Turnaround in uranium markets has begun

Posted: April 29, 2009, 1:29 PM by David Pett

To all those investors hanging on for uranium markets to turnaround, RBC Capital Markets analyst Adam Schatzker has a message: The wait is finally over.

"We believe that the uranium market is in the early stages of a bull market rally that could last three to four years," he said in a note to clients.

From recent trough levels, Mr. Schatzer noted uranium equities have recovered by about 225% but still remain about 68% below historic peak values. He thinks it will take about two years to reclaim those peaks and points to the looming supply/demand shortfall as one of the keys to recovery.

"We think the uranium market will be facing substantial deficits and that utilities will have to pay higher and higher prices to secure both spot and long-term supplies. We also believe that the longer the spot price remains depressed (e.g. below US$70/lb), the more dramatic the price run-up will be.

He added that recent asset and equity purchases by Japanese and Korean utilities indicate utility companies around the world are beginning to look to secure long-term supplies where they see potential shortfalls. Lastly, the analyst thinks consolidation in the uranium business will occur in the coming 12 months.

"The number of quality names is limited and should help drive equity prices higher," he wrote.


David Pett