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Uranium Spot Prices
(historic) (US$/lb)


World Primary Production of Uranium Oxide

 

 

Mining Uranium & Nuclear Fuel Cycle

Rössing’s marketing activity is undertaken by Rio Tinto Uranium (RTU),  a company created to maximise the value relationship between the mine and its global customer base.  With its central headquarters in London and regional offices in each of the key geographic markets for nuclear power production, the RTU team is working with customers somewhere in the world, 24 hours a day. 
 
Key strategic objective alignment between Rössing and RTU, and a customer-focused organisational structure, combine to enhance both established customer relationships and facilitate additional value-creating opportunities with the world’s leading nuclear power producers.  The marketing team combine their broad multi-commodity and specific uranium experience to create and develop value propositions that meet Rössing’s strategic requirements and their customers fuel cycle needs.


Craig Kinnell
Managing Director: Rio Tinto Uranium
London

The uranium market continued its strong recovery in 2006, with prices rising strongly throughout the year. Last year the spot price of uranium, as published by the Ux Consulting Company, effectively doubled from US$36.25 per pound in December 2005 to a high of US$72.00  per pound in the corresponding period of 2006.  Overall, buying activity remained high through 2006, but was marginally down on the record levels achieved in 2005.

These lower sales volumes were more a reflection of restricted supply conditions than an indication that the market might be about to take a downward turn. Many sellers were reluctant to commit material to market while there remained the possibility of even higher prices in the future,  subsequently competition for available material was very strong resulting in above average price increases.

The long-term price, under which Rössing sells most of its product, closely mirrored the spot price for most of 2006. Typically, the long-term price is higher than the spot price reflecting the value of security of supply.

During 2006, the majority of new long-term contracts were negotiated using so-called market related terms, the price valid at the time of delivery as apposed to the price at the time of agreement, while fewer deals were contracted using fixed prices. The advantage of market related pricing is that it captures any future price increases. In addition sellers sought to protect future earnings by incorporating price protection in the form of a minimum price (floor price).

 

 

The primary causes for the resurgence in the uranium market have been the depletion of substantial uranium inventories held by power utilities, reductions in the supply of secondary material (e.g. former weapons grade material) to the market and a renewed interest in nuclear power around the world. International issues such as global warming, carbon emissions and security of energy supply have all contributed towards changes in political opinion regarding nuclear energy policy. Nuclear energy is a reliable, long-term energy source with zero carbon emissions and as such is on the verge of a renaissance on a global scale.

For Rössing, the volume of material sold during the year was high, as many utilities sought to secure future supply in what, for them, is a very uncertain market.

Despite the price of uranium doubling last year the average sales price realised by Rössing Uranium was considerably lower for two reasons.  Firstly, uranium is typically sold in US dollars, which can leave Rössing exposed to exchange rate fluctuations. Secondly, Rössing, like most other major producers, is still exposed to many low-priced legacy contracts that were negotiated when the price of uranium was as low as US$7 per pound U3O8.  Over the next few years these legacy contracts will expire and the average sales price will increase considerably to reflect the higher market prices. 

Rössing, through its marketing arm Rio Tinto Uranium, is committed to underpinning the long-term future of the mine by securing even more new long-term contracts that will take full advantage of any upward movement in future market prices, but which also have adequate floor prices, should the market move downwards. The company remains committed to maintaining a loyal, international customer base that provides the greatest total return, while minimising risk and complying strictly with all international safeguard regimes. Rössing prides itself on the relationships that it has with its customers, some of the premier nuclear power companies in the world, and this is reflected in the longevity of many of these relationships, some of which now stretch to twenty years or more.

The outlook for Rössing and for the uranium market in general looks promising. Existing unfulfilled demand remains high and current uranium production is not expected to exceed demand for several years.  If the much touted ‘Nuclear Renaissance’ also materialises then future long-term demand is likely to increase substantially.  All of these factors point to a strong uranium market over the next few years. 

 

 

 

 

Worldwide Reactors

Operating

Under
construction

Planned

Proposed

Asia     

103

16

38

74

Eastern Europe

66

4

14

26

Western Europe

131

1

4

2

North America

121

3

4

21

Other

8

2

4

36

Total

435

26

64

159

[Source: World Nuclear Association 2007]

 

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