A gain reaction as Labor nukes uranium policy
Monday, 30 April, 2007
by Kevin Andrusiak
The Australian
After months of pumping up the share prices of the 140-plus listed miners with uranium exposure, investors who backed the stocks were given a second leg-up by the Australian Labor Party's decision to axe its no-new-mines policy.
But this does not mean the uranium hopefuls, the market darlings of the moment, will be shovelling out the yellowcake any time soon.
In fact, very few are anywhere near production in the next few years.
There are three producing mines in Australia: BHP Billiton's enormous Olympic Dam; the privately-owned Beverley mine, also in South Australia; and ERA's Ranger Mine in the Northern Territory.
But more than 100 other companies are just itching to scratch the dirt all around the country, particularly in Western Australia and Queensland, now that they don't have to face a blanket rejection.
ABN Amro believes the Labor vote - which frees the state governments that are responsible for mining approvals from the old national party policy prohibiting new uranium mines - will lead to further share-price hikes and a round of consolidation in the sector.
"We believe companies with uranium exposure in South Australia and Queensland will be best placed to take advantage of a potential change in the Labor policy in the short term," it said.
ABN analyst Warren Edney said the share prices of explorers focusing on Western Australia would benefit most, because the goodwill had already been factored-in elsewhere.
"Potentially one of the best to take advantage will be Nova Energy," he said.
"Rio's Kintire deposit is also well advanced.
"I think if there is a change of mind it will be the deposits in WA that get fast-tracked."
Rio Tinto has already completed a feasibility study for its 35,000 tonnes Kintire deposit and could easily move into production.
The heady rise in uranium stocks this year is largely due to expectations of prolonged high demand.
Forty-eight new nuclear reactors are expected to be commissioned globally by 2013, including 13 in China and eight in India. This creates strong demand for Australian uranium.
Industry experts say very few uranium hopefuls are in a position to go to their bank with a mining plan. Far East Capital analyst Warwick Grigor has 23 companies listed as producers or potential producers.
Almost all the companies on the list with Australian assets are exploring in the Northern Territory or South Australia.
They include Arafura Resources, Energy Metals, Marathon Resources and Toro Energy.
Energy Metals has already been mentioned by market watchers as a possible takeover target.
Bell Potter institutional broker Rocco Tassone is also bullish on the prospects of Toro Energy, which was spun out of Oxiana Resources.
He said that while Federal ALP might have changed its stance on uranium mining, the states retained authority over developments.
"In South Australia you have got your Peppinini's, Marathon's and Alliance Mining," he said.
"Alliance makes sense from an investment point of view not just because the South Australian Government is more welcoming of uranium mining, but because it is right next to an existing mine."
Alliance, which gained 15 cents to $2.55, is partnered with Quasar Resources in the Arkaroola project, which is immediately west of the Beverley mine. Quasar is an affiliate of Heathgate, which operates the mine.
Paladin managing director John Borshoff warned that uranium miners still faced long lead times to get a mine into production.
"South Australia will be prime real estate, so will the Northern Territory," he said.
"These enormous market caps of companies are just centred around the bloodsport of watching the uranium price go up."
Mr Borshoff predicted there would be enough pressure on the Queensland and West Australian governments to eventually force uranium mining in those states.
"The Europeans, the Chinese, Indians and Americans have all embraced uranium mining," he said.
"It could be two to three years away in WA, and in Queensland there is more appetite for change."