Uranium prices under short-term pressure

29 Jan 2016 10:30am
WINDHOEK, 29 JAN (NAMPA) – Uranium spot prices are likely to remain under pressure for the rest of the decade, a global leader in financial information services has warned.
Fitch Ratings raised the concern in a media statement issued on its website on Thursday, blaming very high inventory levels, recycling of already-mined uranium and the slow restart of Japan's nuclear reactors.
“Spot prices for U3O8 have been fluctuating around US.dollars 35 per pound and we do not expect them to recover to US.dollars 50 for several years. In the longer term, low uranium prices are likely to lead to more mining project cancellations and delays, which may result in undersupply after 2020, driving prices up,” it cautioned.
Triuranium octoxide (U3O8) is a compound of uranium with an olive green to black colour. It is odourless and solid and is one of the more popular forms of yellowcake that is processed until pure uranium and is shipped between mills and refineries.
Uranium prices have been falling since the year 2011, when the Fukushima disaster caused the Japanese authorities to shut down all 52 of the country's reactors and prompted the German government's decision to phase out its nuclear power by end of 2022.
The first two Japanese reactors came back online in the second half of 2015, but progress to restart other reactors may remain slow, according to the statement.
The extended period of oversupply also contributed to a big build-up in utilities' uranium stockpiles, with European utilities having enough fuel to last three years and Japanese utilities enough for four to five years.
These stockpiles will help maintain pressure on prices as demand slowly recovers. Secondary sources of previously mined uranium, such as reprocessed nuclear fuel and 'blended-down' highly enriched uranium from dismantled nuclear warheads will also continue to weigh on prices.
Long-term prospects for uranium, however, remain positive and Fitch expects demand to rise by nearly 45 per cent by 2030, with China, India and Russia the main users of net new global capacity.
On the local scene, the Namibian Uranium Association (NUA) said on its website Namibia is well positioned to become the second largest producer of uranium in the world, elevating Namibia past Niger, Australia and Canada to the second rung on the world ladder of uranium producers.
Currently, Chinese state-owned company Guangdong Nuclear Power Company (CGNPC) Uranium Resources’ Husab uranium mine is said to hold about 280 million tonnes of uranium ore. It has a life of about 20 years and is expected to boost the gross domestic product (GDP) of Namibia by five per cent. It is expected to produce 15 million pounds (6 800 tonnes) uranium oxide per annum, more than twice the total current uranium production of Namibia.
Rio Tinto’s Rössing Uranium and Paladin’s Langer Heinrich are currently Namibia’s only two producing uranium mines, with production targets of up to 12 million pounds per annum. Areva Resources Namibia’s Trekkopje mine, approximately 65 kilometres north-east of Swakopmund is currently under care and maintenance.
Valencia Uranium, with a 25-year mining license is expected to continue with additional exploration. Canadian owners, Forsys Metals, intend to build the area now known as Norasa into a consolidated uranium project.
A number of exploration companies, notably Bannerman Resources and Reptile Uranium, are still awaiting Government's approval to proceed with mining. Bannerman Resources applied for a mining license for its Etango Project with an estimated US.dollars 870 million (about N.dollars 14.2 billion) capital cost for a mine and heap leach concentrate plant.
Another Chinese company that received a mining license in 2012 is Zhonghe Resources (Namibia) Development, a Namibian registered company founded in 2008.
The Zhonghe licensing area is located near the Rössing Uranium mine and Husab Project. The Zhonghe Project is expected to be an open pit mine, and the company hopes to achieve a mine lifespan of around 10 to 15 years, at a production capacity of 700 to 1 000 tonnes of uranium per year.
“These new projects offer the prospect of significant investment, direct and indirect job creation, infrastructure development and a contribution to the creation of wealth in Namibia, extending into communities well beyond those directly connected to the projects,” NUA added.