Uranium: Support for a Bounce or Breech?

Canaccord Genuity's Morning Coffee (03/03/2010)
"The price of spot uranium fell again last week. Ux Consulting recorded only one spot transaction during the week, which underscores the light spot-market activity since the start of 2010. Despite the recent fall in prices, Canaccord Adams Junior Mining team continues to see positive price catalysts over the short to medium term, including (1) the potential funding of a new uranium investment fund and its purchase of inventory, (2) the recent coup in Niger, which did not interrupt production but may prompt buying due to increasing risk in the market and (3) utility buying for new reactor inventories.
In addition to these catalysts, the price of uranium has reached important support level, which may begin to encourage buyers to return to the market. Finally, a pickup in market activity like that seen last year at this time could be expected, spurring market activity out of its current lull.
Separately, UxC noted Monday night that the US$40/lb U3O8 level serves as an important support level because it represents the previous bottom in price over the last four years, as the price fell to this level for one week in April of last year. Reflecting back on the last time the price dropped to US$40/lb U3O8, it does seem like this price, despite being a fairly strong support level, is more vulnerable to being breeched now than last year because there is stronger selling interest and demand is relatively weak, UxC stated. And, even if the US$40/lb U3O8 level is not broken in the near term, the prospects for a price recovery are much less than when the price previously hit US$40/lb U3O8 because of the selling interest. After hitting US$40/lb U3O8 last April, the price rebounded to over US$50/lb U3O8 in just five weeks. The second tranche of material related to the DOE transfer to USEC was put up for bid this week involving just over 525,000 pounds U3O8 equivalent (about 202,000 kgU as UF6)."

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