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Australian Uranium Policy: A Queenslanders view!

Map of Queensland 15oct07

Before any investment is entered into we should assess the political environment in terms of its acceptability to what is proposed. As Australia is home to the largest reserves of uranium then the Australian political scene is of immense interest to us.

One of our readers has sent us his view, which makes interesting reading below:

Anyone with an interest in Australian uranium properties is probably also curious about local attitudes toward exploration and exporting. The current liberal government has a forward thinking approach to nuclear energy already signing agreements with China, Japan, India and most recently Russia, however Australia is at an important cross road in federal politics. With an election announced on November 24th and the opposition labor party currently streets ahead in polls, it may be an important time to look closely at their uranium position.

As you probably know, for 25 years labor has maintained its “three mines” policy restricting uranium mining to existing projects. In April this year labor, led by Kevin Rudd voted 205 to 190 to abandon the old policy. This seems positive but there’s a catch. Currently the decision to mine uranium is left up to individual states and although most states oblige and profit, there are important exceptions.

Alan Carpenter, the labor Premier of Western Australia is steadfast in blocking uranium mining. His position is becoming increasingly uncomfortable as the federal government explores options to alter his perception. It is likely that a change in federal power and a labor prime minister may prove more persuasive. Queensland’s premier Beattie was also against anything uranium but has recently softened his stance. During his state party conference in July 2007, premier Beattie changed his rhetoric from blocking uranium mining to assuring local members that uranium enrichment is not on the agenda, a significant back flip.

The plot thickened when Premier Beattie announced his imminent retirement after nine years in power. He named Annah Bligh as his successor and begs the obvious question, “Who is Annah Bligh?”

Anna Bligh 15oct07

Annah comes from a strong labor left background. She has been groomed for the leadership role over the last two years with key portfolios in finance and business related areas. Her views on uranium have reflected her outgoing premier to date. On the 18th of May 2006 she addressed the Queensland Media Club seeking clean energy alternatives for her party stating, “Companies that want to explore for and mine uranium must work with scientists to lobby politicians and the public. Convincing them that the safety concerns that existed two decades ago, that we are somehow now in a position to resolve them.” By August 2006 her words had softened when Annah told the Courier Mail in Brisbane she was “Keeping an open mind towards uranium and labour’s no new mines policy” (22/08/2006). By March 2007 the government had received a report indicating that uranium mining would not adversely impact Queensland’s huge coal industry. The three mines policy was dropped in late April with both Beattie and Annah Bligh’s blessing.

Since April this year, the now Premier Bligh has sent mixed messages. She firstly reiterated her opposition to establishing a nuclear power industry in Queensland stating she would strictly limit its involvement to extracting uranium for export overseas. This sounds positive but in contrast on September 14th 2007 Annah Bligh gave an “unequivocal” commitment to the ban on uranium mining through a spokesperson, (source It will be interesting to finally get a statement straight from the horse’s mouth.

When it comes down to it, Australia has a federal government that is aggressively pro uranium. They are currently pursuing uranium supply agreements internationally. States such as South Australia are supportive. The federal government controls mining approvals in the Northern Territory and the Tasmanian government has just made uranium mining legal. This leaves Queensland and Western Australia in lone opposition. Federal power is likely to change late 2007 and will be headed Kevin Rudd, a strong uranium advocate. He will probably have more influence on all eight state leaders who are from within his own party.

It seems that most leaders including Australia’s now understand that when it comes to nuclear energy it is not a question of ‘if’ but ‘when’. The people are slower to catch on and I sometimes wonder if the end game has already been decided for us. While the politicians talk tough on uranium mining in Queensland and Western Australia, state governments continue approving exploration licenses. This makes no sense unless future plans include a political change of heart. It may be strategic for some states to feign opposition to uranium and wait for an evil higher power in ‘the federal government’ to forcefully intervene. Watch this space!!!!

Paul Trevethan (Queenslander!)

If you would like to send us a ‘Johnny on the spot’ review of an area near you regarding any aspect of uranium mining we will do our best to publish it. By pooling our knowledge we will all be better informed and hopefully make better investment decisions going forward.

