Uranium Stocks Continue To Fall As Uranium Spot Prices Sink
March 15 2011 - 11:11AM
Dow Jones News
Uranium miner stocks continued to fall Tuesday on fears that
reactor problems in Japan will halt the worldwide growth of nuclear
power and the consumption of the radioactive metal.
The uncertainty about the situation in Japan, where three
reactors continue to overheat and at least one has suffered a
partial meltdown, has largely halted trading in the uranium spot
market according to a person familiar with the matter, and caused
prices to fall nearly 10% to $60 a pound.
Spot uranium was trading at $66.50 a pound as of March 7,
according to Ux Consulting Co., which publishes spot prices for the
industry.
Shares of Cameco Corp. (CCJ), the largest publicly owned uranium
company, declined 9.1% to $29.65 in recent trading on the New York
Stock Exchange following a 12.7% drop on Monday. Shares of
Australia's Bannerman Resources Ltd. (BMN.AU) saw the steepest
drop, down 33% on Tuesday and losing roughly half their value since
the trouble with Japan's reactors began.
Analysts, who were mostly positive about uranium equities, said
the drop in stock prices was largely overdone. Nevertheless, they
hesitated to recommend jumping into the sector due to the
uncertainty about the situation in Japan and whether the public
reaction would slow the growth of nuclear power.
Dundee Capital Markets analyst David Talbot said "normally we
would be pounding the table" for investors to buy Uranium
Participation Corp. (U.T), which is down 26% from last week, but he
said the outlook was especially uncertain.
"Investors are now entering a period where speculation and
misinformation may run rampant," Talbot wrote in a note to clients.
"We believe this may not go away for some time and struggle to
predict market direction. How this Japanese situation evolves will
play a large role on how the public (and governments) will
ultimately accept nuclear power."
UBS Securities analysts told clients that the troubles in Japan
are "likely to undermine demand growth for uranium, some steel raw
materials and base metals for the next 6-12 months."
The spot price for uranium may also fall further, due to a
combination of Japanese utilities affected by the earthquake and
tsunami deferring deliveries, and as traders that had been
speculating in a rising uranium price exit the market.
Cameco Chief Executive Jerry Grandey said Monday that Cameco
would still be well within its guidance for the year even if all 11
Japanese reactors in the earthquake zone deferred deliveries.
Uranium deliveries to Japan makes up 18% to 20% of Cameco's
long-term revenue forecasts, and 10% to 12% of its revenue for
2011.
There are 442 nuclear power plants in the world, 54 of which are
in Japan, and about 60 reactors currently under construction or
refurbishment in 12 countries.
-By Edward Welsch, Dow Jones Newswires; 403-229-9095;
edward.welsch@dowjones.com