Nuclear power is the 'way forward'

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The growth of nuclear power in China and India over the next two decades will outpace other countries, a senior International Atomic Energy Agency (IAEA) official said Monday.

"China has developed quite fast in the nuclear power industry in the past 20 years," said Yury Sokolov, IAEA's deputy director-general and head of the department of nuclear energy.

"In China, in India, you have very definite plans for increasing the nuclear capacity six to 10 times for 20 years, this is really fast growth.

"The growth of the world is not so fast."

Sokolov said he remained positive about the future of nuclear power.

"Now nuclear power exists in 30 countries," he said.

"And 30 to 40 other countries have expressed their willingness to explore nuclear power."

He made the remarks on the sidelines of an IAEA symposium on nuclear power plant management, which opened on Monday.

China started nuclear power operations in 1991, when Qinshan-I, a 300-megawatt (MW) presurized-water reactor unit, independently developed by China, plugged into the grid.

China has fast-tracked development of nuclear power in recent years with a target to take its nuclear power capacity from about 9,000 MW in 2007 to 40,000 MW by 2020, according to China's long-term development plan for the nuclear power industry.

The Indian Department of Atomic Energy also had plans to increase the country's installed nuclear power capacity, expected to reach 20,000 MW by 2020.

Some Chinese experts said nuclear power was the best choice for China to satisfy its thirst for clean power amid pressure to sustain economic growth.

"The needs for energy consumption as well as for environmental protection are both pressed," Zheng Mingguan, vice-president of Shanghai Nuclear Engineering Research and Design Institute, said.

"Nuclear power is the most suitable choice to meet both needs."

Sun Libin, a scholar with the Institute of Nuclear and New Energy Technology of Tsinghua University, said: "Other forms of new energy, such as wind power and solar power, carry energy density much lower than nuclear power, and are unable to meet the tremendous power demand in China".

(China Daily October 16, 2007)

Price of energy value of Uranium: $20,000 a pound

As I had predicted in my earlier article, OPEC is now blaming speculators for high prices. Regardless what OPEC is saying now or will in the future, it will not derail in the oil bull market. Oil will eventually reach over a $1000 a barrel. No that is not a typo. In the next 10-15 years the export market will contract by over 70%. Assuming essential services required to keep society functioning at whatever level feasible are still around, that would mean that the average person in the US would have to cut his consumption by 90%. I think it will take prices at least 4 fold higher from here to achieve that. That multiplied with the Fed's aim to use the US dollar to put “Charmin” out of business will result in at least $1000 a barrel. But the road will a long and jagged one. Prices will spike and dip at every turn. Rumors of alternate energies being developed will cause “limit down” down days and threats on oil infrastructure will have the opposite effect. Through it all Joe Kernen and his his band of illiterate merry men on CNBC will keep trying to tell you that speculators are destroying your life. Sharron Epperson will keep telling you that oil is going down on a particular day because 2 and half weeks of world oil consumption were discovered somewhere. Although production should start after 5-8 years will make little difference to her astute explanations. (Those who saw her reaction after Devon's Jack discovery know exactly what I am talking about).

Finally I would like to add that in spite of the long term outlook for oil prices being incredibly bullish it is possible that a pullback to $70 -$80 could happen at anytime. This does not negate the long term fundamentals. I have stated my case above for why oil could go up 10 fold or more over the next 10 years. The fundamentals for uranium are even better than that for oil. Although uranium is used exclusively for electricity whereas oil is hardly used for that purpose, in an energy starved, global warming aware world it is also highly likely that Uranium will eventually trade at about BTU parity with oil. That means uranium at over $20,000 a pound. Seems a bargain at $80 a pound.

Paladin Says Uranium May Rise to $110 a Pound in First Quarter

By Claudia Carpenter

Oct. 18 (Bloomberg) -- Paladin Resources Ltd., which runs a uranium mine in Namibia, expects the price of the metal to rise to as much as $110 a pound in the first quarter of next year, a gain of about 40 percent.

``Availability is the issue,'' Paladin Chief Executive Officer John Borshoff said at a BMO Capital Markets meeting in London today. He forecast first-quarter prices at $105 to $110.

The spot price of the metal that's processed as fuel for nuclear reactors rebounded to $78 a pound last week, halting a decline from a record $138 a pound in June, according to TradeTech LLC, a Denver-based pricing service.

``I heard a utility participated'' in the transaction, Borschoff said. ``It wasn't just some hedge fund.''

Perth-based Paladin plans to produce 900,000 pounds of uranium this year and 2.6 million pounds next year, he said.

Macquarie Bank Ltd., Australia's largest investment bank, this week lowered its 2008 forecast for uranium to $100 a pound, from $140.30, citing in part stockpile sales by the U.S. government in August.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net .

Palladin looks to correct more

Above: Palladin Mining (PDN-TSE) another high quality name now down almost 50% from the absolute highs… one day, this will be an outstanding repurchase candidate, and one day this stock will soar again to dwarf the highs seen in the first half of 2007… long term investors, no worries, it's just a question of following the stock down and letting it tell us when the bottom has been seen.

So what’s next for Uranium and Uranium Miners? In our view, both Uranium and Uranium stocks are in a primary degree correction, meaning a correction that can last many months. In addition, with the prospect of a global recession, if not an outright depression looming directly ahead, we feel that it is best to use a cautious approach and not try to pick a final low. To help clarify this point, on all of the updated charts shown above, the “AFTER” charts through today’s trading we include the three most important moving averages for each stock, the 50 day, the 100 day, and the 200 day. In all cases, the moving averages have rolled over and experienced downside cross-overs, with the slow poke of the group, the 200 day moving average in most cases just turning down. That is a sign that it could still be very early in the downtrend, as normally, declining markets tend to see the 200 day moving average trending down week after week after week after week, until eventually, the darn thing starts to flatten out.

As I write this, I am reminded of Stan Weinstein and his terrific stage analysis, wherein these stocks would all be in stage four declines. For those of you who like to read up on Technical Analysis, Stan is both a gentleman and a scholar, and a number of years ago turned out a first rate tome entitled, “Stan Weinstein’s - Secrets for Profiting in Bull and Bear Markets” -- still a Barbera, “House Favorite.”

Putting a slightly different spin on the Uranium Sector, I note that my GST Uranium Index (which includes about a dozen names among the likes of Cameco, Denison, Strathmore, Paladin, Pinetree, Crosshair, JNR Resources, Mega Uranium, Laramide, UEX Corp., Fronteer Development and SXR Uranium) is now down 51.02% from its April 10th, 2007 peak. Now there are those that would say that’s the entire bear market. Yet, what is common in situations like this is for prices to retrace a proportional amount in relation to the advance which came before. In the case of the Uranium stocks, the percentage increase seen in the last few years is measured in the thousands of percents. When viewed on a semi-logarithmic scale, we note that to date, the very steep percentage decline off the high has only approached a minimum .236 Fibonacci retracement. More common, would be a .382 fibonacci retracement which could carry the index even lower toward the 420 level, with index closing today at a reading of 902.50.

Ok, we can hear the cringe, and readers should understand that while that type of move is possible, it may not in fact develop. What we are trying to point out is even if the entire sector were to be cut in half again from present levels, it would still fall into a clear cut “Wave 2” type of outcome, and would not change the very long term secular bull market view. Admittedly, a move down to the low 400 level on this index would be an unbearable amount of pain, but it is possible within the context of a major crash in the global markets that readings like that could be seen in the months ahead.

For now, the best approach is to be a trend follower and recognize that the trend is now definitively down. Until we see the kind of basing action that would suggest momentum divergences and downside deceleration, readers are advised to remain cautious and ideally on the sidelines and out of harm's way with regard to this group. In many cases, corrective Wave Two patterns traces out an A-B-C structure, within which it is possible that Intermediate Wave A of Primary Wave (2) has just recently bottomed. In this vein, a counter-trend “B” Wave advance could provide those holding these stocks with a loss, the opportunity to reduce the loss into strength and then stand aside as prices move down in Wave C, and into a more important final low.

Correction, not a rout!

http://www.theaustralian.news.com.au...-18261,00.html

BEING unashamedly and firmly one of the glass-is-half-empty crowd, Pure Speculation needs to detect only a zephyr of doubt to begin looking on the gloomy side of life. And being able to smugly throw in a "we did warn you" rider does add lustre to a spot of bad news.
The latest quarterly report from Sydney-based Resource Capital Research reminds us that the present uranium spot price is $US136 a pound; that's 45 per cent up from the $US95/lb level three months ago and a 111 per cent gain on the $US65.50/lb six months back. RCR is bullish, saying indications are for $US148/lb in the near term and $US165/lb by September 2008.

But we're now seeing a growing tide of reports from Canada saying there is concern the uranium price may have already peaked - although you have to factor in that power utilities are anxious to talk down the price. Buy orders are drying up, and some uranium for sale has been withdrawn from the market. Cameco, the world's biggest producer, saw its stock take a terrific hammering on the Toronto exchange early last week.

But it will be a correction, not a rout. The usual pattern is for buyers to re-emerge once prices come off a little, and there's no doubt that uranium demand will be strong in the years ahead. But those investing in companies with low-grade or unexplored tenements might like to pause for reflection.

NO doubt a good many investors are already scratching their heads at the price retreat in a range of uranium stocks.

Having one mine in operation and another on the way hasn't stopped Paladin Resources falling from $10.70 in April to $8.26 on Friday. On the exploration front, the once hot Toro Energy closed at 95c, compared with $1.28 two months ago. Alliance Resources has a slice of an advanced 15,000-tonne deposit in South Australia, with more high-grade hits last month. No good: its shares are at $1.74 compared with $2.85 in May.

And reports of further high-grade hits at Bigrlyi haven't restored Energy Metals to its April high of $8.34. Other recent market darlings have also suffered share price pain - Crossland Uranium Mines, A-Cap Resources and Black Range Minerals among them.

Yet a few continue to do well. Marathon Resources, one of the better fancied South Australian plays, was $3.88 at the start of April, $6.75 on Friday.

