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uranium prices continue to rise

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    November 21, 2008
    Spot price continues to rise amidst producer woes
    Publisher: U3O8.biz
    Author: Luke Brocki


    Spot uranium prices continue to rise, much to the delight of sellers again in the privileged position of being able to raise offer prices. The global financial crunch may have crippled the sector, but cleanup efforts are already beginning: takeover talks are underway and a new market is emerging in Australia, after a long-standing uranium ban was lifted in that country's western state.

    Last week's producer woes continue to impact the sector in positive ways, as Schadenfreude returns to a sector ripe with opportunities for the smart investor. Producers galore---Cameco, Denison, First Uranium, Uranium One, URI, just to name a few---are announcing cuts to spending and production. And that's good news to a market recently flooded with cheap supply of the radioactive metal. With spot supplies also shrinking and demand on the rise, spot prices can finally flex some muscle.

    This week, they did just that, as price publishers Ux Consulting and Tradetech both raised their spot price indicators US$5 to US$53 a pound U3O8, reporting several off-market transactions of some one million pounds U3O8, with each one concluded at higher prices than the last. All kinds of buyers are buying, not just speculators looking to make a quick buck. According to Tradetech, also lining up are utilities, intermediaries, and producers. As the inquiries continue to roll in, smart sellers are raising their offer prices, adding to spot uranium's positive momentum.

    Devastated miner Uranium One, which recently slashed some 1,000 jobs as it put its former flagship Dominion mine on care and maintenance, is now a ripe takeover target, according to analysts at Cannacord Adams.

    The National Post newspaper reports Uranium One's low-cost assets in Kazakhstan (which the company has said it will continue to pump money into despite cuts to production and exploration elsewhere) could be tempting for Canadian giant Cameco Corp., which is currently commissioning its Inkai project in the country.

    Uranium One, was one of the industry's biggest upstarts in 2007, but has since suspended operations at Dominion, postponed capital expenditure, cut corporate and exploration costs, and sought partners to help fund the development of future projects. Amid the company's supply woes, its stock has sunk some 90% in 2008, placing it in the bargain bin for companies looking to scoop up a mid-cap producer.

    In Australia, The West Australian Government has formally lifted the state's controversial ban on uranium mining. The Australian newspaper reports Premier Colin Barnett promised a green light for uranium mining on all leases issued moving forward. The move fulfills an election promise to have Western Australia capitalize on massive uranium deposits spread through the state.

    The Australian Uranium Association applauds the move, predicting mining companies could now look beyond today's financial crunch and unstable uranium spot prices and start developing projects. The Australian points out that last July's risky $500-million move by Canadian and Japanese mining giants Cameco and Mitsubishi to buy Rio Tinto's vast Kintyre uranium deposit in the Pilbara is now set to pay off huge. Kintyre is the state's third-biggest uranium deposit, with some 36,000 tonnes of resources begging to be hauled out of the ground.
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