Growing demand for nuclear energy prompts investors to look for other producers
Peter Koven
Sun
TORONTO — For Cameco Corp., it was another horrible setback. For the rest of the uranium market, it was a much needed shot in the arm.
Investors pounced on uranium stocks Wednesday after Cameco’s announcement that a shaft at its Cigar Lake project in Saskatchewan had reflooded. It served as a reminder that the world is relying heavily on Cigar Lake, Australia‘s Olympic Dam and very few other projects to meet the demand growth expected over the next decade — and a problem at any one of them could severely tighten the uranium market.
Investors were buying in to any mining company Wednesday that is producing uranium or expected to in the near future. Shares of Denison Mines Corp., Uranium One Inc., and Paladin Energy Ltd. all rose about 15 per cent after being beaten down in the last couple of months.
“I think we’ve benefited because the news of the day is uranium again. It hasn’t been for quite a while, and when people focused on uranium, [they said] ‘Holy cow, look at the value here, ‘” said Peter Farmer, Denison‘s chief executive.
The Cigar Lake debacle began when the deposit first flooded in 2006. Cameco eventually took the blame after an independent report found its “deficient” actions contributed to the accident.
Last month, the company finally began to de-water the mine. Shaft No. 1 was pumped down to 430 metres below the surface without incident until early Tuesday morning, when workers noticed that water was flowing in. They initially tried to pump it out faster. But when the inflow rate got too fast, they let the shaft flood again.
Cameco, the world’s largest uranium producer, is holding a conference call this morning and it could get ugly if investors express their disgust with the latest setback at Cigar Lake.
With estimated production of 8.16 million kg of uranium a year, Cigar Lake is expected to make up about 15 per cent of global supply.
The project is scheduled to return onstream in 2011 at the earliest. But after Wednesday’s announcement, analysts and investors said that even 2012 might be optimistic.
The 2006 Cigar Lake flooding provided a catalyst for the dramatic run-up in spot uranium prices to $138 US a pound. The price corrected all the way back to $57 and now sits at $64.50, according to Ux Consulting.
Experts said the latest incident will not have the same impact on prices. But it demonstrates how small the global uranium market is, and how difficult it is to bring new projects onstream.
