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Japan reinforces nuclear commitment, M&A speculation resumes

by Greg Klein | February 25, 2014

Japan has strengthened its commitment to nuclear energy in a draft policy document released February 25, the Financial Times reports. While Shinzo Abe’s pro-nuclear efforts have so far focused on the short term, the document indicates a more far-reaching strategy, according to the FT: “The energy plan, expected to be approved by Mr. Abe’s cabinet by the end of March, could open the door to a nuclear revival, possibly even including the construction of reactors.”

The paper cautions, however, that the plan to recommission some existing plants “still faces hurdles and any restarts must be approved by safety regulators and local governments.”

While polls show a majority of Japanese oppose nuclear energy, a February 23 local government election saw a pro-nuclear candidate defeat rivals who campaigned against a proposal to build a reactor in the region, the FT states.

Abe’s predecessor Naoto Kan opposed nuclear energy but with only limited backing from his own cabinet. Business groups support nuclear power for its relatively low cost. Even so, Japanese industry minister Toshimitsu Motegi “sought to play down the degree of change in energy policy, noting that the energy plan still committed the country to ‘reducing its reliance on nuclear power as much as possible,’” the FT points out.

The paper adds that Japanese re-starts could affect global liquefied natural gas markets. Japan’s post-Fukushima imports pushed up LNG prices in Asia and Europe. “Any moderation in Japanese demand could take some of the heat out of the global LNG market.”

We’ve only been about one year into this project and we’d hate to have a situation where we sell and the best drill hole comes afterwards.—Fission Uranium CEO
Dev Randhawa, as quoted by Bloomberg

Meanwhile anticipated Japanese restarts have renewed interest in mergers and acquisitions, Bloomberg reported on February 21. “The rebound in uranium demand may fuel takeovers as buyers try to get ahead of rising prices,” according to a Bank of Nova Scotia statement quoted by the news agency.

“Now is a great time for cherry-picking good assets,” Cantor Fitzgerald analyst Rob Chang told Bloomberg. “We think 2014 is going to be really the kick-off year for the uranium space. The timeframe for cheap acquisitions may be running out.”

Denison Mines TSX:DML and Fission Uranium TSXV:FCU figure prominently in analysts’ speculation. Denison holds interests in exploration and development projects as well as the Athabasca Basin’s McClean Lake mill, one of the world’s largest uranium processing facilities. Fission Uranium’s sole asset is Patterson Lake South, an early-stage sensation that has yet to produce a resource estimate.

David Sadowski, an analyst at Raymond James, told Bloomberg, “If you’re Rio Tinto [NYE:RIO], you just bought a bunch of pounds in the Athabasca Basin and you’ve got nowhere to process those pounds. Why not buy Denison right now?”

The news agency cited Cameco Corp TSX:CCO as another possible suitor.

Fission Uranium chairman/CEO Dev Randhawa told Bloomberg his company has signed three non-disclosure agreements, one with a Chinese interest.

His own company recently acquired joint venture partner Alpha Minerals, presumably to make PLS a more attractive takeover target. Even so, Randhawa said an acquisition of Fission Uranium might be premature. “We’ve only been about one year into this project and we’d hate to have a situation where we sell and the best drill hole comes afterwards,” Bloomberg quoted him. “Our investors don’t want us selling with uranium at $35 a pound, but at the same time we don’t control the people who are buyers.”

See a roundup of last week’s uranium news.

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