THIS all suggests that buying a uranium project might no longer be the quick fix for a lagging share price. But this hasn't stopped more from leaping in. The latest entrant is Pacific Enviromin. This company has previously been concentrating on bentonite, which, among other things, makes good cat litter. Now it has acquired 22,000sqkm of uranium tenements in the Northern Territory and a smaller parcel in Queensland.

But we still like something a bit more advanced. Thatcher Soak in Western Australia is living up to promise, with Uranex reporting intersections up to 0.82 per cent U3O8.

BACK in 1958, Don Walker acquired the Herberton assets of the Great Northern Tin Co, which had been a Queensland producer of that metal since 1881. He was subsequently Australia's representative on the former International Tin Council. Without him and his tenement holdings, North Queensland Metals would probably not exist.

NQM was a modest float last December, going to market for just $2.5 million with Walker on the board. It has just picked up another 13 tenements in the old tin mining area inland from Innisfail. And the company has an interesting strategy.

Tin mining in the area boomed until the 1930s, revived in the 1960s and then closed down again when the tin market went bust in the 1980s. There were several big companies mining their own deposits as well as buying ore from the hordes of small-time players (there being about 400 recorded mines in the area).

There are still plenty of prospectors with their own piece of turf, and NQM's plan is to develop several deposits on their own to supply one central treatment plant, but then go back to the strategy of the old days in terms of buying from any individuals who want to start producing ore.

The company hopes to have its core Baal Gammon project producing by late 2008 as a copper-tin proposition. But the 5.8 million tonne resource also has indium, used in electronics, at an average grade of 29 grams/tonne. NQM has received a lot of calls from Chinese companies about the indium.

INVESTORS in iron ore players getting up and running in Western Australia's mid-west might soon need to re-crunch their numbers. It had been assumed that companies not near railways would have to build their own and, indeed, Murchison Metals is working on such a study. There is also the Yilgarn Infrastructure Group, which fancies itself as the big port-rail player in the region, but it now faces having its nose put out of joint.

Babcock & Brown Infrastructure Group has entered the picture. It controls WestNet Rail, the 5100km railway network in WA. And it wants to build its own iron ore lines in the mid-west - serving Murchison's Jacks Hill mine near Meekatharra, passing the proposed Midwest Corp Weld Range development, with a branch out to Wiluna where Golden West Resources is working up a resource.

This means B&B would be putting up the capital for rail developments, not the individual mining companies - a huge slice off mine capital costs.

THIS column has always had a soft spot for energy juniors chancing their arm in the US. So it is heartening to see Redfork Energy believing it has a company-maker. This junior reports an initial coal seam methane reserve in Oklahoma of 37.5 billion cubic feet, worth about $270 million at present prices. Pipelines riddle the area, and the city of Tulsa is in close proximity.

Redfork is presently pumping about 600,000 cubic feet of gas a day with prices running at about $US7 per 1000 cubic feet. That's about three times what gas goes for here and the Bank of Oklahoma's long-term forecast is for prices to stay around that figure.

Redfork's David Prentice says margins are "very high". On top of that, each well - which has an expected 15-year life - pays back its capital within a year.

ALISTAIR Cowden wouldn't be the first resources boss with an overseas project to feel the local market is not exactly simpatico. His Vulcan Resources has been building up a considerable portfolio in Finland and needs some big money to develop the Kylylahti copper-cobalt-nickel project and get an idea of how much nickel there is at Kuhmo.

So $49 million of Scandinavian money will be coming in the door and Vulcan will list on the Norwegian Stock Exchange. Companies such as Vulcan are too small for the London and New York main exchanges, and London's AIM is seen as lacking liquidity.

But the Oslo bourse is patronised by a big swag of retail investors and is buoyed by Norway's equivalent of the Future Fund, the Norwegian Pension Fund, the biggest in Europe and primed with billions of krone from North Sea oil.

Kylylahti is particularly interesting because its cobalt element averages 0.24 per cent, which is high for that metal. Cobalt is now fetching $US61,000 a tonne and in high demand. Future supply growth depends on the large nickel laterite projects now in various stages of development (all experiencing delays) and on future mining in the Congo, which also has its problematic elements. In other words, supply is likely to be tight.

The Australian implies no recommendations regarding any of the stocks mentioned. The author does not own shares in any of the mentioned securities.

Green nuclear power coming to Norway | COSMOS magazine

Green nuclear power coming to Norway | COSMOS magazine: "Green nuclear power coming to Norway


SYDNEY: Safer, cleaner nuclear power is a step closer to reality after Norway's state-owned energy company, Statkraft, this week announced plans to investigate building a thorium-fuelled nuclear reactor.

Statkraft (which translates to 'state power') announced an alliance with regional power providers Vattenfall in Sweden, and Fortum in Finland, along with Norwegian energy investment company, Scatec AS, in a bid to produce the thorium-fuelled plant.

Thorium (Th-232), has been hailed as a 'greener' alternative to traditional nuclear fuels, such as uranium and plutonium, because thorium is incapable of producing the runaway chain reaction which in a uranium-fuelled reactor can cause a catastrophic meltdown. Thorium reactors also produce only a tiny fraction of the hazardous waste created by uranium-fuelled reactors (see 'New age nuclear', Cosmos, issue 8).

Statkraft, which is already Europe's second largest producer of renewable energy - mainly thanks to Norway's abundant hydroelectric resources - has recently made thorium-fuelled nuclear power a point of serious consideration. "It would be a sin of omission not to consider it," said Bård Mikkelsen, CEO of Statkraft, in an interview with the Norwegian newspaper Dagbladet.

To date, thorium has seen only limited application, such as by U.S. company, Thorium Power, which produces mixed uranium-thorium fuel for use in conventional nuclear reactors. However a reactor fuelled entirely by thorium would have significant advantages over conventional uranium or mixed-fuel reactors.

Besides their inability to go critical and their low generation of waste, thorium-fuelled reactors don't suffer from the same proliferation risks as uranium reactors. This is because the thorium by-products cannot be re-processed into weapons-grade material.

Thorium also doesn't require enrichment before use as a nuclear fuel, and thorium is an abundant natural resource, with vast deposits in Australia, the United States, India and Norway.

Another advantage of thorium-powered reactors is they can be used to 'burn' highly radioactive waste by-products from conventional uranium-fuelled power plants.

Over the past eight months, there has been a substantial rise in public support for thorium reactors in Norway. In June 2006, polls showed 80 per cent of the population were completely opposed to any form of nuclear technology. Then in February 2007, the same percentage were in favour of investigating thorium reactors as a potential energy source.

"It is an absolutely incredible surprise that it has been possible to turn around the population in a country, just by quietly campaigning and explaining the benefits of the technology," said Egil Lillestøl, a nuclear physicist at the University of Bergen, Norway.

Lillestøl is a keen supporter of the ADS (Accelerated Driven System) technology used in thorium-fuelled reactors. Because thorium is incapable of achieving a self-sustaining chain reaction – unlike uranium or plutonium – it needs energy to be injected into the reactor to keep it running. This energy comes in the form of neutrons from a particle accelerator. For this reason, a thorium-fuelled reactor is also sometimes called a sub-critical reactor.

Statkraft is the third Norwegian company to express interest in thorium reactors this year; Thor Energi and Bergen Energi, have both applied for government licenses to build plants.

The announcement by Statkraft coincides with the first meeting of the Thorium Report Committee – an initiative commissioned by Norway's Ministry of Petroleum and Energy, in association with the Norwegian Research Council, to investigate the benefits and risks of thorium reactors.

The committee will submit its report at the end of 2007. Norwegian legislation currently bans the use of nuclear power, so the report is critical for gaining Government consent to build thorium plants in Norway.

"Norway has taken the lead on this. We are an energy nation; we have large supplies of thorium – not as much as Australia of course – but we have a very advanced energy industry, and we have a responsibility to the world," said Lillestøl. "Without nuclear energy we will destroy the world, we will spend all the coal, oil and gas, and we will be left with an energy desert."

Reza Hashemi-Nezad, a nuclear scientist at the University of Sydney in Australia agrees that thorium is a promising alternative energy source. However, while the European Union, India, the US, Japan and Russia are all working on thorium technologies, Australia is lagging behind.

"Australian industry is very interested in investing in this type of clean, safe and cheap nuclear energy," says Hashemi-Nezhad. "But I am afraid that if Australian scientists and industry do not get adequate support from the government and research institutes in Australia, they may move offshore."

Areva to Buy UraMin for $2.5 Billion - WSJ.com

Areva to Buy UraMin for $2.5 Billion - WSJ.com: "French state-owned nuclear-engineering company Areva SA agreed to acquire Canadian uranium miner UraMin Inc. for $2.5 billion.

Areva said the $7.75-a-share offer 'perfectly fits' into its strategy to significantly increase its presence in the uranium market, in which it already holds a 23% share in sales. Areva's current production of uranium is 6,000 tons a year, which it plans to double by 2011-12 from existing projects, such as those in Niger and Canada, and through the increase in production of its operations in Kazakhstan.

Olivier Mallet, Areva's senior executive vice president of mining, chemistry and enrichment, said the short-term plan to double uranium production was in place before the acquisition of UraMin and therefore didn't take its production into account. He said he expects about 7,000 tons a year of uranium to be added to Areva's production by UraMin."

URANEX kinda looks promising..

A couple of weeks ago Deutsche Bank bobbed up with a Buy on Uranex – the same mob that Stokes is punting on.

MD was amused to see the research note titled "Getting in Early".

No latecomer tag for this broker – it is getting in on the ground floor!

Could someone please tell Deutsche that the uranium boom has been running for a couple of years now? And Perth-based Uranex, a spin-off from Goldstream Mining, listed in October 2005.

The company is exploring for uranium at the Bahi prospect in Tanzania and Thatcher Soak in Western Australia.

The latter prospect has the obvious hurdle of being located in WA, where Premier Alan Carpenter is still firmly opposed to uranium.

