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« URANIUM: Up $5 or $6/lb? | Main | Longview Capital Partners Incorporated: The Next Pinetree? »
Monday
Mar122007

URANIUM: Not Another Flood!

ranger1


Energy Resources of Australia Limited (ERA) a part of the Rio Tinto Group has suffered an unusual down pour of 750 millimetres of rain in one 72-hour period causing extensive flooding to its Ranger Mine and Processing Operation.

Assessment of the impact of the water level in the operating pit is on going, however production will be impacted in the second half of 2007. ERA has declared force majeure on its sales contracts as the excessive rainfall has impacted on production at the Ranger mine and processing plant. First quarter production is estimated to be between 20 and 30 per cent lower than in the same period last year. Ranger produces about 4 million pounds or 4% of the world’s annual uranium consumption.

This abnormality in the weather pattern clearly demonstrates how precarious the mining business can be. When assessing an investment opportunity the geographical location is one of the considerations. However we would rarely consider Australia to be a particularly difficult or dangerous area for mining. Then along comes a freak cyclone and wreaks everyone’s plans.

We will watch and hope that they can get this operation back into full-scale production as soon as possible with the effects of this cyclone being minimized.

However if they were to experience more freak cyclones then this operation could have a serious knock on affect for the end users. This is a serious incident for the utility companies who have just seen a 13% jump in the price of uranium at a ‘sealed bids auction’ and what of the suppliers? This must be music to their ears; they can now afford to hold out a little longer allowing those who were relying on the production from Ranger to enter the market and jostle for the available meager supply. For investors this is the second flood to hit the uranium industry in a short space of time, so inclement weather has now become a ‘consideration’ when assessing an investment opportunity. For those of us who utilize SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) then flooding and inclement weather should be considered as a possible threat to your investment.

We may have to wait a little while longer before the next uranium deal is struck as news and rumours will no doubt abound adding confusion to the situation in Australia.

12 March 2007


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Reader Comments (7)

Apparently, TradeTech has stated that the spot price is now $90. And they gave a commentary and interview outlining their view that the flood at ERA will push the price up further. See the very in-depth article on ERA flood, damage, length of time to rectify production, and "opinions" offered by mining execs.
http://www.marketoracle.co.uk/Article506.html

March 12, 2007 | Unregistered Commenterstoneygulch

Thanks for the input and the link to the article. As far as we can see the article does mention $90/lb but this is not mentioned on Tradetechs website. We cant find $90/lb anyway at the moment. however we do agree with the sentiment that this can only put upward pressure on the price of uranium.

If we do hit $100/lb in the near term then $200/lb becomes a little less silly as time goes on.

March 12, 2007 | Unregistered CommenterUranium Stocks

Well, I didn't check the sources, but another article on
http://newswiretoday/news/15103/
had $90/lb. in the headline of their article:
"TradeTech Weekly Spot Uranium Price US$90 per Pound"

NewswireToday - /newswire/ - Sarasota, FL, United States, 03/11/2007 - According to TradeTech’s Nuclear Market Review, the consulting service raised its weekly uranium spot price indicator to US$90/pound in light of strong bidding and the force majeure announced by uranium miner ERA on March 7th

March 12, 2007 | Unregistered Commenterstoneygulch

I didn't want to be seen to be making things up, so it was with great relief that I read the Summit Resources (SMM:ASX) letter to their shareholders (to reject PDN's hostile bid) dated Mar. 13 (Australian date, they're 1 day ahead of usa) and they ended it by stating that the spot price of uranium was now $90 lb.
Then I noticed that Trade-tech finally put it up, too.

March 13, 2007 | Unregistered Commenterstoneygulch

Well done, you are a step ahead of the game - TradeTech has now updated to $90/lb! along with u3o8.biz, so we are there.

March 13, 2007 | Unregistered CommenterUranium Stocks

And I just heard it is $91. Can anyone figure out why the stocks are not staying higher? This volatility is tiring. And I can't pass up a bargain, either, so I keep buying more.

March 15, 2007 | Unregistered Commenterstoneygulch

Firstly Tradetech have the price at $90/lb then we have The Ux Consulting Company who have it at £91/lb. We have been in touch with a number of people who are usually on the money, but this time it is difficult to pin down. When we wrote about it going up £5 to $6/lb we were not being glib or casual about the price we just could not pin it down.

Lucky you having to buy some more uranium stocks at these prices! We are just about fully invested with only a few bucks on the side lines so we can't buy until a little more cash comes in.

March 15, 2007 | Unregistered CommenterUranium Stocks

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