By Barry FitzGerald
Uranium prices are on the march again, moving up from around the $US40 a pound mark in the June quarter to $US58.50 a pound.
But we ain’t seen nothing yet according to John Borshoff, the tell ‘em as you see it managing director of Perth-based African uranium producer Paladin Energy.
In a conference call with analysts this week, Borshoff said that the recent upwards price increase for the radioactive material tells us that ‘’supply remains in some sort of trouble''.
Paladin – currently a second tier 2 producer - is doing its bit at its African mines with plans to double production by 2016. According to Borshoff, it is the Tier 1 producers that are letting the supply side down.
‘’Rio (Tinto) have old projects and any new endeavours that they may undertake will only facilitate replacement pounds rather than provide additive contribution,’’ Borshoff said.
‘’BHP (Billiton) are caught up in a metallurgical merry-go-round at Olympic Dam, with no significant contribution (in terms of additional pounds of production) in the near term.’’
‘’Areva (the French nuclear power giant) are battling demons at their African projects and (Canada’s) Cameco have no significant increase until well after 2015,’’ Borshoff said.
On the demand side, Borshoff reckons that China has come ``out of its slumber’’ and piled up 133 million pounds in long-term supply contracts.
‘’Although they have sucked (up) a chunk of new production they are nowhere near their target of acquiring in the vicinity of 45-50 million pounds per annum by 2020.’’
Meanwhile, Korea, the Middle East, Japan, and to a lesser degree Russia, have yet to fully secure their (uranium) positions and are on the prowl for long-term supplies.
So according to Borshoff, there is an avalanche of demand – not the oversupply that the World Nuclear Association talks about.
‘’Ho, hum, who believes them anymore,’’ Borshoff said.
‘’I feel some real action is about to start, if it hasn’t already, and the customers are starting to jockey for the very limited (supply) positions there are available,’’ he said.
That’s all very interesting and means that apart from anything else, Borshoff can forget about getting Xmas cards from Rio, BHP, Areva and Cameco.
But he might get something better from one of them – a takeover bid. A $3.3 billion company, Paladin’s operating mines and reserve/resource base have particular strategic appeal, more to the integrated Arevas and Camecos than the pure miners, Rio and BHP.
That strategic appeal is not something fully reflected in Paladin’s share price, even if it has come up off its 52-week low of $3.37 a share to get to the $4.59 a share close on Tuesday (down 12 cents a share on the day).
Paladin’s market capitalisation is a whole lot bigger than Garimpeiro normally deals with. Those looking for something at the smaller end for uranium exposure in response to Borshoff’s vision splendid are spoilt for choice.
Uranium’s run before the global financial crisis to a peak of $US136 a pound spawned more uranium exploration stocks than you could poke a stick at. One that keeps getting a mention around the traps is Aura Energy. It has the twin focus of Sweden and west Africa, with an exploration program in Mauritania said to be worth watching.
bfitzgerald@theage.com.au