And it is remote, being further inland from BHP's Yeelirrie project, to the east of Meekatharra.

But it does have at least one thing going for it: a resource estimate.

BP discovered the deposit in 1972 and calculated 6000 tonnes of uranium oxide.

However, different assaying techniques gave a resource as big as 15,000t (15 million tonnes of ore grading 1000 parts per million yellowcake), Deutsche Bank notes.

"In our opinion, one of the most appealing features of the Thatcher Soak deposit is that around 80% of the carnotite deposit is located within 6m of the surface," the broker says.

This provides the opportunity for the company to achieve "very low" mining and development costs, compared with competing deposits, it reckons.

The broker has a 12-month price target of $3.05, compared with the recent share price of $1.63.

Critical to Uranex's fortunes is an 8000m drilling program that started May 8 at Thatcher Soak. It will investigate the quality of the deposit and explore for extensions.

The other determining factor, of course, is the uranium price.

No fears there, according to yet another investment bank – Australia's own Macquarie.

The latter reckons that uranium will peak at $US150 per pound in late 2007, up from a record $125/lb in mid-May.

The window of opportunity could shut relatively quickly, though.

By the end of the decade, Macquarie expects the market to have moved into surplus as new supplies from Kazakhstan, Africa and Canada come onstream.

Still, that gives another six months, at least, of rising uranium (and share) prices for the Johnny-come-lately brigade.

Uranium hopefuls must act to maximise prices : thewest.com.au

Uranium hopefuls must act to maximise prices : thewest.com.au: "“Overwhelmingly the conclusion is that the economics are real and companies should be pushing ahead full steam to develop their projects,” Mr Grigor said.

“The biggest winners on our table and in the stockmarket are those lowgrade companies that we had been dismissive of two years ago. Since then the uranium price has quadrupled, catapulting these companies into enviable positions.”

He estimates that if all 19 Australian potential uranium producers were to reach production it would increase uranium supply by 17,000 tonnes a year, or up to 30 per cent over the next five years. If combined with increasing global supply, this could drag the uranium price back below $US100/lb.

“This means that the highly leveraged, low-grade companies will need to be up and running as early as possible to maximise the peak of the uranium price cycle, sometime between today and three years time,” he said.

One of the hurdles will be the high capital costs of up to $300 million to develop many of the low-grade projects.

The report suggests that this could be a significant issue for Acclaim, Bannerman, Deep Yellow, Toro and Uranex, while better-placed companies include Contact, Energy Metals, Monaro and Uranium King.

Mr Grigor warned many of the floats now hitting the m"

Uranium sea change -- (News Ltd)

STAND by for a uranium sea change -- the end of the big tenement land rush and the start of serious exploration.

This means, according to Far East Capital's Warwick Grigor, that the race is now on among the 150 or so locally listed uranium companies to find a resource while the metal's price is still in its peak phase.

Mr Grigor, who charts hundreds of resource juniors on a daily basis, said that the potential uranium supplies to be brought on to the market by Canadians and others could eventually see the price go back below $US100 a pound. The metal was still holding strong at $US120/lb last week.

But if the land rush phase is just about over, it's ending with a bang as both established explorers and latecomers scramble for projects.

And Africa seems to be the latest favourite.

In recent days, Crossland Uranium Mines has expanded its search to West Africa by joining a Canadian explorer to pick up 5000sqkm in Burkina Faso; Murchison United has begun drilling in Guinea and is raising another $6.6 million; Western Uranium has hired consultants to find it uranium projects in Africa; recent entrants New Age Exploration and Palace Resources have jointly gone hunting uranium in countries ranging from Sierra Leone to Mali; and NGM Resources is acquiring three uranium leases in Niger, a country where Canadians and Chinese companies have also been pouncing on uranium leads.

Also joining the ranks of the uranium players is Marmota Energy, a float being spun out of Monax Mining. Xenolith Gold has plumped for "nearology" and acquired tenements close to advanced projects held by Nova Energy, while oil and gas junior Rawson Resources is going looking for yellowcake opportunities in Texas, Utah, New Mexico and Colorado.

Mr Grigor, in his client note on uranium, said the uranium boom was now fact, no longer fantasy.

"This is a bull market based on hard factual economics, not fantasies and what-ifs," he wrote. "At these uranium prices, there are enormous cash flows that can be made."

And he now likes many of the companies that, two years ago, he dismissed as marginal players. These were the players with low- grade resources but -- with the quadrupling of the uranium price in that time -- had now been placed in an enviable position.

"If the uranium price keeps rising, these companies will shine even more," he added.

Mr Grigor expects the new exploration phase to last about two years, after which investors would be much better educated.

The more serious companies would be moving toward production, but the majority of exploration stocks would probably have withered on the vine.

Far East Capital's rankings have now been expanded to include two more companies in the potential producer category, Alliance Resources and Bannerman Resources.

Alliance has a stake in a 15,000 tonne resource in South Australia while last week a European consortium bought a large stake in Bannerman as that company looked to develop uranium mining in Namibia.

Geoscience Australia -overview of exploration

Australia has more low-cost uranium in deposits than any other country, but finding it is not easy. While the price for uranium has been low, little was found but now exploration is starting to increase.


Australia has the largest share of the world's "reasonably assured resources" of uranium, with approximately 27% of the total resource. This is recoverable for less than US$80/kg.

There are about 85 uranium deposits in Australia, including about 20 that have been mined out or partly mined. However, approximately 94% of Australia's uranium resources that are recoverable at less than US$80/kg are within the following seven large deposits.

* Olympic Dam and Beverley in South Australia;

* Ranger in the Alligator Rivers region of the Northern Territory;

* Jabiluka and Koongarra in the Northern Territory (mining of these deposits requires approval from traditional owners); and

* Kintyre and Yeelirrie in Western Australia (mining of these deposits requires a change in state government policy.

Olympic Dam is the world's largest known uranium deposit, containing about 21% of the world's uranium resources recoverable at less than US$80/kg. Additional resources are being delineated as exploration drilling continues in the south-eastern part of the deposit. The uranium grades at Olympic Dam are very low, averaging 300-400 parts per million, but the deposit also contains copper and gold, which makes the recovery of uranium economical.

During 2005, Australia produced uranium from three uranium mines: Ranger (5906 tonnes U^sub 3^O^sub 8^), Olympic Dam (4335 tonnes U^sub 3^0^sub 8^) and Beverley (977 tonnes U^sub 3^O^sub 8^).

The record total production of 11,218 tonnes represented approximately 23% of world uranium production in 2005, the second largest level behind Canada with 28%. Although there are a number of undeveloped deposits in Western Australia, the Northern Territory, South Australia and Queensland, current state government policies only allow uranium mining in the Northern Territory and South Australia.

Australia has no significant demand for uranium, and all mine production is exported under nuclear safeguard agreements with importing countries.

Uranium Exploration

All exploration for uranium and other minerals in Australia is carried out by private companies. However, the federal and state governments carry out continent-wide geological mapping and airborne radiometric and magnetic surveys. A continental network of gravity measurements is also provided by governments as well as specialised studies of specific mineralised regions.

All of these investigations contribute towards various databases of "pre-competitive information" that are compiled to attract mineral exploration to Australia. In August 2006, the federal government announced the allocation of $134 million to Geoscience Australia over a 5-year period through its new energy security initiative for the acquisition of continentwide geoscientific data to assist companies select favourable areas for exploration of energy sources including petroleum, uranium, thorium and geothermal energy.

The main difference between exploration for uranium and other minerals is the application of geophysical radiometric techniques to detect uranium mineralisation at all stages of exploration and mining including:

* airborne and ground radiometric surveys to detect presence of uranium. Such techniques generally can only detect uranium radiation very close to the surface;

* probes to measure gamma radiation in drill holes and prompt fission neutron probes to estimate uranium grades in drill holes; and

* radiometric ore sorting in mining operations to separate uranium ore from waste rock.

However, in general, exploration for uranium does not differ greatly from techniques used in the search for other types of mineral deposits, and is organised in several stages that often merge and overlap. These techniques involve:

* global scale exploration:

- explorers consider areas that are known to be geologically favourable for uranium mineralisation, the amount of geological information available in the country, as well as the political stability of a particular country, mining regulations and taxation regimes, existing infrastructure (roads, ports etc.) and environmental factors that would affect mining if a deposit was found;

* regional scale exploration (usually hundreds to thousands of square kilometres):

- this begins with a literature search, particularly of any previous exploration results and reconnaissance surveys;

- geologically favourable areas are selected on the basis of broad regional geological criteria and are secured by exploration licence tenements;

- exploration methods at this stage include airborne radiometric and magnetic surveys, regional mapping and geochemical surveys, rock sampling and identification of rock samples' formation conditions.

* semi-regional area selection for more detailed work (tens to hundreds of square kilometres):

- results of regional scale exploration are used to reduce the size of an exploration area to smaller locations for more detailed, and usually more expensive, investigation;

- exploration methods include detailed mapping, geochemical mapping and ground geophysical surveys as well as airborne surveys such as airborne electromagnetic surveys followed by exploration drilling.

* prospect-scale delineation and evaluation of uranium mineralisation detected in the semiregional exploration (usually up to only a few square kilometres per prospect and takes place only if uranium mineralisation has been established). Exploration activities at this stage centre on an assessment of uranium mineralisation and include:

- detailed assessment drilling to establish the size of the deposit, often including digging trenches and limited underground workings to ascertain the formation of the mineralised body and consider mining options;

- studies of uranium ore mineralogy, metallurgical studies, bulk sampling and pilot plant metallurgical test to determine the appropriate method to process the ore;

- feasibility studies to establish the profitability of the mining operation;

- appropriate environmental studies and government approvals for mining the deposit.

* a mine development stage:

- make a decision to mine the deposit based on the results of feasibility and environmental studies and mining conditions specified by government authorities;

- proceed to develop the mine and commence mining activities; and * mine closure:

- rehabilitate the mine site once the mining of the deposit is completed.

