The great uranium bull run

The price for uranium today is the highest it’s been in 27 years. And with its current trend it may only be a matter of months before it matches its all-time high of just over $43 per pound. But until it started to take off in 2003, uranium spent a couple decades hovering around the $10 range. There are several reasons why uranium has finally awoken from its dormant state.

Just like all commodities taking part in this soaring bull market, fundamentals are ultimately the driving force behind each secular trend. And like most other hard commodities, uranium is in the midst of a massive economic imbalance as mined supply is not even close to keeping up with soaring demand.

Peter Farmer of Denison chimed in his concerns in a recent interview after his company’s annual meeting in April. Farmer echoed the strain suppliers are under as demand is growing, and went on to criticize the bureaucratic constraints miners are experiencing. Farmer points to the Canadian Environmental Assessment Act, recently signed into action, as a cumbersome delay in the licensing and permitting process for project development and hints that the Canadian Nuclear Safety Commission is seemingly in an administrative maelstrom.

In Canada it now takes longer today to obtain a project permit than it did several years ago, when the price of uranium was depressed. And in Australia, the second-largest uranium producer, I am told it is just as difficult if not more difficult to obtain the appropriate permissions for development.

Another interesting insight from this interview, which I suppose makes sense, is that most of the natural resources regulatory agencies are having serious personnel issues. I would suspect this spills over to all of the commodities sectors in that many of the government employees are switching from the public sector to the private sector with promises of big salaries and hefty options. So mixed with the new rules and regulations, there is an administrative backup miners are having to deal with.

Though this red tape proves quite unfortunate today, it is time to play catch-up for uranium explorers. In order to meet the growing demand for uranium, many more mines will need to be constructed and many more economical discoveries will need to be made.

The bottom line is the uranium needed to fuel the growing nuclear-friendly economy is in major short supply. Even though the price of uranium has rapidly ascended of late, $40 uranium may seem cheap years down the road.

Asia Times