World Uranium Supply-Demand to Remain Tight

A worldwide dearth of uranium mines and highly skilled metallurgical teams to mine it has investors seeing yellow (cake, that is). “The thing with uranium is it’s easy to dig up but hard to get out,” says Simon Tonkin, who covers base metals, including uranium, at Thomas Weisel Partners. In this exclusive interview with The Gold Report, Simon discusses emerging challenges in the uranium sector and the deficits he foresees in the global race for supply.
The Gold Report: Simon, why have the uranium stocks made such a nice move in the last week or two when oil’s been coming down? I thought part of what was driving the uranium stocks in the previous cycle was the ever-spiraling upward price of oil, making more and more people want to look to alternatives (one being uranium). Could you comment on that?

Simon Tonkin: First of all, I think the supply-demand picture looks tight. We’re forecasting deficits to about 2013 and, potentially, if Cigar Lake—the biggest undeveloped uranium deposit in the world—doesn’t come online, then we could see deficits further out than that. Secondly, there’s a scarcity of uranium mines throughout the world. Most of them are owned by big companies like BHP Billiton Ltd.Kazatomprom, Cameco Corp and Rio Tinto.

Most recently what we have seen in the uranium space is the power utilities coming in to buy stakes in uranium producers to potentially guarantee supply. We’ve seen the Japanese and Koreans come and buy stakes in uranium mines, and last week the Chinese said they are interested in buying stakes in mines and, a while back, the Indians also indicated that they were looking at that. So it’s these emerging economies with big reactor plants that are buying up stakes in uranium mines and projects. That’s actually sparked the market to realize supply is potentially scarce.

The thing with uranium is it’s easy to dig up, but it’s hard to get it out. It’s the processing that’s the key to getting the actual uranium out. Each deposit is fairly unique in terms of its processing, and getting a good metallurgical team together to actually recover the uranium is most important.

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