Chance Discoveries

Explorers may find a uranium deposit while looking for deposits of other minerals. The best example of this is Olympic Dam, where explorers were using magnetic and gravity anomalies along with satellite imagery to identify an area in South Australia for a certain style of copper deposit that required testing by expensive deep drilling.

As a result, a previously unknown type of deposit of copper, gold and uranium was discovered. Geologists are continuing to investigate the Olympic Dam deposit to develop a better understanding of its signatures, which could then be used to discover other similar deposits.

The likelihood of explorers finding uranium deposits while looking for other mineral deposits depends on:

* the type of exploration techniques being used. A variety of mineral deposits could be detected with geochemical and some geophysical surveys. While some exploration programs will target a particular type of mineral deposit, a lookout will be kept for other closely associated deposits types that can be detected by the same methods;

* the type of area being explored. Some areas are not geologically favourable for any uranium deposits; and

* some deposits are polymetallic, such as Olympic Dam, Jabiluka and Nolan's Bore, which contain a combination of minerals

Uranium Exploration in Australia

There was a resurgence in uranium exploration in Australia in 2005 with expenditure of $41.09 million, a threefold increase on the $13.96 million expenditure the previous year.

The number of companies actively exploring for uranium increased from five at the start of 2004 to more than 34 by late 2005. The proportions of total expenditure on exploration in each jurisdiction were:

* South Australia (42%);

* Northern Territory (37%);

* Queensland (15%); and

* Western Australia (6%).

The combined expenditures in South Australia and the Northern Territory accounted for almost 80% of Australia's total. The main areas (in terms of expenditure) are given in Figure 3. They are:

* the Gawler Craton-Stuart Shelf region, tertiary palaeochannel sediments of the Frome Embayment, and palaeochannels overlying the Gawler Craton in South Australia;

* the Alligator Rivers region and western Arnhem Land, and the Ngalia Basin (including the Napperby project in Tertiary sediments overlying the Ngalia Basin) in the Northern Territory; and

* Mount Isa province in Queensland.

Further details on Australia's uranium exploration can be accessed in the Geoscience Australia publication Australia's Identified Mineral Resources at www.ga.gov.au:8500/ image_cache/GA7036.pdf

Australia's Most Likely Regions

Figure 3 shows areas that are geologically favourable for uranium and were being explored for uranium deposits in 2005. Areas of particular interest include:

* the Gawler Craton area in South Australia, which has the Olympic Dam deposit ("hematite breccia" type) that holds about 70% of Australia's uranium resources. Explorers are looking for more Olympic Damtype deposits in the area. Other areas considered favourable for Olympic Dam-type deposits include the Curnamona Craton (Mt Painter area) of South Australia and the Georgetown and Mount Isa regions in Queensland;

* the Arnhem Land and Rum Jungle areas in the Northern Territory, where companies are exploring for "unconformity-related" uranium deposits similar to those at Ranger and Jabiluka, the second most important type of uranium deposit in Australia with about 18% of the country's uranium resources;

* the Frome Embayment in South Australia is the most important area in Australia for sandstone-type uranium deposits such as the Beverley deposit. This type of deposit accounts for about 4% of Australia's uranium resources and is the most widespread; and

* the north-east Yilgarn area around the Yeelirrie and Lake Way uranium deposits in Western Australia is a promising area for "calcrete" deposits, which account for about 3-4% of Australia's uranium resources.

Recent Discoveries

The last major uranium discovery was Kintyre in Western Australia in 1985.

The discovery of uranium deposits depends on the level of funding allocated to carry out exploration. This depends on the demand and the price, which in turn is determined by the perceived supply. During the late 1960s through until the early 1980s there was a perceived shortage of uranium, which was followed by an oversupply and a sharp downturn in uranium exploration.

If explorers are looking in areas that are geologically favourable for uranium deposits, more funds will be allocated to exploration and more deposits will be found. During recent years there has been increasing concern that there will be a world shortage of uranium for nuclear electricity generators, resulting in a quadrupling of the uranium price to more than US$50/lb. This has been accompanied by a corresponding sharp increase in uranium exploration expenditure.

In constant dollars, expenditure of $41.09 million in 2005 was the highest annual expenditure on uranium exploration in Australia since 1988. However, this is less than half the comparative level of expenditure during the peak years between the late 1960s and the early 1980s, when most of the significant deposits were discovered.

From the early 1980s to 2004, when uranium prices were depressed, there was relatively little exploration either in Australia or globally. Apart from Kintyre, no significant uranium deposits were found during this period.

The recent surge in uranium exploration expenditure has led to the first recent significant uranium discovery, the Beverley 4 Mile, in 2005.

It is of interest to note that Australia's uranium resources have continued to grow for more than 20 years from discoveries made prior to 1985 despite increasing mining since 1976. In particular a lot of additional resources have been discovered in the course of ongoing exploration at Olympic Dam.

Apart from high levels of exploration expenditure, the surge of uranium discoveries also was due to a combination of additional factors including extensive highresolution, low-level airborne radiometric surveys, which picked up uranium deposits emitting radioactivity because they were exposed at the surface.

Among these deposits were Ranger, Nabarlek and Koongarra in the Northern Territory and Yeelirrie in Western Australia. The discoveries led to a better geological understanding of these deposits, and deposit "models" were developed by geologists to assist in the recognition of geological clues that indicate where certain types of deposits are present.

Conversely, the lean period of uranium discoveries from the early 1980s until about 2003 was exacerbated by other factors such as:

* government policies from 1983 to 1996 restricting uranium mining to three mines, which curtailed exploration activity because any discoveries could not be mined. Uranium mining is still prohibited in Western Australia and Queensland, and uranium exploration is not allowed in New South Wales and Victoria;

* decreasing land access to some prime uranium areas, such as the Kakadu National Park in the Northern Territory; and

* as "easily discoverable" uranium deposits are found, it becomes increasingly more difficult and more expensive to find deeply concealed uranium deposits. This is particularly the case for Australia, where about 70-80% of the continent is covered by a veneer of deeply weathered barren rock, making it even more difficult and expensive for explorers to "see through" the barren cover to search for hidden uranium deposits.

Significant factors assisting the discovery of uranium and other mineral deposits are the availability of regional geological, geophysical and geochemical data acquired by government agencies such as Geoscience Australia and state and territory geological agencies.

The data minimises the risk for explorers in areas such as Olympic Dam, where the deposit is concealed by 325 metres of rock but was discovered partly because of the interpretation of regional geophysical data acquired by Geoscience Australia's predecessor, the Bureau of Mineral Resources. Yeelirrie also was found because of the interpretation of regional radiometric data.

It was a similar case for the large uranium deposits at Ranger and Jabiluka in the Northern Territory, which were found when explorers were attracted to the area by their interpretation of the regional geological mapping.

Many of the early discoveries were found in areas of little surface cover, so the rate of uranium discoveries diminished as the value of the old data from the regional geological mapping and geophysical surveys were exhausted. The challenge for future discoveries is to assist explorers with more sophisticated regional data provided by government agencies, which allow explorers to look through the cover and locate uranium deposits below the surface layer covering 70-80% of Australia.

The geophysical and geochemical programs being launched by Geoscience Australia during the next 5 years through the federal government's $134 million new energy security initiative will play an important role in the discovery of new uranium, thorium and geothermal energy as well as other mineral deposits in the future.

Uranium overview - mid 2007

What more do we know about the junior uranium companies? Firstly, it is clear that nearly all of them are involved at die early stage of exploration. It is believed that world expenditure on uranium exploration quadrupled between 2001 and 2005 and now stands at over 9200 million per year. The juniors are responsible for over half of this, the remainder being carried out by the current major producing companies. Altogether, this can be called the beginning of a second major exploration cycle for uranium, following the first in the 1970s and 1980s, when many of the current operating mines were discovered. Maybe a third of the companies are also buying up previously known deposits indeed there has been a rush to acquire the data from previous exploration activities, while share swaps and other similar corporate activity is very much part of life for such companies. Very few of the companies, no more than 20, have yet reached the next stage, which can be termed active mine development, in other words going through the regulatory process, preparing environmental impact assessments and bankable feasibility studies and beginning to invest in the mine infrastructure. What is clear is that it will still take many years for new discoveries to result in active mine production - this is true for all metals and minerals, but in uranium it tends to be prolonged. In some cases, this may be 20 years or so - it has taken that long to get current mines into operation. Of the junior companies, only a small number are now producing, such as URI and Mestena in the USA, Paladin Resources in Namibia and UrAsia in Kazakhstan.

As time goes on, however, more and more junior companies will reach the production stage. It's interesting to consider the countries where this is likely to take place. About half the junior companies have their headquarters and stock exchange listing in Canada, with about one third in Australia. Yet the geographical spread of their activities is much greater. Although Canada and Australia are both prominent at the exploration and known deposit acquisition stages, many of the companies are active in both the USA and Africa, with smaller numbers working in Asia, Latin America and Europe. So new production could come from any of these locations - indeed there are good grounds to believe that Africa and the USA may well outpace Canada and Australia, at least over the next 5-10 years.

With the exception of the Honeymoon in situ leaching mine in South Australia (which SXR Uranium One should commission by 2008), there is nothing immediately coming up from the juniors in the two big producing countries, which currently account for half of world output. One reason for this may be that the regulatory process seems to be rather more lengthy in these countries (and Australia is only now escaping from anti-uranium public policy and sentiment}. It is notable that Paladin has got the Langer Heinrich mine in Namibia up and running in a relatively short period of time, encouraged by supportive public authorities. Other African mines, in South Africa and other countries, are likely to get into production well before all the projects in Canada and Australia, currently only being talked about. The position in the USA is less clear, as the regulatory process there can also be lengthy, but there is every prospect of some of the juniors getting production moving strongly upwards in the 5-10 year timeframe, American utilities, who have been most exposed to the uranium price spike, will no doubt support this. Yet the big increase in world production before 2010 is likely to come from Kazakhstan, where operations are largely controlled by Kazatomprom, clearly a major established player in the market.

