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Desperate times for the uranium industry, and no hope in sight

burial.uranium-industryDesperate uranium miners switch to survival mode despite nuclear rebound, Reuters, By Geert De Clercq 7 OCT 16  LONDON   “……..BULGING INVENTORIES  Mining executives partly blame the slump on their customers’ wait-and-see attitude, as utilities believe that the uranium market’s over-capacity will persist for years and see no need to rebuild their dwindling stockpiles.

Demand for uranium is determined by the number of nuclear plants in operation worldwide, but supply and demand are disjointed by huge stocks and uranium’s long production cycle……..

In the five years before Fukushima, utilities worldwide bought about 200 million pounds of uranium per year, he said. Although Japan’s consumption averaged only around 25 million pounds per year, when it closed its reactors demand was cut far further, falling by half. European and U.S. utilities saw that the market was over-supplied and reduced inventories, buying less.

Mining firm Energy Fuels estimates global uranium stocks held by utilities, miners and governments are now at around 1 billion pounds. That is down from a peak around 2.5 billion pounds in 1990, but still many years’ worth of consumption.

Despite the plunge in uranium prices after the 2008 financial crisis and again after Fukushima, uranium production has doubled from 80-90 million pounds in the mid-1990s to about 160 million pounds last year, according to Energy Fuels data……

DESPERATE TIMES

With so much new supply, and demand sliding, prices have fallen to a level where most uranium miners operate at a loss.

“At today’s spot prices, the primary uranium mining industry is not sustainable,” US uranium producer Energy Fuels COO Mark Chalmers told the World Nuclear Association’s London conference last month.

He added that many legacy long-term supply contracts will expire in 2017-18, which will force many mines to close or throttle back even further than they already have.

Miners like Canada’s Cameco, France’s Areva and the uranium arms of global mining companies have closed or mothballed several mines and deferred new projects in order to cut back supply.

Paladin – the world’s second-largest independent pure-play uranium miner after Cameco and the seventh or eighth-largest globally – has production capacity of 8 million pounds of yellowcake uranium but produced just 4.9 million pounds last year at its Langer Heinrich mine in Namibia.

Molyneux said the firm will produce about 4 million pounds this year and will cut output further to about 3.5 million pounds next year if prices do not recover.

Paladin suspended production at its 2.3 million pounds per year capacity Kayelekera mine in northern Malawi in 2014 but maintains equipment so it can resume when prices recover.

Meanwhile it is trying to further reduce its debt, which already fell from $1.2 billion five years ago to $362 million.

Paladin has agreed to sell 24 pct of Langer Heinrich to the China National Nuclear Company and plans to use the expected proceeds of 175 million dollars to further reduce debt.

Bigger peer Cameco in April suspended production at its Rabbit Lake, Canada mine while also curtailing output across its U.S. operations, saying market conditions could not support the operating and capital costs needed to sustain production.

Cameco marketing head Tim Gabruch told the WNA conference that “desperate times call for desperate measures”.

Supply adjustments and producer discipline had not yet been sufficient to counter the loss of demand, he said.”As difficult as those decisions have been, we recognize that those actions may not be enough.”(Reporting by Geert De Clercq; editing by Peter Graff) http://www.reuters.com/article/us-uranium-nuclearpower-idUSKCN1230EF

October 8, 2016 - Posted by | 2 WORLD, business and costs, Uranium

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