Russia, Speculators to Dictate Uranium Price Swings in 2007

The year gone by was the warmest in England since 1659. Australia may be doomed to suffer the countrys worst drought since the Federation Drought of 1894 1902, and at least one Dun & Bradstreet consultant believes if conditions do not improve, the countrys Reserve bank may be forced to lower interest rates. Abrupt weather changes could increasingly become a significant element in determining business expectations and national growth. (While Florida didnt have the hurricanes the weatherman forecast, Asia got the brunt instead with typhoons.)

The green light for accelerated demand of nuclear energy could come about because of a potential loss of up to 20 percent global gross domestic product annually. This estimate was courtesy of Sir Nicholas Stern, a senior UK economist, who calculated the impact of climate change. And 2007 might pass 1998 by as the worlds warmest year on record. Eight of the twelve warmest years on record have occurred since 1990.

This must be welcome news to uranium speculators, especially those holding the physical metal. Speculators outsmarted U.S. utility fuel managers and industry consultants by hoarding yellowcake in anticipation of the supply deficits now growing. Thats why they are the smart money. But will the nearly 200 consecutive weeks of a rising uranium price sustain through 2007?

By all accounts, uranium miners and future developers should be ecstatic over the $72/pound announcement of the spot uranium price. The latest long-term uranium contract brought $69/pound. Many of the new uranium projects, which we have been tracking since mid 2004, are likely to be economic at or below $60/pound. The broad purpose of a rising uranium price was to dust off the old uranium projects and reopen previously explored, nearly developed uranium mines. This is in the process of bearing fruit.

So why do we see continued hoopla for a higher uranium price? Its because the speculators need the excitement and panic buying by utilities to unload their uranium stockpile.

Speculators holding physical uranium hope to make a kings ransom should the uranium price zip through the inflation-adjusted record of approximately $111/pound and race even higher. Uranium oxide, or U3O8, very well could race to $100/pound and beyond. The momentum and panic leading to a much higher uranium price is evident in our research and discussions with industry insiders, but the pendulum might also swing backward later in 2007.

According to Treva Klingbiel, editor of TradeTechs Nuclear Market Review, which first publishes the weekly spot uranium price on Fridays, Speculators are holding about 24 million pounds of U3O8 equivalent. This amounts to about eight times the current U.S. uranium production, more than double the Kazakh 2006 production some 22 percent of global uranium production in 2005. The speculators hoard easily outnumbers the U.S. Department of Energys announcement of 5+ million pounds of annual sales.