Antinuclear

Australia’s uranium promoters working hard against the reality of falling profits

 Uranium bulls have spent much of the past 12 months arguing there is a serious disconnect between the way the sharemarket and short-term investors view the outlook for uranium and the way long-term industry players (the CGNPCs and Rios of the world, for example) see it.

No sweeteners for yellowcake players, The West,  Kate Emery April 11, 2012,  A little over a year after the Fukushima nuclear disaster and despite endlessly positive outlook statements from the uranium industry, the fact remains it’s a still a tough time to be in the yellowcake business.

Just ask Bannerman Resources, which rolled out the definitive
feasibility study for its flagship Etango project in Namibia
yesterday.

The headline numbers look fine, with forecast operating cashflow of
$US923 million after tax, cash operating margins of 24 per cent and a
six-year payback.

That’s until you realise that the study’s base case is a long-term
uranium price of $US75 a pound — as much as 50 per cent higher than
current spot prices — with a break-even point of $US61/lb.

The capital cost of Etango has crept up 24 per cent since the group’s
pre-feasibility study 15 months ago to $US870 million but that’s
little surprise, given not only industry cost pressures but changes to
the scope of the project, such as increasing the plant size from 15
million tonnes a year to 20mtpa and lifting average forecast
production by 22 per cent.

What’s more pertinent is that forecast operating costs are also up,
albeit by a smaller 8 per cent, to $US41/lb for the first five years
and $US46/lb over the life of mine.

The current uranium spot price is close to $US51/lb although contract
prices (which, uranium players say, are the ones that matter) are more
like $US60/lb.

This puts Bannerman in the somewhat uncomfortable position of sitting
on what is one of the few advanced uranium projects of its scale in
the world but a project that is nonetheless not profitable at current
prices, thanks largely to its comparatively low grade.

Essentially that means Bannerman has become, more than ever, a bet on
where the uranium price is going…… Uranium bulls have spent much
of the past 12 months arguing there is a serious disconnect between
the way the sharemarket and short-term investors view the outlook for
uranium and the way long-term industry players (the CGNPCs and Rios of
the world, for example) see it.
http://au.news.yahoo.com/thewest/opinion/post/-/blog/13390362/no-sweeteners-for-yellowcake-players/

April 11, 2012 - Posted by Christina Macpherson | AUSTRALIA - NATIONAL, business, uranium