Thursday, July 28, 2005

Uranium surging on healthy numbers

Uranium surging on healthy numbers - Breaking News - Business - Breaking News

Uranium surging on healthy numbers
July 28, 2005 - 4:10PM

Once the problem child of the Australian resource sector, the uranium mining industry has experienced a massive resurgence in popularity over the last few years.

Shares in uranium focused companies - from the giant diversified miners to small explorers - have soared on the back of higher prices, rising demand and dwindling world supplies.

With 28 per cent of the world's known uranium reserves, Australia is in a perfect position to take advantage of the boom.

And regardless of the high politics and ethics involved in the uranium and nuclear industries, companies big and small are riding the wave - many in anticipation of the rewards to come rather than with feasible mining projects.

Rob Brierley, head of research at Patersons Securities, believes the industry has "got a little bit ahead of itself".

"It's a little bit reminiscent of the tech boom, perhaps, with some of those guys going hell for leather," he said.

"A sure sign of this is when companies change business direction and start to realign themselves to the boom commodity.

Regardless of cautionary tales, the share performance of many of the lesser known uranium explorers and miners has been startling.

Shares in Paladin Resources, which has a mine in Namibia and exploration rights in Australia, have risen from 16 cents to a recent high of $1.74 in 12 months.

While Paladin and other companies have proven deposits and are working towards mining, other firms' shares are more based on expectation.

This is especially the case for small explorers like Queensland-focused Summit Resources, whose shares have risen from 5.5 cents to a high of 70.5 cents.

Hindmarsh Resources, with only a few exploration licences in South Australia, listed in July and is now trading around 50 cents - almost double its initial public offer price.

And there's a healthy set of circumstances backing up this enthusiasm.

The spot price of uranium is currently trading around $US29 per pound compared to $US8 to $US10 four years ago.

The jump in price has been sparked by the general acceptance internationally of uranium as a cheap alternative to fossil fuels and as well as an environmentally friendly source of power generation.

Uranium mine production has been in deficit for over a decade and the shortfall has been made up by dwindling supplies of weapons-grade uranium from the United States and the former Soviet states.

But these stockpiles are slowly fading and there are fears miners cannot keep up with demand from the world's 441 nuclear power reactors.

Meanwhile, China plans to build 30 new reactors by 2020 while the United States, Britain, South Korea, Russia, Ukraine, India and Chile also looking at increasing their reactor programs.

Australia, with its reserves, is well placed to help fuel an expansion in nuclear power generation.

Currently there are only three working uranium mines - BHP Billiton's Olympic Dam, Heathgate Resources' Beverley mine both in South Australia and Energy Resources' Ranger mine in the Northern Territory.

There are also several advanced projects like Jabiluka in the Northern Territory, Honeymoon in South Australia and Yeelirrie in Western Australia.

But they remain on hold because of cultural and political reasons.

Mr Brierley said the uranium issue was now back on the agenda in Australia despite still being caught up in a regulatory regime stemming from the ALP's three mine policy in the 1980s.

While the federal government remains quietly supportive of an expansion in uranium mining the stance of state governments, which have the power to grant mining and exploration licences, is mixed.

South Australia and the Northern Territory are very supportive while resource rich Queensland and Western Australia tend not to favour the uranium industry.

There is the remaining concern over the possibility a nuclear accident of the scale of Three Mile Island in the US in 1979 or Chernobyl in Russia in 1986.

There is also the issue of nuclear waste disposal.

"A lot of the uranium resources are tied up in a regulatory regime that doesn't allow it to be commercialised," Mr Brierley said.

"But despite the lack of clear direction, there appears to be a growing chorus from all sides of the moral and political fences recognising the time is nigh to bring the issues to the table for debate."


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