Another feature to watch with the junior uranium companies is that they are often very dependent on the uranium price staying high. The average grades of many of their deposits are quite low, suggesting they may be quite high up the cost curve. While buyers are keen to diversify their sources of supply, particularly at present when they feel weak against the established producers, price is vitally important and they won't generally support those with high cost profiles.

It is clear that there will inevitably be a huge amount of consolidation in the junior uranium sector. The better companies will inevitably become acquisition targets for the major producers, particularly if these find themselves short of material to satisfy contracts. Indeed, cynics about the sector would claim that this is all most of the juniors really want to do - they have no intention of ever producing a pound of uranium themselves and are just seeking to sell out at a good profit to whoever comes along. This may be true of many, but there are clearly those who are dedicated to getting mines up and running. But of course, everything has its price. What is likely is that over the longer term, there will likely be only 10-20 survivors out of the current pool of 400 who are still involved in uranium, independently and at the mine production stage. Possibly even fewer. So a wave of takeovers, mergers and even corporate failures is now likely to ensue.

Finally, it must be said that the junior companies have brought a fresh air to a sector that, with a few exceptions, appeared to be on its last legs only a few years ago. Some would say that a lot of the fresh air is also hot air, but this U inevitable in a business such as mining, with its sharp up and down swings. Industry meetings have certainly been enlivened by the appearance of many 'characters' from the past and by the arrival of financial types, only really out to make money (and not apologetic about this). And as said earlier, the rising interest in uranium has presaged the increased focus on nuclear power as a whole, which must be a good thing.

News Limited May 21, 2007 - Uranium sea change

Robin Bromby

Commodities

STAND by for a uranium sea change -- the end of the big tenement land rush and the start of serious exploration.

This means, according to Far East Capital's Warwick Grigor, that the race is now on among the 150 or so locally listed uranium companies to find a resource while the metal's price is still in its peak phase.

Mr Grigor, who charts hundreds of resource juniors on a daily basis, said that the potential uranium supplies to be brought on to the market by Canadians and others could eventually see the price go back below $US100 a pound. The metal was still holding strong at $US120/lb last week.

But if the land rush phase is just about over, it's ending with a bang as both established explorers and latecomers scramble for projects.

And Africa seems to be the latest favourite.

In recent days, Crossland Uranium Mines has expanded its search to West Africa by joining a Canadian explorer to pick up 5000sqkm in Burkina Faso; Murchison United has begun drilling in Guinea and is raising another $6.6 million; Western Uranium has hired consultants to find it uranium projects in Africa; recent entrants New Age Exploration and Palace Resources have jointly gone hunting uranium in countries ranging from Sierra Leone to Mali; and NGM Resources is acquiring three uranium leases in Niger, a country where Canadians and Chinese companies have also been pouncing on uranium leads.

Also joining the ranks of the uranium players is Marmota Energy, a float being spun out of Monax Mining. Xenolith Gold has plumped for "nearology" and acquired tenements close to advanced projects held by Nova Energy, while oil and gas junior Rawson Resources is going looking for yellowcake opportunities in Texas, Utah, New Mexico and Colorado.

Mr Grigor, in his client note on uranium, said the uranium boom was now fact, no longer fantasy.

"This is a bull market based on hard factual economics, not fantasies and what-ifs," he wrote. "At these uranium prices, there are enormous cash flows that can be made."

And he now likes many of the companies that, two years ago, he dismissed as marginal players. These were the players with low- grade resources but -- with the quadrupling of the uranium price in that time -- had now been placed in an enviable position.

"If the uranium price keeps rising, these companies will shine even more," he added.

Mr Grigor expects the new exploration phase to last about two years, after which investors would be much better educated.

The more serious companies would be moving toward production, but the majority of exploration stocks would probably have withered on the vine.

Far East Capital's rankings have now been expanded to include two more companies in the potential producer category, Alliance Resources and Bannerman Resources.

Alliance has a stake in a 15,000 tonne resource in South Australia while last week a European consortium bought a large stake in Bannerman as that company looked to develop uranium mining in Namibia.

Western Aussie thoughts on Uranium stocks

Among the companies he follows are Berkeley Resources (which is exploring in Spain and has formed an alliance with France's Areva, the world leader in nuclear power development); Energy Metals, which has a high-grade deposit in the Northern Territory and is a possible takeover target; Nova Energy, 57 per cent owned by Oxiana, which has two Western Australian projects that could be out of blocks as soon as state bans on mining are lifted; and Uranex -- not for its fashionable Tanzanian exploration so much as much for its Thatcher Soak deposit in Western Australia, once explored by BP and now shaping up as the flagship project for the company.

Wilson's tips for investing in uranium stocks are:

* They should be unhedged, so they get full exposure to the soaring spot price once in production.

* They must have exploration upside. In other words, they will have already found something but can value-add by extending the size of that resource with more drilling.

* Preferably, the projects are advanced and the company has started ticking off the milestones on the road to production. A Joint Oil Reserves Committee (which sets Australian standards for resource findings) resource would be a good start.

* They have the potential to be taken over, particularly if the company is at the grassroots end of the spectrum, realising value for shareholders.

Warwick Grigor wears several hats. He sits on the boards of Monaro Mining and Peninsula Minerals and he analyses the companies through his Far East Capital investment business. He says the biggest trap for new players is being impressed by a company announcing it has "radiometric anomalies". Think geiger counter making that squawky noise.

All that means is that there may be some trace of uranium, a mineral that is pervasive and widespread. The radiometric response is not an indicator that there's an economic amount of uranium underneath.

And investors should look for companies that have done some systematic exploration.

"Isolated assays mean zilch," he says.

"Investors have to stop getting excited by these isolated assays."

Grigor argues that 90 per cent of uranium companies are not yet in a position to say they have a mineable proposition. Only when they have a bank of drill intersections are companies in a position to talk with any certainty.

However, Grigor has shifted ground on the economic threshold of projects.

As he says in his latest uranium review, sent out to clients, he had to recant his view of two years ago (when uranium was only $US30/ lb) that a deposit needed to have a minimum average grade of 0.07 per cent.

"Now, with the rise in price, even grades as low as 0.04 per cent could be profitable," he says.

Grigor ranks 23 companies as either being in production or being well on the way to that state. Some of those are -- in his view -- already fully priced.

These include Summit Resources, Toro Energy, Marathon Resources (which is starting a scoping study on its Mt Gee deposit), Arafura Resources and Berkeley Resources.

The ones he would buy now are: his own Monaro Mining, which he argues has undervalued prospects in Kyrgyzstan; Uranium King, which has projects in Nevada and New Mexico (and the Americans support uranium mining); and Contact Resources, with its project in Peru.

Grant Craighead, an analyst with Stock Resource, says one point investors should keep in mind is whether a company has geologists who know uranium well.

There are not too many of those around, and they are getting on in years, given that we went for more than 20 years without exploration for the mineral.

"There is a limited pool of talent -- to be an expert on uranium, you'd have to be at least 55," he says.

Craighead has put his own money into Energy Metals (as well as recommending it to clients).

That company has a high-grade resource at Bigrlyi in the Northern Territory which, with a new drilling program about to start, is likely to get much bigger. More importantly, though, Craighead smells a takeover in the wind.

Canada's Denison Mines is a shareholder and is keen to get a foothold in Australia. It is about to see another of its takeover bids collapse.

All the signs point to Denison then switching its takeover energies to Energy Metals.

RED HOT TIPS

WARWICK GRIGOR'S WATCHLIST

Contact Resources ............ Undervalued Peru deposit

Monaro Mining ................... Undervalued Kyrgrzstan project

Uranium King ..................... US projects

Impact Minerals ................. Inexpensive but good project

Peninsula Mining ............... New project in Wyoming

Paradigm Gold ................... Cheap buy in Queensland

Erongo Energy ................... Namibia shaping up

Xstate Resources ............... US exposure

SXR Uranium looking for Australian assets

June 11, 2007 12:00am

ACQUISITIVE Canadian uranium player SXR Uranium One is sniffing for Australian assets as it moves to bulk up its production of the nuclear fuel.

Speaking to reporters after a seminar in Toronto, the company's chief executive Neal Froneman said he would like to achieve a "critical mass" in Australia, where uranium production is dominated by global miners BHP Billiton and Rio Tinto.

Uranium One is developing the Honeymoon project in South Australia, which is expected to begin production in 2008.

The company also has assets in the US, Kazakhstan and South Africa, and last week offered to buy Toronto-listed Energy Metals Corporation in an scrip deal worth about $C1.4 billion ($A1.55 billion).

Mr Froneman said the company was not currently in talks with any companies in Australia, however the Canadian miner is believed to be watching closely the efforts of local explorers, particularly in uranium-friendly South Australia.

China, which is planning to build almost 70 new nuclear power plants, is also taking a keen interest in Australia's uranium juniors.

Liu Xuehong, vice president of China Nuclear International Uranium Co, an arm of the state-owned China National Nuclear Corporation (CNNC), told World Nuclear News the company was contacting Australian explorers with the aim of forming partnerships.

CNNC will present next month at a conference in Perth, which is expected to be attended by a high-level Chinese delegation.

Six Chinese organisations are among more than 40 companies vying for a potentially lucrative uranium deposit in the Northern Territory.

The Chinese might also be buyers of uranium from Honeymoon, with just 40 per cent of the mine's production currently pre-sold.

Uranium prices have soared over the past two years, with renewed interest in nuclear energy driving demand well above supply, following years of sluggish exploration.

Spot prices hit $US138 a pound last week, up from $US7 in 2000, although producers caution that the spot market is driven largely by speculators and doesn't reflect long-term contracts agreed to by producers and utilities.

Mr Froneman said he expected demand to continue to outstrip supply, due to the long time lag between exploration and production.

"Up to about 2015, we don't see the market coming into balance," he said.

He predicted spot prices would hit $US150 a pound before the end of the year, but said prices actually paid by utilities over the long term would likely be about $US60 a pound.

