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StockInterview has another short article about the Ranger mine flood. I had been adding updates to this prior post, but I've reached a point where it's probably best to create a new post.

After Cameco Corp’s Cigar Lake flood at the company’s northern Saskatchewan uranium mining project rattled analysts and utilities who previously expected sufficient uranium would be available to meet the needs of nuclear utilities, along came another mine flooding.... While Cigar Lake effectively removed uranium mining supply in 2008, ERA’s ‘force majeure’ announcement withdrew supply anticipated for this year.

Emphasis added.

Uranium supplies have been reportedly dwindling at utilities to low levels. Right after the Cigar Lake mine flood in October of last year, James Finch wrote this about Cameco's invocation of the force majeur clause:

U.S. utilities should panic. Less than one month ago [Sept or Oct 2006], we challenged Rajiv Kundalkar, Vice President of Nuclear Engineering for Florida Power and Light, about Cigar Lake and other significant uranium supply sources at a Platts-sponsored nuclear fuel conference. We asked him if he was aware of the risks at Cigar Lake and else where. Calmly, he answered that he was.

This new Ranger mine flood adds to the problems from Cigar Lake:

The impact of this flooding has not yet been evaluated. Preliminary estimates for the first quarter 2007 could mean a loss of nearly one million pounds. Because of the company’s force majeure announcement and the company’s official statement that “production will be impacted in the second half of 2007,” TradeTech’s Gene Clark estimated the loss of newly mined uranium could run much higher.

And utilities are surprised, to say the least:

TradeTech announced that ERA’s force majeure ‘stunned’ nuclear utilities. Active demand for uranium is currently running more than two to one. More utilities want to buy uranium than what is presently offered. Utilities, which were locked-in ERA contracts, were paying the Australian subsidiary of Rio Tinto about $22/pound. Now, utilities will be forced to pay about five times the price for the same uranium.

You've got to wonder about potential buyers who had been sitting on the sidelines waiting for things to cool down. What's going through their minds? And how many utilities have contracts with ERA? They're probably wondering how much they're going to be losing that needs to be replaced this year. Will it increase over time?

Think about the incentives for ERA right now in minimizing the impact of this flood (see here for pictures). Any heroic efforts they make to limit the impact or accelerate production merely allows them to sell uranium for $22. I don't know the details of the contracts, whether they're required to sell the uranium later on to the same people for the same price. Or can they sell the uranium for what might be well over $100?

TradeTech says the spot price is now at $90.

When Cigar Lake flooded, the severity of it took a few days to become clear, and there was a hint from someone in the industry that it might still turn out to be even more severe, given the difficulty of the mine. Industry insiders who looked at the Ranger pictures made it seem like this is a very bad flood.

I'm thinking this is going to be a good week for uranium stocks.

UPDATE:
article about the frothiness right now

UPDATE March 17, 2007:
Here's a map of the Ranger mine. You can see Pit #3 in the upper center and it matches fairly closely to the photo here. RP1 through RP4 are presumably the retention ponds. The Ore Stockpile contains low grade ore that's mixed with higher grade ore to keep an optimum grade going into the mill. With the flood, they'd be feeding poor grade ore directly into the mill until at least one active pit gets cleaned up. Apparently, Pit #1 is now the tailings dam.

Here's a map of where Ranger is. You can see that the Arnhem Hwy is a major road. Looking at the photos, I'd say the whole area is in very bad shape.