by Greg Klein | November 7, 2014
Purchases by utilities helped boost uranium by $2 on November 6 in a rally that might carry miners with it, stated Dundee Capital Markets analyst David Talbot. TradeTech’s price indicator hit $39 a pound U3O8 while Ux Consulting determined a price of $39.25, according to Talbot’s November 7 note. That marks a 40% increase since last summer’s lows of $28, he added.
Talbot attributed the price increase not to news about Japanese reactor restarts, but to buying. “It is the utilities that are starting to enter the market, suggesting that this rally could have some sustainability. While equities did not partake on previous price increases, they did overnight in Australia and we expect today should be a good day in North America, and the potential catalyst for upward momentum in the stocks.”
We have always said, just like in 2006-2007, when contracting begins and the price moves, it will move fast.—David Talbot
A large purchase by Exelon Corp, the largest American nuclear utility, “has now spurred buying interest from other nuclear power providers such as Southern, Duke, Florida Light and Power, PSE&G Power and others. And that is in the U.S. alone,” Talbot emphasized.
“We have always said, just like in 2006-2007, when contracting begins and the price moves, it will move fast.”
He cautioned, however, that the number of buyers and sellers “remains limited, so the market remains in a delicate balance.”
Other market factors include potential impacts of sanctions against Russia, a lawsuit against the U.S. Department of Energy by uranium conversion company ConverDyn and shrinking supplies.
Apart from utilities, Talbot pointed to the Macquarie Group’s $200-million purchase of Deutsche Bank’s uranium stockpile and activity by nuclear fuel traders. The price surge preceded November 7 news that a Japanese governor approved two nuclear restarts.
Meanwhile mining stocks “soared” following news of the restarts, Bloomberg stated on November 7, reporting a 10% increase for Cameco Corp TSX:CCO, 24% for Denison Mines TSX:DML and 17% for Fission Uranium TSX:FCU. “We have been waiting for this moment for a long time,” the news agency quoted an investors’ note from Raymond James Financial analyst David Sadowski. “Restarts in Japan will reduce the threat that Japan’s utilities will dump their uranium inventories into the market.”