Uranium Price Weak, But Miners Moving Ahead With New Projects

Even as uranium prices remain weak due to a flood of supplies and lower demand, many companies are moving forward with uranium project developments, hoping to capitalize on the eventual rebound in prices.

Greenland is looking to start construction of the world’s fifth-largest uranium mine and second-biggest rare earths operation to help diversify its economy and reduce its financial dependence on Denmark. Even though the near-term outlook for uranium demand is weak, Greenland really wants to reduce its dependence on a locked Danish subsidy of 3.2 billion DKK (about $500 million), which constitutes about half of its budget. The mine would have an annual processing capacity of 3 million tons a year and is already facing stiff environmental opposition.

More immediate, Vimy Resources recently cleared he last environmental hurdle needed to be scaled before it can build its Mulga Rock uranium mine. The Australian mine will be a major producer, according to its feasibility study, producing 1,360 metric tons of uranium oxide (U3O8) per year. For comparison, Australia’s Olympic Dam mine, the largest uranium deposit in the world, produces 4,500 metric tons of U3O8 per year.

Spot uranium prices, currently sitting around $25.50 per lb, according to prices compiled by UxC, remain weak with the market still suffering in the aftermath of the Fukushima nuclear disaster. Still, prices have rebounded since last since early winter when they fell to around $17 per lb.While right now it does not make sense to expand uranium output, miners and analysts are maintaining their position that over the long-run, uranium prices will rally again as demand will increase. By diligently exploring and expanding reserves right now, these miners could position themselves to benefit from the expected uranium resurgence. In the meantime; however, their job will be hard as they may struggle to raise capital with banks reluctant to fund a sector facing large fundamental pressures.

Leia Toovey has a B.Sc. in geology from Simon Fraser University, and her degree had a focus on resource economics. Out of school, she started working in the booming mining industry of Vancouver, Canada, covering junior mining stocks and commodities including potash, copper, nickel, oil and gold. Then she moved to New York and worked as a commodities analyst covering a breadth of commodities, from the Baltic Dry Index through the softs. As a geologist she has a greater understanding of the exploration and extraction side of commodities, and how changes in technology and the depletion of resources impact pricing. At Economic Calendar she covers a variety of commodities, providing daily technical and fundamental analysis and assessing major market developments.