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Tuesday’s Sealed Bid Auction Could Set New Record Uranium Price
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The weekly TradeTech uranium spot price indicator remained unchanged for a third straight week, but Tuesday’s sale of 100,000 pounds U3O8 could result in another record price spurt. According to Nuclear Market Review (NMR) editor Treva Klingbiel, “This lot of material represents an opportunity for buyers to secure material at a fixed price and is expected to be highly sought after.”
After publishing the weekly uranium spot price indicator in the Nuclear Market Review magazine every Friday, TradeTech publishes the price indicator on the consulting service’s website at uranium.info
Klingbiel pointed out in the February 16th issue of NMR, “The majority of other supply currently available to potential buyers is being offered with market-related pricing terms at time of delivery.” Utilities and other buyers have hesitated to accept U3O8 and related product under these terms. As a result, the spot uranium price has remained nearly unchanged for the past two months, aside from a small percentage increase at the end of January.
Activity has come to a standstill at these lofty price levels. Uncertainty about remediation efforts by Cameco Corp at its Cigar Lake uranium project has left buyers and sellers at odds with each other. As TradeTech has told us during this two-month stalemate, buyers are nervous about paying these prices, while sellers are confident they can get even higher prices. Three weeks before the Cigar Lake flood, we reported that some utilities believed the uranium price would decline to $30/pound. By mid December, the price had jumped 50 percent higher from the October levels, to US$72/pound.
The significant problem buyers now face is being forced to blindly agree to purchase uranium without knowing the final price tag. Contracts for the sale of uranium lack a definite, fixed price. Under ‘market-related pricing terms,’ a utility would not know the final cost of the ‘purchased’ U3O8 until the product was delivered several months later. Buyers worry the ‘market-related price surcharge’ could run double-digit percentage points higher by the time the utility accepts delivery of the material.
In light of these market conditions, we believe the modest sale of 100,000 pounds U3O8 would likely result in a new record spot uranium price. Treva Klingbiel is accurate in her forecast for the February 20th auction – this uranium should be highly sought after. Numerous crystal ball gazers have predicted the spot uranium price should reach $80/pound after the sealed bids are opened next week. Some have called for an even higher price tag.
And the best bit...
We suspect many of the uranium companies might enjoy further share price appreciation this week for two reasons: (a) the Sprott annual conference for institutions will take place this Tuesday in New York and in Toronto on Wednesday; (b) another likely boost in the spot uranium price after Tuesday’s auction. The combination of uranium companies presenting to institutional investors against the backdrop of another price rise in yellowcake could create compelling excitement for many investors through the entire week.
rgds
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