Australia is home to about 30 per cent of the world's low-cost uranium reserves and moves to relax laws on developing new uranium mines have international players watching.

The Australian Labor Party recently scrapped its opposition to new mine developments, but has left the ultimate decision in the hands of the states.

Western Australia and Queensland -- home to some of the richest deposits -- are still opposed to uranium mining.

with Reuters

Grandich also sees $200 an Oz Uranium

Peter Grandich sees uranium climbing to US$200, financial players yet to take profits
With the spot price for uranium rising further in the wake of two auctions last week, and another major deal with sxr Uranium One Inc.’s $1.6-billion friendly bid for Energy Metals Corp., surging investor interest in the sector continues unabated.

But is the end of this bull market for the nuclear fuel near?

Not if you ask Peter Grandich, author of The Grandich Letter, who attributes rising prices to tight uranium supplies.

Although he thinks we’re past the halfway point for uranium equities, he thinks uranium prices will rise to US$200 per pound. Market monitors Ux Consulting and TradeTech recently raised their spot prices to US$135 per pound and US$138 respectively, while long-term prices are at US$95 for both groups.

Mr. Grandich expected that a hedge fund or Uranium Participation Corp., which buys physical uranium, might have taken some profits by now and actually sold some uranium. But they haven’t.

“By them not doing that yet, it convinces me that the US$200 target is more reasonable than we could even have imagined just six months ago,” he said, adding that some of these players got into the uranium play early at US$30 or US$40 or less.

“It’s very hard to pass up on 300% and 400% gains, and they are doing that at the moment.”

What about the suggestion that uranium speculators may be driving up spot prices to boost the value of their mining stocks?

While the amount of institutional money out there makes these sort of manipulations relatively easy, Mr. Grandich thinks this was more likely a year or two ago because shares had not yet risen dramatically. He also pointed out that since the beginning of 2007, uranium prices have climbed, but many uranium stocks have corrected.

Not only does Mr. Grandich expect there will be more consolidation in the uranium sector among current producers, he thinks advanced-stage exploration companies will also be acquired in the next stage of deals as prices continue to rise.

As far as the ‘nuclear renaissaince’ sxr Uranium One chief executive Neal Froneman expects in the U.S., Mr. Grandich thinks the recognition of an acute need for energy both globally and in the U.S., has opened the door again for nuclear energy to become a viable energy source there.

“If someone were to have told me as late as three or four year ago that anywhere in the continental United States we would have been speaking about a nuclear plant again, I would have told them ‘not in my lifetime’ and I’m 51 year old.”

Uranium May Reach $200 in Two Years

By Angela Macdonald-Smith

June 5 (Bloomberg) -- Uranium spot prices may reach $200 a pound within the next two years, buoyed by a shortfall in supply and increasing investment in the nuclear fuel by speculators, said Macquarie Bank Ltd., Australia's biggest securities firm.

The price, which reached $125 a pound in mid-May, will probably average $125 a pound this year, rising to $135 next year, Macquarie said in a June 1 report. RBC Capital Markets, UBS AG and producers Rio Tinto Group and SXR Uranium One Inc. are among those also forecasting further gains.

Uranium prices have jumped 12-fold since early 2003, underpinned by a shortage, concerns over future production and a lack of investment in new mines, Macquarie said. Efforts to limit emissions of carbon dioxide from burning fossil fuels have bolstered demand for uranium for power generation.

``In the near term, with the market expected to remain in significant deficit in 2007-08, risk on the supply side and growing speculative interest, it is hard to see what could prevent spot prices going higher,'' Macquarie analysts Max Layton and John Moorhead said. ``We would not be surprised to see prices move up to around $200 a pound over the next two years.''

Layton, based in London, is an economist who joined Macquarie in January from the Reserve Bank of Australia, the nation's central bank. Moorhead, based in Sydney, has been at Macquarie for a year and earlier held roles at ABN Amro Morgans and BHP Billiton Ltd., owner of Olympic Dam, the world's biggest known uranium deposit.

Global uranium supply fell last year as a gain in secondary supplies from dismantled nuclear weapons failed to offset a fall in mine production.

Ux, TradeTech

There is no formal exchange for spot uranium, and the two principal companies quoting spot prices are Ux Consulting Co. and TradeTech. Ux quoted the spot price at $125 a pound as at May 28, while TradeTech put the price at $133 as at May 31, according to the companies' Web sites.

The New York Mercantile Exchange started a market for uranium futures last month. The price of the June contract closed yesterday at $137 a pound.

The start of the uranium futures market, where settlement is by cash only, not physical delivery, may add to price swings in the spot market through 2008, Macquarie said.

``We note the massive drop-off in spot volumes in mid-late April and early may, prior to the beginning of the commencement of futures contracts on Nymex, suggesting that one short-term risk is that the financial settlement-only futures take demand away from the spot market,'' the analysts said.

SXR Forecast

Macquarie's price forecast is less bullish than that of Neal Froneman, chief executive officer of Toronto-based SXR Uranium One, who said the spot price may more than double to $250 a pound next year as demand outpaces production. SXR yesterday agreed to buy Vancouver-based Energy Metals Corp. for C$1.59 billion ($1.5 billion) in shares, after in February agreeing to buy UrAsia Energy Ltd. for $3.1 billion in stock.

RBC Capital Markets last week raised its forecast for uranium spot prices. Its 2007 average forecast is now $120 a pound, up from an earlier estimate of $100, the bank said in a May 28 report. That's still lower than Macquarie's estimate. RBC raised its 2008 forecast to $145, from $85, which is higher than Macquarie's estimate for next year.

UBS also expects further gains, the bank said in a May 16 report.

`Environmental Pressures'

``Despite sharp growth in the spot prices we remain confident that the uranium spot market will continue to strengthen over the next several years,'' UBS said. ``Strong long-term global energy values and mounting environmental pressures will continue to drive the market forward.''

Rio Tinto, the world's second-biggest producer of uranium, sees ``plenty of upside'' to uranium prices, Preston Chiaro, energy group chief executive officer, said last month. Rio is examining expanding output at mines in Namibia and Australia as it seeks to benefit from higher prices.

One of the risks to the forecast for higher prices in 2007 and 2008 is any positive news from Cameco Corp., the world's biggest uranium producer, about the start-up of the Cigar Lake mine in Canada, Macquarie said. Saskatoon, Saskatchewan-based Cameco said last month that a flood in October at the mine, the world's largest untapped deposit of high-grade uranium, will delay start-up for three years until 2010 and help double construction costs.

Hedge Funds

Any turn in sentiment by traders, speculators and hedge funds, which have helped drive up prices in recent months, would also quickly push prices lower, Macquarie said. About 8,000 tons of uranium or almost 20 percent of mine supply, may be in the hands of speculators and hedge funds, it said. Any move by Rio Tinto to accelerate expansions at the Rossing mine in Namibia and the Ranger mine in northern Australia pose a further risk to the higher forecast, the bank said.

The uranium market supply deficit, which was 10,572 metric tons last year, should halve this year and narrow further next year to 3,945 tons, as supplies increase from new mines in Kazakhstan, Africa and North America, Macquarie estimates. Beyond 2008 the market will probably move into surplus as supply responds to higher prices, it said.

Total supply is forecast to increase by about 46 percent to 90,500 tons by 2013 from 62,192 tons in 2006. Mine supply is set to surge by 85 percent to 72,821 tons by 2013, while secondary supplies are set to fall 23 percent over the period, the bank said.

Macquarie forecasts the average uranium spot price will fall to $100 a pound in 2009, $80 in 2010 and $65 in 2011, then to a longer-term average forecast of $40.

Ngapa clan want low level dump

Land in Australia's Northern Territory will be assessed for suitability for radioactive waste management facilities after nomination by its indigenous owners.

The Ngapa clan has put forward 1.5 sq km of its 200 sq km holding near Muckaty Station as a potential site for a low-level waste (LLW) disposal site and an intermediate-level waste (ILW) store.

LLW typically takes the form of laboratory materials like gloves, glasswear and clothing as well as contaminated soil and objects like luminous dials. The material is typically placed in steel barrels which are then compacted to save space. ILW would include disused radiotherapy and industrial radiation sources as well as waste resulting from the recycling of used nuclear fuel from Australia's research reactors, which has taken place in France and the UK.

The country's first research reactor, Hifar, has recently been shut down, having been replaced by Opal, which is currently in the commissioning phase.

The Australian Nuclear Science and Technology Organisation (Ansto) would now be permitted to study the land, alongside a number of other possible locations. If Muckaty Station were to be chosen, the Ngapa clan would receive A$1 million ($819,000) to invest in enhancing their education and training opportunities, while payments amounting to A$11 million ($9 million) would be made to a charitable trust for their benefit. The clan numbers around 60 people. The Ngapa land would be leased to the Australian government for 200 years, before being returned to them.

Meanwhile, Ansto has submitted an application for a licence to enter the second phase of decommissioning Hifar. The first stage was the removal of highly radioactive used nuclear fuel and the reactor's heavy water. The second phase would see the dismantling of non-radioactive parts of the facility and detailed work begin to fully plan the remainder of decommissioning work. Further permissions would be required before the third and final stage could commence, leaving the site free for alternative use around 2016.

Much material from Hifar's decommissioning would eventually be stored in the LLW and ILW facility.

Short Term Outlook points to Higher Uranium Prices

Shares of Paladin Resources (PDN) rose from a low $0.04 in January 2004 to beyond $1.00 for the first time in February 2005, a gain of 2500% in a little over a year. By January 2006 they had crossed the $3.00 mark, a gain of another 200% in less than a year. By December of last year they were trading above $9, representing another gain of 200%.

Paladin shares peaked at $10.75 in February this year and then again at $10.80 in April, only to fall back below $8.50, from which point they've risen again to above $9.

For the first time in more than three years shareholders have not made any gains on their shares over a five month period.

