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CEO of SXR Uranium One interview

MINEWEB: And I�ve emphasised that, because it is relevant to cost.

NEAL FRONEMAN: It is very relevant � and not only that. Alec, we have positioned the company, because we can, as a low technical risk company. Now part of the surge that you�ve seen in the uranium prices was caused by Cigar Lake, which was a high technical risk mine that failed to come into operation.

MINEWEB: Just explain that � what happened at Cigar Lake?

NEAL FRONEMAN: Well, at Cigar Lake they�re mining in sandstone. It�s a very difficult mining operation. They were still developing the mine, and the sandstone contains water, and they have to freeze the water around where they mine. They lost the freezing ability, they had a ground collapse, the mine flooded, and now it is just about impossible to de-water that mine and seal it off.

and also

MINEWEB: Just getting back to the demand side. The Indians are talking about dramatically increasing the number of nuclear power plants they have in that country, because there nuclear only accounts for between 2 and 4% of India�s power. They are power-poor, they need to get more of it. The Chinese are talking the same kind of story. Even in The Financial Times of London today, Angela Merkel reiterated that she�d like to reverse the decision taken in 2000 to close off all the nuclear power plants in Germany by 2020. So there is this move towards nuclear power, which means more and more demand for uranium. What has it done to the uranium price?

NEAL FRONEMAN: You know, the increase in demand has not really filtered through into the uranium price yet. The reasons are that we are being very conservative in the industry regarding forecasting increases in demand. I think that the real uranium price-driver at this stage is constrained supply. So we�re not even seeing the benefit of increased demand yet.

Froneman then discusses a bit about their new contracts with utilities. The contracts have a price floor (minimum price that SXR will receive per pound), but the price tracks the market price without any cap. They've signed off 28% of their future production (2008 to 2012). Even though they're a low cost producer, this still doesn't quite pay off the cost of the mine. Once the mine starts producing, incremental costs are $14.5 per pound.

And Stockinterview.com has another article out.
The utilities are waiting for better prices, but they already got screwed by waiting up to this point.

Cameco's chief operating officer glumly hinted at something we highlighted in our late October report, “Drilling through the Athabasca sandstone has been more challenging than anticipated.” Several sources, some of which may be reliable, suggested Cameco still can’t the stop the water from coming in at the Cigar Lake uranium mine. We’ll find out in February whether this is gossip, old news or accurate.

I recall reading about the Cigar Lake mining operation and they need to jump through a lot of difficult hoops to get at the uranium and it's quite possible that they won't be able to get it for a long time.

On January 11th, UrAsia Energy announced a sales contract with a “major North American utility.” According to the company’s news release, approximately four million pounds of U3O8 have been offered for delivery over a five-year period from the Akdala uranium mine in Kazakhstan. UrAsia has a 70-percent interest in the joint venture, which wholly owns the mine.

Because of the recent surge in the spot uranium price, the contract includes market-related pricing with a floor price protection at the weekly spot price indicator of US$72/pound. Of course, over the course of the next few years, the utility may be forced to pay more for the same uranium but UrAsia is guaranteed this floor price.

Another price floor combined with an adjustable market pricing, like SXR got.

What the utilities don't seem to understand is that when you have a massive imbalance in the market, the market will develop incentives to bring additional supplies online one way or another, or else you'll have shortages. Those who are going to be bringing uranium to the market anytime soon are going to be hugely rewarded if the supply is going to increase as much as it needs to.