SOURCE: Resource Capital Research

December 18, 2007 08:22 ET

Resource Capital Research Issues Fourth Quarter Equity Research Report on Global Uranium Companies

SYDNEY, AUSTRALIA--(Marketwire - December 18, 2007) - Resource Capital Research ("RCR"), an equity research company which focuses on small and mid size resource companies, today launched its major quarterly research report covering 28 global uranium exploration and development companies with a focus on Australia, Canada, USA and UK. Over 500 junior and mid cap explorers, development and production companies are identified.

The report reviews companies active in established uranium districts globally, including Australia, Canada, USA, Argentina, Peru, Mongolia, Zambia, Tanzania and Namibia. US traded Unor Inc. (TSX-V: UNI) (PINKSHEETS: UNOFF), ASX listed Contact Uranium (ASX: CTS) and dual TSX and ASX listed Equinox Minerals (ASX: EQN) (TSX: EQN), Extract Resources (ASX: EXT) (TSX: EXT) and Bannerman Resources (ASX: BMN) (TSX: BAN) are covered in the December 2007 report.

To access the free summary report, go to www.rcresearch.com.au. To purchase the complete 108 page comprehensive report, go to http://www.rcresearch.com.au/documents.

Uranium Highlights - 4Q 2007

Uranium Market:

--  The spot uranium price is US$93/lb, up 9% from US$85/lb 3 months ago
    (and up 24% from its low of US$75/lb, October 2007) and down 33% from its
    high of US$138/lb 6 months ago.
--  Forward indicators currently suggest a flat outlook for the uranium
    price of around US$90/lb to US$100/lb over the next few months.
--  Indicators currently suggest the uranium price market expectation is
    US$125/lb by September 2008.
--  Uranium fund sentiment and activity remain important factors in the
    outlook for the spot uranium price.
--  Planned and proposed new nuclear power reactors worldwide have
    increased strongly from January to October 2007. As reported by the World
    Nuclear Association (WNA), the number of planned and proposed reactors has
    increased from 222 reactors (January 29) to 316 reactors (October 17), an
    increase of 94 reactors (or 42%).
--  China has announced 116 planned and proposed new nuclear power
    reactors, up from 63 in January 2007 (an increase of 84%); and the USA is
    up from 23 in January 2007 to 32 units (up 39%).
    

Uranium Companies:

--  The market valuation of Australian companies with one or more uranium
    projects is unchanged over the past month, up 21% over the past 3 months,
    and up 47% over the past 12 months.
--  This compares with a selection of 306 Canadian companies with one or
    more uranium projects, down 15% over the past month, up 5% over the past 3
    months, and up 14% over the past 12 months.
--  Juniors are making solid progress advancing through important project
    milestones. Of particular note is the number of companies and projects in
    Namibia that have announced new resources or project studies; these include
    Extract Resources, Bannerman Resources, Deep Yellow and West Australian
    Metals. In addition, Paladin Energy is continuing to ramp up production at
    the Langer Heinrich uranium mine in Namibia.
--  The quarterly report feature article reviews licensing issues for U.S.
    uranium properties (part 2).
    

Equity market performance

The market valuation of Australian companies with one or more uranium projects (272 companies) is unchanged over the past month, up 21% over the past 3 months, and up 47% over the past 12 months. This compares with a selection of 306 Canadian companies with one or more uranium projects, down 15% over the past month, up 5% over the past 3 months, and up 14% over the past 12 months.

In the past 3 months the majors have had mixed performances: Cameco (CCO) is down 4%, Denison Mines (DML) up 10%, Uranium One (UUU) down 17%, Energy Resources of Australia (ERA) up 16% and Paladin (PDN) up 25%.

Uranium price outlook

The spot uranium price is US$93/lb, up 9% from US$85/lb 3 months ago (and up 24% from its low of US$75/lb, October 2007) and down 33% from its high of US$138/lb 6 months ago.

Forward indicators currently suggest a flat outlook for the uranium price of around US$90/lb to US$100/lb over the next few months though in the past 3 months indicators have ranged from US$90/lb to US$120/lb. Indicators currently suggest the uranium price market expectation is US$125/lb by September 2008, and have been relatively stable over the past few months at US$125/lb to US$135/lb.

The September 2008 indicator reached a high in 2Q07 of around US$210/lb and a low in 3Q07 of around US$70/lb. The industry average long term uranium price has remained firm at US$95/lb.

These expected price levels are revised down from the RCR September uranium quarterly when indicators suggested a near term uranium price of US$90/lb and US$120/lb (4%) September 2008.