A similar story applies to shareholders of Energy Resources of Australia (ERA), which is currently trading some 14.5% below its April peak, and to most of the 160 other ASX-listed uranium stocks. In Toronto and New York as well most share prices of uranium producers and developers have retreated in the past weeks.

What is happening with uranium stocks? Has anything fundamentally changed for the sector?

Not really. If anything more and more market insiders and close followers of the industry have come to realise the market is likely to remain much tighter for a much longer time. Taken from that perspective uranium is no different from the likes of iron ore, crude oil and nickel for which average price estimates in the market have been continuously on the rise this year.

Uranium's spot price certainly has had the experts baffled since late last year. After entering calendar 2007 on an already higher than expected US$75/lb, spot uranium has made a few giant leaps to a preliminary peak of US$122/lb this week, up 62.6% in five months after doubling in price in each of the two previous calendar years.

If current market indications are any guide spot uranium will reach US$150/lb between now and December. If achieved, this would mean the weekly spot price has once again doubled within twelve months.

According to sources inside the industry, this scenario is likely to unfold sooner rather than later as spot uranium seems poised to record another leap forward in the next few weeks. This could possibly take the weekly spot price as high as US$140/lb in June.

Within this context, last week's price increase by US$2 to US$122/lb would have come as a minor disappointment to participants in the industry. Apparently several offers in the US market at around US$125/lb failed to find a buyer while one small transaction was concluded at US$122/lb during the week.

Two public auctions in two weeks have the potential to push spot uranium to new record highs. Firstly there is the monthly auction of 100,000 lb U3O8 (yellow cake or uranium concentrate) by Corpus Christi, Texas based and privately held Mestena. It is believed this month all bids are due by May 30. The Mestena auctions have been responsible for solving several deadlock situations between buyers and sellers in the first months of 2007.

This month the Mestena auction is competing with an unnamed hedge fund which is believed to have approached a number of potential buyers and invited them to submit offers by June 1. The fund is auctioning 200,000 lb U3O8 and 100 metric tons UF6 (uranium hexafluoride).

The positive prospects for uranium producers were also highlighted at a Rio Tinto presentation to securities analysts in London this week. Both the slides and a webcast of the presentation are available on the RioTinto.com website.

The company reiterated its intention to potentially double its global production in the next five years while still expecting the market to remain in deficit until at least 2012.

A recent presentation by industry service provider Nukem goes even further. The industry experts believe market fundamentals have shifted even more in favour of uranium producers recently, a situation that may not change for another ten years.

Nukem sees increasing demand for uranium as the world's focus on global warming and more efficient energy usage intensifies, while producers need time to ramp up new mines and extend their current programs. Delays and production shortfalls are more norm than exception, the experts at Nukem argue, pointing out the flooded Cigar Lake project could easily be delayed for three to five years (instead of the two years as stated by operator Cameco). This would have clear negative ramifications for buyers of uranium in the years ahead.

Cigar Lake is the single most important known new source of uranium in the world. The potential loss of production from the project in 2009 exceeds all current scheduled additional supply for the year, and not just in Canada but globally.

Nukem believes demand for uranium is likely to exceed the so-called high case projections by the World Nuclear Association whose estimates are used by securities analysts worldwide.

The presentation suggests supply and demand are unlikely to reach a balance for many years to come.

Whether all this means that share prices of every company with a vague connection to uranium will continue to soar is doubtful. Some market commentators believe part of the hot money has left the sector this year as momentum slowed and further appreciation of share prices had become less obvious.

Others believe investors have become more knowledgeable and they have started to differentiate between likely winners and losers in the sector. The fact that Cameco shares are trading near their all time high on the Toronto Stock Exchange could be interpreted as a sign of this.

Probably of equal importance has been the fact that mainstream stock brokers have sort of rediscovered the sector over the past nine months. Apart from revealing a wide variety in opinions and views, with corresponding large differences in price projections, reports issued by these experts have also shown investors further upside for share prices does come with limits.

As an example of this, Deutsche Bank analysts upgraded Paladin Resources to Buy this week with a price target of $9.73 arguing paying around 1.7 times Net Present Value seemed appropriate for a company such as Paladin.

Some commentators believe investors largely dismiss these NPV based calculations these days as the usage of long term product prices of around US$45/lb has become questionable with experts such as Nukem anticipating another ten years of global supply deficits.

But even looked upon from a pure price/earnings ratio point of view it is difficult to argue that Paladin shares are cheap these days. At Monday's $8.76, Deutsche Bank believes the shares traded on an estimated FY08 P/E multiple of 31 (forecast EPS $0.36) and a FY09 multiple of 18 (forecast EPS $0.56).

All of a sudden, a share price of $15, or even $12, as widely speculated only a few months ago, seems a long way off. Many an explorer is trading at higher resource valuations than both Paladin and ERA.

It should come as no surprise to anyone if share prices of most uranium stocks will fail to keep pace with further rises in the spot price from here on. The real challenge will come when the weekly spot price stops rising, though that may not happen for a while still.

Flood at Canada Uranium Mine Tied to Cameco Blasting

By Elliot Blair Smith and Christopher Donville

April 20 (Bloomberg) -- Cameco Corp. announced at 2:11 a.m. on Oct. 23 that its Cigar Lake uranium mine in northwest Canada had flooded after a ``rock fall,'' jeopardizing the world's richest undeveloped source of nuclear fuel.

In the six months since, Cameco has said little about the circumstances behind a disaster that will delay production at its $25.5 billion claim for up to three years.

The accident removed 10 percent of anticipated supply from an already overstretched global uranium market, helping drive the ore to $113 a pound today, double the October price.

Canadian government records and interviews with authorities reveal that blasting by Cameco workers may have triggered the flood at Cigar Lake and that the company couldn't control the water because it didn't fulfill repeated pledges to regulators to install more underground pumps there. Those promises came after a similar accident at another of its Saskatchewan mines three years earlier.

``We didn't have it installed quickly enough,'' Cameco Chief Executive Officer Jerry Grandey says.

That statement -- made during an interview at the company's Saskatoon, Saskatchewan headquarters -- is the first acknowledgment by Cameco that it might bear some responsibility for a disaster that has jolted the global nuclear fuels market.

``We'll find, I'm sure, that there was a combination of geologic factors and human error,'' Grandey, 60, says. ``It's that type of combination where you learn your lessons.''

Missing Out

For investors, the Cigar Lake accident means Cameco won't fully profit from one of uranium's greatest bonanzas since the beginning of the Atomic Age. The company could have sold ore from that mine for prices closer to the current spot market. Most of the uranium Cameco now sells is covered by older contracts with lower prices and terms of up to 10 years.

Cameco said in a March 30 securities filing that it would disclose in the third quarter the results of a company- commissioned investigation. Its press releases, securities filings and conference calls with analysts and reporters haven't gone beyond saying the flood was caused by a ``rock fall'' of indeterminate origin.

The company's Nov. 10 accident report to its primary regulator, the Canadian Nuclear Safety Commission in Ottawa, doesn't mention Oct. 11 blasting by its workers as a potential trigger for the leak. That possibility was raised by Cameco's vice president of safety, health and environment, John Jarrell, during a Dec. 13 commission hearing.

``The first sign of instability occurred in a wedge failure which resulted from the Oct. 11 blast sequence,'' Jarrell said.

Regulators haven't issued an official report and say their investigation is continuing.

Previous Accidents

In April 2003, blasting contributed to a flood that exceeded Cameco's pumping capacity and almost cost the company its flagship McArthur River mine, 50 kilometers (31 miles) southwest of Cigar Lake, according to a company report filed with the nuclear safety commission.

Another flood at Cigar Lake in April 2006 knocked out a secondary shaft that remains underwater. A company report on the accident that was due in February hasn't been filed with regulators yet.

The setbacks are prompting Canadian regulators to question Cameco's ability to master the daunting geology of northern Saskatchewan's uranium-rich, water-laden Athabasca Basin.

`Closer Scrutiny'

``This is the third flooding event in this Athabasca sandstone for Cameco,'' says Kevin Scissons, director of the Canadian Nuclear Safety Commission's uranium mills and mines division in Saskatchewan. ``It just requires closer scrutiny, period.''

Scissons, who visited the site, said in an interview at his Saskatoon office that blasting by miners is ``directly linked'' to the latest Cigar Lake flood.

Ernest Becker, director of the Saskatchewan Labour ministry's Radiation and Mines Safety Unit, which also is investigating, agrees that the blasting and flooding are related.

``A blast always shakes up things, but the real issue is the ground control failed,'' Becker says, referring to work typically done before blasting to stabilize the earth. ``I want reassurance that whatever they do for ground control in the future will maintain the integrity of the mine.''

Nuclear Plants

The accident also exposes the fragility of uranium's global supply chain. In 2006, worldwide production of uranium oxide, or yellowcake, fell 4.6 percent to 103 million pounds from 108 million the year before, says Jeff Combs, president of Roswell, Georgia-based Ux Consulting Co., which closely tracks uranium production and prices.

The world's 435 existing nuclear reactors require 173 million pounds of the mineral a year, the industry's World Nuclear Association in London says.

That means only 60 percent of the uranium needed by reactors is extracted from the ground. The balance is culled from dismantled weapons in Russia and the utilities' own dwindling inventories, built up during 20 years of oversupply when nuclear power was out of favor.

No new production anywhere near the amount Cameco has under water at Cigar Lake will enter the market for years, mining forecasts show. That could limit the nuclear power industry's plans to develop 168 new nuclear plants worldwide by 2020. Another 198 million pounds of ore is needed to start up those plants, Cameco Vice President Scott Melbye told the association at its September conference in London.

Regulators Concerned

Cameco said immediately after the Cigar Lake accident that it is ``adequately positioned to meet its contractual obligations.'' It is delaying deliveries from Cigar Lake for five to seven years, as allowed under those contracts.

The issues of ground control and pumping capacity at the mine are being investigated by regulators and the company, and in hearings before the Canadian Nuclear Safety Commission.

