More pain for Guptas – supply glut hits uranium price, family’s biggest bet

By Sonja Elmquist

(Bloomberg) — A glut that’s made uranium the worst-performing raw material this year is set to turn into a shortage as miners cut output and nuclear-reactor construction climbs, according to producer Uranium Energy Corp.

nuclear_energy_symbolOversupply from mines in Kazakhstan, Canada and Australia has seen uranium futures drop 18 percent this year, the biggest loss among 80 commodities tracked by Bloomberg except carbon credits, while iron ore and oil rally. But as supply diminishes and demand improves, stockpiles will be eroded and the slump will reverse, said Chief Executive Officer Amir Adnani, whose Vancouver-based company has cut output and spending until that happens.

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“There’s pain in the sector while there’s this incredible trajectory in 5 to 10 years for the nuclear sector,”  he said in a telephone interview.

Prices aren’t factoring in the pace at which inventories will disappear in coming years, according to David Wang, an analyst at Morningstar.

“We’re all surprised by how low it’s gotten, especially considering the bright prospects going forward,” Wang said in an interview. He expects uranium to more than double to about $65 a pound by 2019 from $28.25 now.

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Japan halted all nuclear energy production after an earthquake and tsunami led to meltdowns at the Fukushima Dai-Ichi power plant. The island nation has restarted four of its 42 operable reactors, according to the World Nuclear Association.

As Uranium Energy waits for prices to recover, it has idled its Palangana mine and Hobson plant in Texas and delayed spending plans at projects in Texas and Paraguay.

“Near-term perceptions are based on psychology or emotion,” Adnani said. “The positive long-term fundamentals don’t reconcile with the short-term price.”

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