Monday, 29 October, 2007

by Christopher Donville and Miriam Steffens
Sydney Morning Herald

THE price of uranium has risen for three consecutive weeks as speculators rekindled their interest in the raw material in nuclear reactor fuel.

The metallic element rose $US4, or 5 per cent, to $US84 a pound, said TradeTech LLC, a Denver-based publisher of price assessments. The equivalent of at least 350,000 pounds were sold in just two transactions, the company said on Friday in a weekly report.

"Renewed buying interest on the part of speculators and hedge funds is contributing to the upward price pressure," TradeTech said. "However, this demand remains predominantly discretionary."

Purchases by hedge funds and other non-consumers of uranium helped lift the spot price to a record $US138 a pound in June. But the price tumbled to as low as $US75 by the end of September as speculators sold the material to free cash, and some nuclear power operators temporarily withdrew from the market. Deutsche Bank analysts said late last month that the price decline was overdone and posed an "opportunity to re-enter the uranium space".

E. Peter Farmer, president of the Canadian speculative uranium buyer Uranium Participation Corp, said last week he expected a "continuing strong market, but a more rational market".

On September 28, his company bought 217,230 kilograms of uranium hexafluoride, of UF6, at the equivalent uranium price of about $US75 a pound.

"We thought $US75 represented the current floor price," Mr Farmer said. He expects the volume-weighted spot price of uranium to average $US90 to $US110 a pound next year.

Shares of Cameco, the world's largest supplier of uranium, rose $C1.65 to $C48.70 in Toronto on Friday. Its chief executive, Gerald Grandey, said last month prices were likely to rebound to more than $US100 next year.

Rio Tinto's chief financial officer, Guy Elliott, said at a uranium presentation in May that the material presented one of the company's "most exciting short-term growth stories". The miner wants to almost triple production to 20,000 tonnes a year by 2020.

Rio and BHP Billiton control the three biggest uranium deposits in Australia. Rio's stock jumped $2.57 to $107 in Sydney on Friday, while BHP shares closed $1.02 higher at $45.76.

The Howard Government signed a nuclear pact with Moscow last month, allowing the companies to sell uranium to Russia. It has also paved the way for $250 million of uranium shipments to China, and agreed to exports to India.