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Incentives for a Boom in the construction of nuclear reactors!

BBC Logo 11oct07

There is an interesting article by Laura Smith-Park of BBC News, Washington, regarding the possible boom in the construction of nuclear reactors today.

The flood of applications now being generated for the construction of new nuclear power plants is gaining momentum and generating interest in this sector. This article lists a few of the factors behind the renewed enthusiasm as follows:

“The introduction of a new fast-track combined construction and operation permit, making new reactors easier and cheaper to build

A tax credit, introduced in the 2005 Energy Policy Act, of 1.8 cents per kilowatt hour for the first 6,000 megawatts generated by nuclear plants

Risk insurance adding up to $2bn for the first six plants to be built, protecting companies against the cost of delays in construction

Multi-billion-dollar loan guarantees

A likelihood that the cost of emitting CO2 will rise as the battle against climate change intensifies”

The risk insurance for delays in construction is one that caught our eye. We have mentioned in previous articles that delays in construction put millions of dollars at risk and could break a construction company not acquainted with claims resolution techniques, hence the proliferation of consultancies professing to have such skills. In a competitive bidding environment it is difficult for the contractor to make a provision for such delays, as their price will be rejected as too expensive. The more knowledge that you have about a project the more expensive your bid becomes and so on some occasions the ‘uninformed’ are awarded the contract. We think that such ideas serve as good incentives and will hopefully advance the process of getting this nuclear programme up and running.

To read the article in its entirety please follow this LINK.

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Laramide Resources: Up 8.32% yesterday!

LAM Logo 10oct07
The recovery continues for uranium stocks and yesterday it was Laramide Resources that took its place in the sun with a sparkling performance.

Laramide gained $0.63 to close at $8.20 on volume of 407,000 on the Toronto Stock Exchange where it trades under the symbol of LAM. This uranium stock was severely sold off in August during the scramble for cash and traded below $5.00 so it is pleasing to see investors coming back into this thinly traded market sector where the spot price of uranium at times can be a matter of opinion. However investors are now focused on the longer term uranium price rather than the spot price which is much more stable and less subject to the sometimes erratic behaviour of the spot price. The news flow continues to be good with the purchase of 5.6 million shares of Khan Resources and the recent acquisition of the Thunder Lake property.

A quick look at the chart and we can see Laramide has made good progress since the August sell-off and we hope to see it trade in double figures in the near term.

LAM Chart 10oct07

This uranium stock remains part of our core position and we expect it to double from here within the next twelve months or so.

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Aurora Energy Resources Inc: Update

Aurora logo 05oct07
Aurora Energy Resources Incorporated have recently announced their findings in five new drill holes at Jacques Lake Deposit in Coastal Labrador.

The company reported that the results: ‘have all intersected uranium mineralization, expanding the size of the Jacques Lake Deposit along strike by 50 metres and more than 150 metres down-plunge.’

They listed the highlights as follows:

0.13% U3O8 over 36.5 metres in drill hole JL07-066
0.16% U3O8 over 12.00 metres, including 0.27% U3O8 over 4.00 metres at in drill hole JL07-070.
0.11% U3O8 over 12.00 metres and 0.12% U3O8, over 3.31 metres in drill hole JL07-065.

From the drilling programme carried out last year, the Jacques Lake deposit contains 5.4 million pounds U3O8 indicated and 5.0 million pounds U3O8 inferred. The 2007 drill programme continues until the end of the year, which will then be followed by a winter working programme of extensive in-fill and delineation drilling. But for now the focus will be concentrated on expanding the deposit at depth and along strike. This is an aggressive action plan by Aurora with 75,000 metres of drilling this year, costing in the order of C$21 million.

To read the article in full which is on their web site please click this LINK.

FRG Logo

Olympic Dam: More uranium!

The Sydney Morning Herald 04oct07

In an article carried by The Sydney Morning Herald BHP Billiton has announced plans to expand Olympic Dam's copper production to 500,000 tonnes a year at their Olympic Dam mine. However rumour has it that an increase in copper production to 1 million tonnes a year is possible with a by-product of about 30,000 tonnes a year of uranium production.

