A move by one of the world's biggest uranium producers to suspend production will cut global supply by 10 per cent and boost the spot price, according to uranium play Boss Resources.
Cameco last week announced it would temporarily suspend production at its McArthur River uranium mine and Key Lake processing facility in northern Saskatchewan by end of January.
McArthur River accounted for more than 10 per cent of uranium production in 2016. Cameco provides about 17 per cent of the world's uranium from mines in Canada, the US and Kazakhstan.
The move was due to oversupply in the uranium market — which isn't likely to change in the foreseeable future — resulting in continued weakness in the uranium price.
Since the halcyon days a decade ago when its price hit $US130 a pound, uranium has slid to a 12-year low of $US18 a pound in November 2016, recently trading slightly higher at $US20.25 a pound.
In the wake of the Fukushima nuclear incident in 2011, there has been concern over future demand and over oversupply of uranium with three European Union member states – Belgium, Germany and Switzerland – seeking to phase out nuclear reactors.
In the US and Europe, premature retirements of reactors continue to outstrip the rate of capacity addition.
However, managing director Duncan Craib of ASX-listed uranium explorer Boss Resources (ASX:BOE) believes Cameco's cutbacks – along with other cuts by uranium producers including Paladin and Areva – will "bring discipline to the supply side and reduce excess inventories".
"This is further evidence that uranium production is not sustainable at current uranium term and spot prices," he said.
"The cumulative impact of global supply reductions in 2018 should strongly influence the spot market in 2018 and further out, if the suspension period is extended.
"We expect to see the strengthening in spot price reflected in the term price."
Read on from source:
https://stockhead.com.au/resources/cameco-uranium-halt-benefits-industry-boss-resources/