Uranium fund sentiment and activity remain important factors in the outlook for the spot uranium price. The funds are thought to hold about 20mlbs U3O8, which represents a significant percentage of the annual spot market volume, of about 18mlbs to 28mlbs. This leaves the spot market price highly susceptible to further fund activity.

The drivers of the recent spot market pullback have been:

--  Utilities near term demand needs covered.
--  Primary producers near term demand needs covered.
--  Uranium investment funds started to sell inventory.
--  Traditional slow period during the northern hemisphere summer.
    

The market fundamentals are considered to remain robust with strong and increasing demand for new nuclear power reactors, especially from China, USA, Russia, Ukraine and India.

World nuclear power reactors continue to expand

Planned and proposed new nuclear power reactors worldwide continue to increase. From January 2007 to October 2007 there was an increase of 94 reactors from 222 reactors (January 2007) to 316 reactors (October 2007), an increase of 42% in 10 months and an increase of 107% from 153 reactors 18 months ago (May 2006). This compares with 439 nuclear power reactors currently in operation.

Events of the past 3 months include:

Industry

--  The Australian Labor Party won the federal election in November 2007 --
    concern about climate change was a high profile issue.
--  The European Union's (EU) director general of Transport and Energy
    affirmed the strategic potential for nuclear power to help meet the EU's
    2020 carbon emissions reduction targets. The EU parliament endorsed nuclear
    power as indispensable.
--  The International Atomic Energy Agency forecasts global nuclear
    generation to increase to between 447GWe (+25%) and 679GWe (+93%) by 2030,
    up from 370GWe currently.
    

Companies

--  Further production delays announced include delayed commissioning of
    the Dominion mine in South Africa (Uranium One). A temporary shortage of
    sulphuric acid has reduced production forecasts for KazAtomProm and Uranium
    One in Kazakhstan in 2007 and 2008. Uranium One revised production to
    4.6mlbs from 7.4mlbs U3O8 for 2008.
--  Kazakhstan aims to increase uranium production from 4,400t in 2005 to
    18,000t in 2010.
--  Extract Resources (ASX: EXT) released its scoping study for the Ida
    Dome (Husab) project, Namibia. The project has an envisaged plant capacity
    of 6mtpa, producing 2.9mlbspa U3O8, opex of US$29/lb U3O8 and capex of
    US$211m. The target resource head grade is 0.026% U3O8. An initial
    resource, targeting 30mlbs U3O8 is expected 1Q08.
--  A number of Australian companies achieved notable milestones,
    including West Australian Metals (WME) with an initial resource at
    Marenica, Namibia; Deep Yellow (DYL) an initial resource at the Tumas,
    Namibia. Black Range (BLR) announced a large resource upgrade at Taylor
    Ranch, USA (Colorado). African Energy Resources (AFR) expanded resources at
    the advanced Chirundu JV, Zambia, where a scoping study was completed 2Q07.
--  Cameco announced a JV with U3O8 Limited (UTO) covering both parties'
    Ashburton (Washington) tenements (1,200km2). The area has potential for
    unconformity style uranium deposits.
--  Reliance Industries Limited (Australia) "RILA" -- a major Indian oil
    and gas producer and Fortune Global 500 Company farming into Uranium
    Exploration Australia (UXA) grassroots projects in South Australia and
    Northern Territory (A$12.9m) prospective for IOCGU and unconformity
    deposits.
--  The U.S. Nuclear Regulatory Commission (NRC) received its first
    application since 1988 for a new uranium mine -- Moore Ranch, Wyoming
    (Uranium One). The NRC said it is expecting at least 15 applications for
    new uranium projects over the next 3 years.
    

"Over the past few months the uranium price bounce to US$93/lb off its low of US$75/lb has buoyed the sector, though upside price momentum has not returned to levels seen in earlier in 2007. Recent uranium company performance has been driven largely by company specific news flow," noted John Wilson, Managing Director of Resource Capital Research.

About Resource Capital Research

Resource Capital Research ("RCR") (www.rcresearch.com.au) was founded in 2004 and is based in Sydney. 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, ranging from exploration stage, through development and production. John Wilson the principal of the firm and analyst has over ten years' experience analyzing mining companies in Sydney and on Wall Street including for major investment banks.

The report is available at www.rcresearch.com.au. The next Uranium Sector Review will be published in the March Quarter, 2008.

Abbreviations: lb - pound, Mlb pa - million pounds per annum, U3O8 - uranium oxide.

Contact Information

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