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Uranium Spot market unfazed by big news
Publisher: U3O8.biz
Author: Luke Brocki
December 03, 2007

http://www.u3o8.biz/s/MarketCommentary.asp?ReportID=275445&_Type=Market-Commentary&_Title=Spot-market-unfazed-by-big-news

Two gargantuan uranium deals stole headlines around the world this week, yet uranium's spot price remained curiously frozen at $93 a pound.

First, resource-hungry China took a giant leap forward in its quest for foreign energy Monday night, when French nuclear behemoth Areva agreed to supply the country with African uranium for at least the next 14 years.

According to reports, Areva will also build, operate and supply two nuclear reactors in China's southern province of Guangdong.

The value of the deal? The National Post newspaper says about $12 billion dollars and a joint venture with state-owned China Guangdong Nuclear Power Corp. to supply the company with technology and support on other nuclear reactors in the country.

The second deal arrived without fanfare in the Canadian capital of Ottawa. The country's conservative government decided Thursday to join the controversial Global Nuclear Energy Partnership (GNEP). And while the move delighted those eager to see Canada take a bite out of the nuclear renaissance pie, it also infuriated the country's environmentalists.

Gary Lunn, Canada's minister of natural resources, broke the government's silence on the partnership Thursday afternoon, in a release that called on Canada to take charge in the secure development of nuclear energy worldwide. The country is, after all, the world's largest producer of uranium.

The project, led by American president George W. Bush, aims to stop nuclear proliferation and control radioactive waste, but opponents point out the plan to reuse nuclear waste goes against a flurry of North American national security laws in place since the 1970s.

To boot, the move was largely unexpected, since it followed months of silence by the country's government. Canada had clearly been in talks with GNEP members for months, even attending a related planning conference in September as an "observer", but refused to make public comment on its involvement in the pact.

Now, not only is it playing ball, it's also planning to review its aged relationship with government-funded Atomic Energy of Canada Ltd (AECL). At the same time, the company was signing a memorandum of understanding with its Russian counterparts around potential future cooperation on the nuclear front, just months after penning similar deals with Chinese and Argentine nuclear officials. Critics of the announced review fear it's a move toward privatization.

But let's look again at the GNEP. The pact essentially proposes a deal between uranium-rich and nuclear-fuel-hungry countries: All spent nuclear fuel is to be returned to the original exporting country for reprocessing and disposal.

Of course, given Canada's role as the world's largest uranium exporter, critics fear the country could become a dumping ground for much of the world's nuclear waste.

Minister Lunn vehemently denied this, telling the Commons on Friday that Canada would under no circumstances accept any spent nuclear fuel from abroad.

So there are wrinkles to be ironed out, to be sure. And, though widely criticized, participation in the GNEP could mean big bucks for Canada's nuclear industry, since an increase in reprocessing is also expected to increase the country's exports.

It's expected the news will revive a stagnant uranium market, but it hasn't happened just yet. Come Sunday, both industry indicators, namely TradeTech and Ux Consulting, left the spot price of uranium alone at $93 a pound.

That's a solid month without change according to Tradetech. The gap between willing buyers and willing sellers has allegedly been narrowing slightly over the last few weeks, but no major deals have been signed and no new demand has surfaced on the market.

Still, one of my favourite indices, the Resource World uranium stock index, a composite index based on the performance of nearly 100 uranium companies, skyrocketed mid-week.

It did so as uranium stocks gained ground following the Chinese and Canadian announcements. The index gained 63.65 points, or 4.6 per cent last Wednesday; another 33.59 points, or 2.3 per cent Thursday; and 15.52 points, or one per cent Friday, to close the week at 1,509.30.

Uranium fundamentals remain strong, the metal's term prices are holding steady and, given the flurry of deals and policy changes, it would be surprising if market activity didn't soon pick up.