Another Oz company joins uranium race
Australian uranium explorer UraniumSA is the latest company trying to capitalise on investors’ demand for the radioactive metal. The company is expected to list on the Australian Stock Exchange (ASX) later this year.
UraniumSA has struck a joint venture with Australian listed Marathon Resources for exploration over three of the latter company’s central Gawler Craton tenements in South Australia. It also has exploration rights over areas held by ASX listed Stellar Resources.
As uranium prices have soared in recent years, a number of investors and resources companies have clamoured to join the race. Recent studies by RBC Capital Markets, a global resources specialist found that long-term uranium prices must rise to $60/lb in order to meet fuel requirements for nuclear reactors.
Mitsubishi Australia boss Tom Phillips, who left the automaker last year, has joined UraniumSA’s board as chairman. The arrangements, under negotiation since early April 2006, are conditional on UraniumSA completing a successful initial public offering (IPO) later this year, reads a company announcement.
Other UraniumSA directors include Russel Bluck, an ”exploration geologist with a broad range of geotechnical and corporate consulting experience, and Alice McCleary, Deputy Chancellor of the University of South Australia and a director of a number of companies.”
The UraniumSA deal is just a small part of a small explosion in corporate activity in the junior uranium market. Canadian listed Mega Uranium is bidding for ASX listed Redport after acquiring fellow Australian Hindmarsh Resources earlier this year. Also in Australia, Paladin Resources is bidding for Valhalla Uranium.
Meanwhile Marathon itself has received an offer from Hong Kong investment bank Crosby partners.
The Australian uranium industry could receive a big boost if the government’s moratorium on new mines is scrapped. Under the current policy only three mines have licenses to produce uranium: Ranger, Nabarlek and Olympic Dam.
But there is talk that this policy may be scrapped under pressure from pro-uranium lobbyists. Australia’s opposition party leader Kim Beazley has also promised to do away with the policy if he is elected to power.
The spot price for uranium oxide has increased from below $5 in 2000 to current levels of just lower than $50.
Lured by the prospect of making a profit, investors have also joined the uranium race; there are currently two companies that specialise in offering exposure to the price of the radioactive metal: Toronto-listed Uranium Participation Corporation and Aim-listed Nufcor Uranium. However, investor participation is still a small percentage of total uranium demand.
In consideration for entering into the Joint Ventures, Marathon will receive an agreed number of UraniumSA shares at IPO.
”Shareholders in Marathon will be entitled to priority in application for a predetermined number of shares in UraniumSA’s proposed IPO. Details will be provided in the UraniumSA prospectus when it has been finalised and becomes publicly available,” says the Marathon release.
