart nuclear plants in Japan and a lessening of the negativity surrounding the Fukushima meltdown in 2011. These are generally qualitative and not quantitative (i.e. within a 2-3yr timeframe), and could be short-term drivers of the uranium price. Of course, they are important and I am not trying to trivialize. Take the restarts in Japan: this will have a very minor immediate impact on demand but the implication is that there will be many more restarts to follow and the dumping of uranium by Japanese utilities will need to stop.
The market fundamentals have also improved as there is more evidence that the market is driven by security of supply concerns. Utilities (governments and corporate) have become worried about securing sufficient offtake from safe jurisdictions, so much so that they are investing directly in uranium projects and mines. Indeed, the market as a whole is beginning to realize that security of supply is a major factor underlying global production, highlighted by the prolonged and dramatic decline in both near and long-term supply projections. When taken together with the new nuclear builds and proposed plants, there is a serious supply squeeze on the horizon.
For those readers that feel I am dismissing renewable energy solution, don’t, as I agree these energy sources will form put of the future energy supply mix but all of the supposedly ‘green’ energy technologies are intermittent. Today, not one of them provides a base load, steady, reliable source of power without backup from traditional sources of energy including gas and hydro.
I do believe the uranium price and market will continue to recover and that recent gains achieved will not be lost.
The recovery of the uranium spot price and the sector as a whole couldn’t happen at a better time for Forsys. We recently closed a private placement, raising $2.4 million, which we are using to complete a NI43-101 Feasibility Study, due for completion in Q1 2015, that will help secure project financing and commencement of construction at Norasa.
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