This raises the question of cost effectiveness for other budding uranium miners bearing in mind that the Olympic Dam project is producing uranium as a by-product of copper mining. The article goes on to say that an output of 30,000 tonnes per annum would represent more than 40 per cent of global demand. In terms of time frame this expansion is not expected to come on line until 2010.

The article also points out that other uranium miners such as “Paladin Resources predicts cash costs of $US23 a pound over the life of its Langer Heinrich mine in Namibia, and some of the other Australian uranium hopefuls could have even higher cash costs.”

This is something we need to bear in mind when doing a SWOT analysis and should be well and truly placed under the Threats section.

If you wish to read this article in full please click this LINK.

Have a good one

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Uranium Stocks on the move

Uranium chart Tradetech 03oct07

Uranium stocks are on the move despite the spot price of uranium falling to $75/lb according to TradeTech. However we need to look a little deeper to get the true picture.

This price of $75/lb is based on the average price accepted by one seller in late September when TradeTech wrote the following:

‘In late September, one trader entered the market offering 100 tU as UF6 or U3O8 equivalent. The seller has accepted multiple bids and will sell about 300 tU as UF6 or equivalent U3O8 in total. The winning price in each transaction is at or very near today’s Exchange Value of $75.00 per pound U3O8.’

So when investors look at the chart they see the $75/lb.

Prior to this sale going through the results of the DOE auction were released as follows:

The winning bidders include three US utilities and one hedge fund with the average price for all bids received reported as $213.48/kgU as UF6. (213 divided by 2.2 = $97/lb approx)

Now if we check the futures price for 2008 we have a price of $84/lb. The point is that we have three pieces of data but we naturally focus on the latest figure, which in this case just happens to be the lowest figure for uranium.

However we are not invested in uranium but we are invested in uranium stocks, a different animal altogether. So take a look at the following chart, which was carried by Resource World Magazine. This is a chart of the progress of uranium stocks which is entitled ‘Resource World Uranium Stock Index’

Uranium Index 03oct07

As we can see form this chart the value of uranium stocks has been moving up since mid August. This index, if we are reading it correctly stood at around 900 in mid August and now stands at 1250. If you wish to see the uranium stocks that make up this index then click this LINK.

Granted yesterday we took a hit as many of the most popular uranium stocks were sold off. However we are not put off as the fundamentals still bode well for the future. The nuclear revolution has not stopped, we don’t see headlines on a daily basis of nuclear power plants being cancelled do we?

A recent article carried on had the following to say:

Since January 2007, the global plans for new nuclear power plants have risen 37 per cent, up by 82 to 304, with China leading the charge. The Asian tiger plans to build 114 new nuclear reactors, up from projections of 63 last January, a whopping jump of 81 per cent.

The United States is now planning 32, compared to the 23 it proposed in January; a 39-per cent rise. Just last week, NRG Energy Inc, the second-largest power producer in Texas, filed the first application to build a nuclear reactor in the United States since 1979's Three Mile Island meltdown in Pennsylvania. The US Nuclear Regulatory Commission expects to receive the 32 proposed applications through 2009.

If we were to extrapolate Chinas requirements using the above rate of increase the numbers would be mind-boggling. Just imagine for a moment the present figure of 114 reactors increasing by 81% in the next twelve months and then by another 81% the following twelve months! That’s right China would require 373 new nuclear reactors. Well that old intangible ‘gut feel’ tells me that 1.3 billion people will require a lot more than that.

To conclude we intend to remain fully invested in uranium stocks and ride out the current market turbulence.

Have a good one.

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Time to buy uranium stocks: Deutsche Bank

Deutsche Bank 01oct 07

Deutsche Bank's Global Markets Research in Australia see now as a time to buy into uranium stocks and suggest Energy Resources of Australia Ltd (ERA) which has the Ranger mine in the Northern Territory and Paladin Resources Ltd as the vehicles best placed to take advantage of the coming price rises in uranium.

