SOURCE: Resource Capital Research

March 27, 2008 13:59 ET

Resource Capital Research Publishes Its New Global Uranium Equity Research Report

March Quarter, 2008

SYDNEY, AUSTRALIA--(Marketwire - March 27, 2008) - Resource Capital Research ("RCR"), an equity research company which focuses on small and mid size resource companies in the gold and uranium sectors, today launched its major quarterly research report covering 24 global uranium exploration and development companies with a focus on Australia, Canada, USA and UK.

Key Points

Uranium Market:

--  The spot uranium price is US$74/lb, down 20% from US$93/lb 3 months
    ago (and US$1/lb off its low of US$73/lb, Feb. '08) and 46% off the high of
    US$138/lb reached June '07.
--  Forward indicators (fund implied price) currently indicate a modest
    upward move to a uranium price around US$80/lb to US$85/lb, though in the
    past 3 months uranium price volatility has increased.
--  Indicators currently suggest the market expectation is for a uranium
    price of US$105/lb by September 2008.
--  Uranium fund sentiment and activity remain important factors in the
    outlook for the spot uranium price with holdings of around 20 Mlb U3O8.
--  Planned and proposed new nuclear power reactors worldwide continue to
    increase. From Jan. '07 to Jan. '08 there was an increase of 93 reactors
    from 222 reactors (Jan. '07) to 315 reactors (Jan. '08), an increase of 42%
    in 12 months.
--  China announced plans (March '08) to increase its target for installed
    nuclear power capacity to 60 GWe by 2020, up from a 40 GWe target
    previously, and 120-160 GWe by 2030. The country currently has 11 nuclear
    reactors in operation generating 8.6 GWe, and 116 reactors planned or
    proposed.
    

Uranium Companies:

--  The market valuation of Australian companies with one or more uranium
    projects (263 companies) is down 8% over the past month, down 27% over the
    past 3 months, and down 12% over the past 12 months.
--  This compares with a selection of 285 Canadian companies with one or
    more uranium projects, up 11% over the past month, down 1% over the past 3
    months, and down 16% over the past 12 months.
--  The junior end of the market has been disproportionately hurt by the
    subprime market fall out and earlier than expected peak in the uranium
    price.
--  Juniors are making solid progress advancing through important project
    milestones. Of particular note is the number of companies and projects in
    Namibia, elsewhere in Africa and Australia that continue to announce new
    resources or project studies.
    

The quarterly report typically reviews companies active in established uranium districts globally, including Australia, Canada, USA, Argentina, Peru, Mongolia, Zambia, Tanzania and Namibia.

To access the free summary report or to purchase the complete 94 page comprehensive report, go to www.rcresearch.com.au/reports.

Equity market performance

The market valuation of Australian companies with one or more uranium projects (263 companies) is down 8% over the past month, down 27% over the past 3 months, and down 12% over the past 12 months. This compares with a selection of 285 Canadian companies with one or more uranium projects, up 11% over the past month, down 1% over the past 3 months, and down 16% over the past 12 months.

In the past 3 months the majors have had mixed performances: Cameco (CCO) is up 10%, Denison Mines (DML) up 6% (+28% in the past month), Uranium One (UUU) down 43%, Energy Resources of Australia (ERA) up 22% and Paladin (PDN) down 13%.

The junior end of the market has been disproportionately hit by the subprime credit/liquidity crises, exacerbated in the uranium sector by a pull back from the earlier than anticipated peak in the uranium price (June '07). Selective share price outperformance has been driven by company specific newsflow and market position.

Uranium price outlook

The spot uranium price is US$74/lb, down 20% from US$93/lb 3 months ago (and US$1/lb off its low of US$73/lb, Feb. '08) and 46% off the high of US$138/lb reached June '07.

Forward indicators (fund implied price) currently indicate a modest upward correction to the uranium price to around US$80/lb to US$85/lb, though in the past 3 months the fund implied price has ranged from US$70/lb to US$95/lb and uranium price volatility has increased. Indicators currently suggest the uranium price market expectation is US$105/lb by September 2008, and this has been relatively stable over the past few months at US$100/lb to US$108/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 since May '07.

These expected price levels are revised down from the RCR December uranium quarterly when indicators suggested a near term uranium price of US$90/lb and US$125/lb (-16%) Sept. '08.

