I just don’t get how people such as David Berman in the Financial Post can actually say, “the world needs uranium, and lots of it” given all we know about its hazards, the fact that the US nuclear weapons arsenal is huge, that there is no proven safe storage for nuclear waste and that it is not a solution for climate change.
But look beyond the most recent gyrations, you will find that the entire global uranium market is looking fragile these days, with many stocks down 50%. Production problems aside, investors have a bigger issue to deal with: Is interest in uranium stocks fizzling?
Yesterday, Uranium One Inc. joined the casualty list when it cut its production estimates for 2008 by 38%. The reason relates to delays at its Kazakhstan mines, where there is a shortage of sulphuric acid used for extracting uranium. The stock (UUU/TSX) fell 17.6% to $10.49, bringing its total loss for the year to 34%.
Leonie Soltay, an analyst at Wellington West Capital Markets, put a brave face on the setback, arguing the delayed production is good for uranium prices, since lower production keeps the supply-and-demand dynamics tight. She also pointed out that the company is becoming a must-have name for investors who want unhedged international uranium production.
“We believe any short-term weakness should be treated as a buying opportunity by long-term investors,” Ms. Soltay said in a note to clients, in which she lowered her price target to $13 from $16.
These stock-price reversals seem strange given that the world needs uranium, and lots of it. According to the World Nuclear Association, planned nuclear power reactors have leapt 37% since the start of the year.
And who is planning these reactors? The uranium industry, of course, as part of its 2002 plan for a nuclear renaissance.
Interesting, isn’t it?