Nestled in a jack pine forest 660 kilometers north of Saskatoon, Cigar Lake contains about 226 million pounds of ore, the energy equivalent of 1.86 billion tons of coal. That is the world's second-largest deposit of high-grade uranium after the McArthur River mine, which contains an estimated 367 million pounds of uranium and produces 18.7 million pounds a year.

The deposits are considered high-grade because they are far richer in uranium than most such deposits around the world. Radiation levels at these mines also are far more concentrated than in lower-grade deposits, so miners work remotely or in protective clothing and equipment.

1981 Find

The Cigar Lake deposit was discovered in 1981 as the final test hole of a winter exploration. The rugged terrain of woods, lakes and sandstone belies its vulnerability to rock falls and flooding caused by groundwater pressure in earth fractured by glaciers.

Cameco owns 50 percent of the project. Its partners are Areva Resources, a subsidiary of Areva SA in Paris, which owns 37 percent; Idemitsu Uranium Exploration Canada Ltd., a unit of Idemitsu Kosan Co. in Tokyo, which owns 8 percent; and Tepco Resources Inc., a unit of Tokyo Electric Power Co., which owns 5 percent.

The ore lay untapped for two decades as Cameco weighed uranium's then-depressed price against the high cost -- and risk -- of developing new technology to extract it.

By January 2005, when work at Cigar Lake began, Cameco had proven its ability to stabilize the sponge-like rock with a novel ground-freezing technology in use at the McArthur River mine. It also developed high-pressure water jets to carve out the radioactive ore, like a dentist would a cavity, so miners could keep a safe distance.

`Erroneous Assumption'

As recently as April 2006, Cameco said the Cigar Lake mine would be open this year, with uranium production increasing to 18 million pounds a year by 2010. That is enough to meet the annual fuel requirements of 34 nuclear reactors.

The miners blasting at Cigar Lake on Oct. 11 didn't expect a groundwater hazard where they were working, so they didn't take the precaution of freezing the ground there, according to interviews with Cameco officials and executives' testimony before the Canadian Nuclear Safety Commission in December.

``We believed we were developing a geologic area at Cigar that was dry and competent,'' Grandey says in his office. ``Well, that turned out to be an erroneous assumption.''

The danger at Cigar Lake emerged slowly, 11 days after the blasting. The initial leak in the tunnel's ceiling of 340 cubic meters (89,820 gallons) an hour was within the mine's pumping capacity of 500 cubic meters an hour, the company said in its accident report and in testimony to regulators.

Gushing Groundwater

Three hours later, the situation was much worse. Groundwater was gushing into the mine at the rate of almost 1,500 cubic meters an hour -- three times the pumps' capacity -- filling the shaft, the company report states.

Grandey says he was on his way to a Nuclear Energy Institute conference in Quebec City when he learned that the mine was in imminent danger of being lost.

``Your stomach immediately does somersaults,'' he says.

Grandey canceled his trip and chartered a plane to fly seven executives to the remote site. Fifteen minutes before the charter landed, mine workers radioed the pilot to say they couldn't control the rising water, the company's report says.

The workers asked for permission to stop pouring concrete for an underground plug so they could prepare to close two water-tight doors 480 meters (1,575 feet) below the surface that might contain the flow.

Bulkhead Doors

Cigar Lake General Manager Barry Schmitke, who was aboard the plane, told the miners to salvage what they could and prepare to close the doors, according to the report and interviews with company officials.

The miners closed the first of two steel bulkhead doors on Oct. 23 at 1 a.m., according to a transcript of the nuclear commission's December hearing.

Between 5:40 a.m. and 11:09 a.m., miners tried -- and failed -- three times to close the second door as icy water sloshed above their knee-high boots, according to the company report and hearing transcripts.

The second door got stuck in the mud and failed to seal when a gasket fell off, the report says. The insurmountable gap was one-eighth of an inch (3.2 millimeters).

The surging water brought rising radiation, requiring Cameco to alert federal and provincial regulators three times. Workers wore respirators and there were no injuries, the accident report says.

Previous Flood

Just before 11:30 a.m., Schmitke ordered the shaft evacuated. Workers climbed a ladder out of rapidly flowing water -- Schmitke put its temperature at 7 degrees Celsius (45 degrees Fahrenheit) -- into a cage with guide ropes that hovered just above the floor.

``The final evacuation could be described as intense and stressful, as the shaft station did have water accumulation and the groundwater was cold,'' Jarrell told the commission.

Regulators' concerns about the accident have a precedent in the company's own findings that blasting and inadequate pumping capacity contributed to the April 2003 flood at the McArthur River mine.

The Saskatchewan Labour ministry's investigation of that flood, completed two months later, attributed the inundation to workers blasting without adequate ``ground support'' -- that is, earth-stabilizing materials such as bolts, steel reinforcing rods and a form of sprayed concrete known as shotcreting.

Consultant's Report

An analysis for Cameco by Knoxville, Tennessee, consulting firm System Improvements Inc. also concluded: ``If effective ground support had been in place on April 6, 2003, the ground would not have failed and the water inflow could not have occurred,'' according to a copy filed with federal regulators.

The consultants' report also said the chief geologist at McArthur River had warned as early as January 2001 about the company's ``lack of readiness to fight serious water inflow.'' The mine superintendent and contract workers continued expressing warnings and misgivings to superiors about water hazards almost up to the time of the accident, the report says.

Cameco shut down production at McArthur River for three months after that accident. It then told the federal nuclear commission several times that it had reviewed its mine-safety procedures and would increase pumping capacity at the McArthur River and Cigar Lake mines, Nuclear Safety Commission records show.

Pumping Promise

Schmitke pledged to the commission in June 2003 and June 2004 that the pumping capacity at Cigar Lake would be increased to 1,500 cubic meters, according to hearing transcripts. That capacity would have been equal to the peak inflow during the October accident.

``We have essentially tripled the underground pumping capacity that was originally planned for Cigar Lake,'' Cameco Senior Vice President Terry Rogers told the same regulators in July 2004.

Scissons told the commission last December that Cameco had started adding water-pumping capacity at Cigar Lake just before the accident. Regulators had asked the company to begin the work after the April 2006 flood there, he said.

``They made a decision they would put it in after their major development work was done and before they went into operation,'' Scissons says now. ``That was the choice they made and they were very clear.''

Price Soars

Grandey confirms this. He won't discuss whether the company's judgment may have been faulty.

``It was all about where should I put my development priorities when you're trying to develop an underground mine,'' Grandey says in his office. ``You can't snap your fingers and do it all at once.''

Cameco disclosed April 9 in a Canadian securities filing that Grandey won't receive a bonus for 2006 because of the two accidents at Cigar Lake. He was paid a C$600,000 ($528,961) bonus in 2005.

The October flood at Cigar Lake and declining production in Australia -- the world's second-largest producer after Canada -- were just two of the factors pushing uranium prices higher. The market price was rising even before the flood as hedge funds speculated on the market and U.S. utilities tried to restock their dwindling supplies.

On Oct. 16, the week before the accident, uranium sold for $56 a pound. By Oct. 30, the week after the accident, the price had risen 7 percent to $60 a pound, according to Ux Consulting. In December, it was $72.

Uranium doesn't trade on a commodities exchange. Its prices are based on private contracts and occasional public auctions.

`Proven Wrong'

Cameco's potential profits will be hurt by a long-term contracting strategy predating the recent price surge. Last year, the company sold its ore for an average $20.62 a pound, compared with the $49.60 average spot price, Cameco says.

That price difference amounts to $605.7 million in unrealized revenues for Cameco, based on the 20.9 million pounds it sold last year.

``They were continually proven wrong as the price of uranium went higher and higher,'' says Kevin Bambrough, market strategist at Sprott Asset Management Inc. in Toronto. ``They underestimated the full extent of where things are going, and they didn't anticipate the problems at Cigar Lake.''

Still, company shares have bounced back higher than before the accident, rising 39 percent to an all-time high of C$54.06 ($47.34) on April 9, before easing back to C$52.63 a share.

Cameco's largest shareholder, Wellington Management Co. of Boston, with a 14 percent stake, declined to comment.

Lower Production Goal

Stephen Jarislowsky, head of Montreal-based Jarislowsky Fraser Ltd., which owns 2.1 percent -- worth C$395.9 million -- after disclosing in March that it sold 434,000 shares, says, ``Cameco is a very fine company but I think it's getting too high. It's been overheated for a long time.''

In a March 19 conference call with securities analysts and reporters, Cameco said it won't be able to launch production at Cigar Lake until at least 2010. In an accompanying press release, it lowered its first-year production goal to 3 million pounds from the 7 million pounds it forecast previously.

Cameco also disclosed that it probably won't be able to plug the underground leak until late in the third quarter. It said the estimated cost to complete the mine is now C$1 billion, more than twice the C$450 million it forecast in December 2004.

Without elaborating, the company also said it plans to increase the mine's pumping capacity to 2,300 cubic meters an hour, up from its pre-flood capacity of about 500 cubic meters an hour.

`Remediation Hurdles'

Money manager Robert Mitchell of Lake Oswego, Oregon-based Adit Capital Management LLC, which formerly owned Cameco shares, says he isn't convinced the company can deliver on its promises.

``By no means have the regulatory and remediation hurdles been jumped,'' he says.

During the regulators' December hearing, nuclear commission member Christopher Barnes, a geologist, admonished Cameco officials for the Cigar Lake accident.

``My concern is that you're developing a mine here without adequate geologic, geotechnical, hydrogeologic knowledge; and when events like this one -- or the one at McArthur River -- take place, they put workers in considerable jeopardy,'' he said.

Barnes also criticized company officials three years earlier during a hearing on the McArthur River accident.

``When you put the pieces together, they build a story of really fundamental issues about the competence of the company,'' he said in April 2003.

Barnes declined to comment for this story.

Grandey disagrees with the criticism, saying ``management's about taking risks -- calculated risks.''

``We thought we were on the safe side of that calculation,'' he says. ``And we were wrong.''