Uranium fund sentiment and activity remain important factors in the outlook for the spot uranium price. The funds are thought to hold about 20Mlb U3O8, which represents a significant percentage of the annual spot market volume, of about 18Mlb to 28Mlb. This leaves the spot market price highly susceptible to further fund activity -- and positively impacted late February by Uranium Participation Corp. announcing a C$65m capital raising to fund further uranium purchases.

World planned and proposed nuclear power reactors expanding

Planned and proposed new nuclear power reactors worldwide continue to increase. From Jan. '07 to Jan. '08 there was an increase of 93 reactors from 222 reactors (Jan. '07) to 315 reactors (Jan. '08), an increase of 42% in 12 months and an increase of 106% from 153 reactors 18 months ago (May '06). This compares with 439 nuclear power reactors currently in operation and 34 under construction.

In addition, a number of governments have called for a review on reactor closures or have indicated their support for, or plans to accelerate, reactor build -- these include the UK, and the USA. In March '08 China announced plans to increase its target for installed nuclear power capacity to 60 GWe by 2020, up from a 40 GWe target previously, and 120-160 GWe by 2030. The country currently has 11 nuclear reactors in operation generating 8.6 GWe, and 116 reactors planned or proposed.

Events of the past 3 months include:

Industry

--  Uranium production in 2007 was 107Mlb U3O8 up from 103Mlb in 2006, an
    increase of 4Mlb U3O8 and short of industry expectations.
--  Kazakhstan reported uranium production of 7827t U3O8 in 2007, up 25.7%
    from 6228t U3O8 in 2006. A new sulphuric acid plant at Balkhash (cap.
    1.2Mtpa) is expected to be commissioned mid '08.
--  Rising prices of competing energy sources highlighted with the price
    of oil spiking over US$110/bbl March '08.
    

Companies

--  Further production delays announced include delayed commissioning of
    the Dominion Mine in South Africa (Uranium One) due to factors including
    disruption to power supplies and equipment breakdowns. Production in 2008
    is now expected to be 3.15Mlb U3O8 which follows previously revised
    production cuts to 4.6Mlb (from 7.4Mlb U3O8). Forecast production for 2009
    has been cut to 6.8Mlb U3O8.
--  Cameco announced it had successfully plugged Cigar Lake, which has
    potential to produce ~7.5kt pa U3O8 from or after 2011.
--  Trekkopje heap leach uranium project in Namibia is targeting July '08
    commissioning, subject to Areva securing a firm power supply agreement with
    NamPower. (UraMin production target 8.5Mlb pa).
--  Junior and mid cap companies continue to advance new projects. Equinox
    Resources (EQN) is expected to release its updated feasibility study for a
    standalone uranium plant at Lumwana (Zambia) 1H08. African Energy Resources
    (AFR) is expected to release a PFS for its Chirundu uranium project
    (Zambia) 2Q08. Contact Uranium (ASX: CTS) is expecting to announce a
    significant upward revision to its resource base at Corachapi (Peru) late
    2Q08. An enhanced scoping study is expected at Bigrlyi in the NT (53%,
    Energy Metals (EME)) 2Q08. Extract Resources (ASX: EXT) (TSX: EXT) expects
    to announce an initial resource at Ida Dome (Namibia) 2008. Globe Uranium
    (GBE) expects to complete a scoping study at the Kanyika uranium/specialty-
    metal project (Malawi) 2Q08. Significant resource upgrade expected at
    Kvanefjeld (Greenland, Greenland Minerals) (GGG) Mar. '08. Black Range
    (BLR) expects to release its scoping study for Taylor Ranch 1H08. An
    initial resource is expected at Bennett Well (WA, Scimitar Resources, SIM)
    Mar. '08. Toro Energy (TOE) expects to complete a PFS at Lake Way/Centipede
    2Q08. Uranex (UNX) has scoping studies expected at Thatcher Soak (WA) and
    Bahi (Tanzania) 2Q08. West Australian Metals (WME) expects a resource
    expansion at Marenica (Namibia) Mar. '08.
    

"The junior end of the market has been disproportionately hurt by the subprime market fall out and earlier than expected peak in the uranium price. Nonetheless, many companies continue to make solid progress advancing through important project milestones. Of particular note is the number of companies and projects in Namibia, elsewhere in Africa and Australia that continue to announce new resources or project studies," John Wilson, Managing Director of RCR, noted.

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 uranium and gold mining sectors 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 analysing 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 June Quarter, 2008.

Abbreviations: WNA - World Nuclear Association, lb - pound, Mlb pa - million pounds per annum, GWe- Giga Watt electric, U3O8 - uranium oxide, bbl - barrel.

Contact Information

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

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