SOURCE: Resource Capital Research

December 17, 2008 07:00 ET

Resource Capital Research -- December Quarter 2008

Equity Research Report on Global Uranium Companies

SYDNEY, AUSTRALIA--(Marketwire - December 17, 2008) -


Key Points

Uranium Market:

--  The spot uranium price is US$54/lb and we expect it to trade in the
    range US$50-65/lb into 1Q09.
    
--  Recent mine production cutbacks, project deferments and anticipated
    increased utility uranium purchases 1Q09 are supporting the near term
    sector price outlook.
    
--  The industry long term uranium price is US$70/lb, down US$10/lb (from
    US$80/lb) 3 months ago.
    
--  The fund implied uranium price, a key leading indicator, has recently
    traded from a high of US$60/lb (8 Sept) to a low of US$28/lb (23 Oct) and
    is currently US$42/lb, suggesting the possibility of forced fund sales are
    perceived to be declining though remain a market risk.
    
--  Planned and proposed new nuclear power reactors worldwide increased
    December '08 to 376 units, up from 318 August '08 (+58 units, +18%). The
    main increases are UAE (11), Italy (10), UK (6), Vietnam (6) and Poland
    (5).
    
--  Interestingly, a significant number of new planned and proposed
    reactors announced since August are in advanced, non Asian economies such
    as Europe, confirming potential for growth in nuclear reactor demand in
    developed economies.
    

Uranium Companies:

--  The market valuation of Australian companies with one or more uranium
    projects is down 23% over the past month and down 75% over the past 12
    months (from December 5).
    
--  This compares with a selection of Canadian companies with one or more
    uranium projects, down 27% over the past month and down 77% over the past
    12 months (from December 5).
    
--  Production and development stage companies continue to face
    significant challenges in financing and developing new projects, including
    cost pressures and potential delays variously relating to permitting,
    infrastructure development, commissioning and now credit and equity market
    weakness.
    
--  Strategic interest in large scale projects continues in Namibia with a
    takeover offer for Forsys Metals valued at US$7.50/lb U3O8 and Rio Tinto's
    interest in Extract Resources project.
    

Resource Capital Research ("RCR"), an equity research company which focuses on small and mid size resource companies, launched its major quarterly research report covering 19 global uranium exploration and development companies.

To access the free summary report or to purchase the complete 96 page comprehensive uranium company review, go to www.rcresearch.com.au/reports. RCR also published the December quarter gold company review 21 November 2008 which is available at www.rcresearch.com.au/reports.

Equity market performance

The market valuation of Australian companies with one or more uranium projects is down 23% over the past month, down 55% over the past 3 months, and down 75% over the past 12 months. This compares with Canadian companies with one or more uranium projects, down 27% over the past month, down 64% over the past 3 months, and down 77% over the past 12 months.

In the past 1 month the majors have had negative share price performance with the exception of ERA: Cameco is down 12%, Denison Mines down 53%, Uranium One down 17%, Energy Resources of Australia up 8% and Paladin down 16%.

Uranium price outlook

The uranium price is expected to trade ~US$50-65/lb over the next quarter. While sector fundamentals suggest a modest strengthening in the spot price is possible into 1H09, the Fund Implied Price (FIP), currently at US$42/lb indicates market uncertainty and the susceptibility to further forced uranium fund sales a possibility.

In the past 3 months the FIP has traded from a high of US$60/lb (8 Sept) to a low of US$28/lb (23 Oct) with volatility reflecting the increased volatility and uncertainty in the broader financial markets.

"Producers continue to face significant challenges in financing and developing new projects, including cost pressures and potential delays variously relating to permitting, infrastructure development, commissioning and now credit and equity market weakness. Recent mine production cutbacks, project deferments and anticipated increased utility uranium purchases 1Q09 are supporting the near term sector price outlook," said John Wilson, Managing Director of RCR.

About Resource Capital Research

Resource Capital Research ("RCR") (www.rcresearch.com.au) was founded in 2004. RCR provides investors with in-depth reports on current investment opportunities in the mining sector both in Australia and globally. The focus is on small and mid cap resource companies, within the gold and uranium sectors. John Wilson the principal of the firm and analyst has over ten years' experience analyzing mining companies in Sydney and on Wall Street for major investment banks.

The report is available at www.rcresearch.com.au. The next Uranium and Gold Sector Reviews will be published in the March Quarter 2009.

Contact Information

  • For further information please contact:
    John Wilson
    Analyst, Resource Capital Research
    Phone: (+61- 2) 9252 9405
    Email: Email Contact