Pink Sheets

The Wall Street Journal reports here (paid subscription required) that uranium producers, including Strathmore Minerals, are speaking out against the US Government's plans (announced in August) to downblend nuclear weapons grade uranium into nuclear reactor fuel. Here's a free report on the same thing.

The government controls the equivalent of about 135 million pounds of uranium fuel. The world consumes about 180 million pounds per year. The government won't sell off its entire nuclear arsenal, considering that a lot of unstable countries are working on nuclear weapons, with more nuclear wannabes waiting in the wings. So if we figure the US might downblend and sell off 80 million pounds, that corresponds to roughly 1 year's worth of shortfall between what the world consumes and what uranium miners produce, not to mention the rapidly increasing demand with the 27 nuclear reactors being built and even more being planned.

Even the US government admits that it doesn't want to disrupt the uranium producers. In fact, one of the reasons why there's such a large imbalance right now is because of all the downblending of nuclear weapons into reactor fuel over the past 10 or so years. The Wall St Journal reports:

The Nuclear Energy Institute, which represents both nuclear-power-plant operators and uranium producers, has yet to take a position on the DOE's proposal but plans to do so, Felix Killar, the group's senior director of fuel supply, said. "Right now there's a lot of concern about assurance of uranium supply," he said. "We've had a 10-year hiatus of anyone even thinking about putting production on-line."

The US DOE wants to sell 5.5 million pounds of uranium per year, which isn't even close to the 18 million pounds per year that Cigar Lake was going to bring online (Cigar Lake will eventually produce uranium, but probably years later and will it produce the same expected amount?).

Marketwatch reports:

The producers want the department to limit its annual sales to 2.6 million pounds in 2007-2009, 3.9 million pounds in 2010-2013 and 5.3 million pounds in 2014 to 2016. They also say the department should sell the material through long-term contracts to avoid driving down spot market prices, while reserving some supplies for new reactors that will need uranium for their cores.

This actually makes a lot of sense: allow prices to remain high to encourage worldwide mining and then gradually increase the amount as new reactors go online. Oddly enough, it might be in Strathmore's best interests for the government to dump large amounts of uranium into the market in the near-term to keep production down while Strathmore quietly brings mines into production. The supply/demand imbalance won't go away and forestalling it would only make it worse. The uranium prices would go even higher in the long term than they would without the government sales because the 10 year drought in production would be extended for perhaps another 5 years.

UPDATE same day:
It's worth noting that the spot price of uranium jumped another $2.50 to $65.50 this week.