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Tuesday, August 01, 2006

Cameco says uranium spot market is hot

News articles covering the same announcement here and here.
"In the past, the summers have traditionally been very slow and usually there's little movement in the spot price. This summer, the tight supply situation continues to push the spot price higher, notwithstanding the moderate levels in demand," said George Assie, Cameco's senior vice-president for marketing and business development.
And also:
"We now expect total 2006 spot volume to be at or above the high end of the 20-to 25-million-pound range we had forecast," Assie said.
There was talk that the 2005 jump in prices was due to temporary speculation. 35 million pounds exchanged in 2005 on the spot market. UxC wrote some interesting stuff about that on their website (which is also where you find the spot prices). They concluded that roughly 10 million pounds exchanged on the spot market in 2005 were investors/funds and that even if you back that amount out, you still end up with a huge 25 million pounds, which would still be a 10-year volume record.

The spot market for uranium is extremely small, with only 107 transactions in 2005, and a lot of that was in a flurry in the early part of the year. The only point of following the spot market is to get a sense of where the much larger term contract market is heading: it has even fewer transactions, but much larger amounts of uranium.

In Cameco's quarterly results, their uranium earnings actually decreased from last year due to increased costs and an 18% decline in deliveries. They were helped by the increasing spot price and by currency translation changes and they had some increases in fixed price contracts (presumably due to new contracts). How sad that makes me, knowing that Cameco has shipped less uranium. As they look ahead to the full year:
In the uranium business, we expect revenue to be about 15% higher due to a stronger realized price, partially offset by a decrease in sales volumes.
All I ask is more of the same.

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