We have to agree with them about buying uranium stocks although we do not own either of their recommendations. Maybe someone will write in and tell us why these two stocks offer better value than the other front-runners in this market place.

The article goes to say that:

A revision on a June quarter assessment was that the projected 2007 spot price would average lower at $US101.35/lb, would then average $US128.75/lb in 2008 and be about $US130/lb in 2009 before tapering to $US95/lb in 2010.

A serious imbalance would remain between supply and demand until 2009 "at the very least," the latest report said.

However, "the risks for more potential market deficits beyond then are considerable."

If their projections are correct then it should bode well for all of the quality uranium mining stocks. A slightly more pessimistic study was compiled by resources Capital Research of Sydney, Australia, who are predicting a near term spot price of $90/lb by early 2008 and 120/lb by September 2008.

The above article was alerted to us by one of our readers and was carried by Mineweb if you wish to read the whole thing then just click this LINK.

Uranium: Spot price stable but futures rise

Trading data for uranium remains as rare as hen’s teeth with investors tracking the next uranium auction with the view that a result will be indicative of uranium’s future direction.

According to the usual sources, the UX Consulting Company and TradeTech the spot price remains stable at $85/lb.

Nymex Logo 28sep07

However when we take a quick look at yesterdays action in the futures market we can see that the December contract traded at $92/lb with 2008 trading at $90/lb. One swallow does not make a summer but we interpret this as being positive for uranium, as the plunge in the price does appear to have abated for now. So if uranium can stick around at these levels then the quality uranium mining and exploration companies should be able to operate with profitable margins.

Most of the uranium stocks that we monitor are making recoveries although some are slower than others. The near term should be a period of consolidation for uranium and continuing recovery for the stocks.

Hang on in there things are improving almost on a daily basis and stay tuned with our free newsletter, just follow this LINK.


Britain’s nuclear future crawls to the starting gate!

Power stations 27sep07

Public opinion in Britain may be turning towards acceptance of a new nuclear power programme but the bureaucratic progress is slow and arduous. The original consultation has been judged to be very seriously flawed and so the public consultation period ensues bringing mixed results.

In an article by Roland Gribben of Britain’s Telegraph, page A6, Focus on Energy, a poll of over 1000 people had 46% in support of continued use of nuclear power. The article goes on to say that the government is anxious to bring back nuclear power into the energy equation to provide a more balanced portfolio and avoid heavier dependence on gas and other forms of energy. Bang on in our humble opinion.

Now if you reflect on any of the major projects that have been built in your area did you find that the budget was overrun and the schedule was overshot? Projects that spring to mind here are the new Wembley stadium and the new parliament building in Scotland, both managerial basket cases. The same goes for large nuclear projects they are fraught with opportunities for delay, hence the proliferation in claim resolution specialist consultants. Well this is the first article that we have come across that has raised the touchy subject of ‘timetable’ when it points out that by 2020 there will only be Sizewell B producing nuclear power. So Britain has about twelve years to say yes to a nuclear future, produce designs, procure equipment, appoint expert constructors, build and commission this new crop of plants. The construction of nuclear power plants has not been done in this country for almost a generation so the expertise is not available. Well right next door we have the French who are bang up to date with the latest in nuclear technology however everyone else will be calling on their services too. The shortage of skilled labour in this area is bound to impact on the proposed Engineering, procurement and construction schedules so the need to get to the starting gate is absolutely critical if Britain is to avoid a run a candles.

The British government is keen to see that the private sector provides the finance and not the taxpayer, do we have the time to pontificate we ask?

For good measure this article reminds us that the Chinese have plans for 88 out the proposed 223 new nuclear plant proposals, although we tend to think that China will announce more and more new proposals once it has tied up the supply of uranium. Yes uranium! One wonders just how much uranium has been secured to operate these plants in Britain; our guess would be on the low side, if any.

Have a good one.

Fronteer Development Group: Moved to

As Fronteer are now focused on gold exploration we have decided to transfer it to our gold mining investment account at gold where we will report on the companies progress and any trades that we make. Just follow this LINK and many thanks for your patience.