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Gold/Mining/Energy : Uranium Stocks -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (9695)	3/30/2007 7:45:21 PM
From: smh	Read Replies (1) \| Respond to of 30198

Electric Utilties Weather Uranium Prices Associated Press 03.30.07, 5:02 PM ET forbes.com Supply disruptions and dwindling inventories have created a perfect storm in the uranium market. Now electric utilities are hoping they can wait out the bad weather. The price of uranium, the fuel of nuclear power plants, has soared to $95 a pound, from less than $20 a pound three years ago. Market participants say they expect uranium to become even more expensive, at least in the short term. Recent disruptions at two of the world's largest uranium mines have seriously threatened global supply, putting added pressure on prices at a time when new production, until very recently, has been almost nonexistent. Some of the industry's biggest nuclear operators are simply trying to get through the next few years without buying too much uranium. "There's a period where the market is going to be very ugly from a buyer's standpoint," said Frank Rives, director of nuclear fuel at Entergy Corp. (nyse: ETR - news - people ), the second-largest nuclear power plant owner in the United States. "But in the long term, pricing will settle into a more reasonable area." Nuclear power operators are hoping that a wave of new uranium production, spurred by current high prices, will cool the market before too many of their long-term contracts with lower prices expire. "The impact of the rising prices isn't now, it's later," said Jim Malone, vice president of nuclear fuels at Exelon Corp. (nyse: EXC - news - people ), the largest nuclear operator in the United States. "The prices in the contracts we have are reasonable." Malone said producers across the globe are offering prices in long-term contracts of around $45 per pound, much lower than spot market offers, but double the price from a few years ago. "I think we can, so to speak, weather the storm of these very high prices," Malone said. The cost of fuel is a relatively small component of the total cost of operating a nuclear plant, much smaller than the fuel costs for coal or natural gas-fired power plants. Malone says total nuclear fuel costs - which include the uranium itself and the process of enriching it into a more energy intensive form - are 25 percent to 28 percent of total production costs. If fuel prices don't moderate, nuclear plants will be somewhat less profitable, particularly if the enrichment process becomes more expensive, as expected by the Nuclear Energy Institute, which represents nuclear power companies and uranium suppliers. Nuclear power companies that operate in regulated states can probably recover the higher costs of uranium from ratepayers. But nuclear operators in competitive markets, such as Exelon, Entergy, FPL Group Inc. (nyse: FPLPRA - news - people ) and Dominion Resources (nyse: D - news - people ), will see higher fuel costs eat into their profit margins. Meanwhile, new production hasn't yet reached the market. Production in 2006 dropped from 2005. Total global production is now about 100 million pounds a year, compared with global demand of 180 million pounds. For years, extra supply from government nuclear weapons programs was sold to the private sector, making up for the difference between supply and demand. But this inventory has been steadily dwindling and, recently, gobbled up by speculators looking to profit from rising prices. The supply situation took a sudden downturn last October, when heavy rains and flooding prevented the opening of the massive Cigar Lake mine in northern Saskatchewan, Canada. The mine was expected to produce 18 million pounds of uranium a year, or about 10 percent of global demand. Mine owner Cameco Corp. (nyse: CCJ - news - people ) says Cigar Lake won't be started until 2010. The market endured another blow at the beginning of March when a cyclone struck the Ranger mine in Australia, which produces 14.3 million pounds of uranium a year. Energy Resources of Australia, the mine's owner, declared force majeure on deliveries and said production would be affected into the second half of 2007. The disruptions at the two mines highlight the current perilous state of the global uranium market. Because prices were low for many years, only the lowest-cost producers at the largest mines could afford to expand production. That means uranium production today is now highly concentrated at a few massive mines, mainly in Australia and Canada. A disruption at any of them could be disastrous for uranium supply worldwide.

To: energyplay who wrote (9695)	3/30/2007 11:20:22 PM
From: smh	Read Replies (1) \| Respond to of 30198

"Uranium is a very thin market, and easily manipulated." Hey, that's one of my tunes. "The Nuclear Energy Institute sent a letter to the U.S. Department of Energy in February asking the department to create a "Strategic Nuclear Fuel Reserve" that can only be accessed by commercial nuclear reactors." Message 23417094 I believe I have also read that NEI has requested that DOE limit the field of who can bid in its (DOE's)expected auction of something like 5 million pounds this year. This might play into your scenario. As I am sure you know both the nuclear and utility industries have powerful lobbies. I am confident that they are confident that the government will bail them out if it ever gets to the point that a reactor might be shut down do to lack of uranium. One of the things the utilities have done to try and hold the price back, ever since the price runup got going, has been to do so-called "off market" transactions, which don't get reported (at least the price) to Ux and TradeTech. This may have been partially effective a year ago, but may now be why the spot price hinges almost entirely on these 100,000 lb. auctions. SMH