No uranium rebound in the near term: Resource Capital Research

Resource Capital Research detects some life in the uranium sector, namely acquisition plays for Hathor Exploration and Extract Resources, but overall sector performance will remain poor for the first quarter of 2012.

The Australian research group, which released its equity research report on Monday, says that the spot uranium price is expected to trade around the low US$50s/lb 1Q12 and possibly dip below due to a utility surplus. The current spot price, as of Dec. 5, is US$52.25/lb. Over the past three months, uranium majors such as Cameco is down 13% and Denison Mines is down four percent.

“The sector themes have changed little in the past six months,” says John Wilson, Managing Director of RCR.

“There continues to be concerns over utility (Japanese and German) surplus uranium dispositions. Broader equity market concerns persist as well, in particular the economic outlook for the USA and sovereign debt issues in Europe. However, the recent emergence of strong strategic investor support and acquisition activity in the uranium sector reinforces the midterm positive outlook for high quality, strategic assets.”

The report cites the Merrill Lynch Uranium Equity Index, a global basket of uranium equities. Over the past three months, the index is down seven percent, and over the past 12 months it has fallen 54%.

But the report authors are bullish in the long-term due to the planned future build out of the nuclear industry.

“Over 84 new nuclear power reactors are expected to be commissioned globally by 2017, with 62 currently under construction and another 499 planned or proposed,” writes the reports authors.