Energy Fuels Inc.'s convention booth was crammed with potential investors and investment bankers angling for business at the world's largest mining convention, an especially welcome buzz given that company had recently launched a fundraising drive. The uranium company needed cash, and all was going swimmingly.
But less than a week later, on March 11, the glow from the annual gathering of the Prospectors & Developers Association of Canada in Toronto was immediately snuffed out by Japan's deadly earthquake and tsunami. With the damaged Fukushima-Daiichi nuclear power plant leaking radiation, contaminating food and water, and still at risk of a meltdown, the market has soured for all things nuclear.
Mining is an extremely expensive business, and companies depend on the market for cash. With countries around the world re-evaluating plans to build new nuclear power plants or refurbish aging ones, uranium companies are struggling with financing and growth prospects.
Uranium companies across the board were crushed in the days after the March 11 Japanese disaster. Shares for Energy Fuels, for example, closed at 87 cents on March 10; they fell to 81 cents on March 11, 59 cents on March 12, and hit 42 cents on March 17. Energy Fuels closed at 48 cents Monday on the Toronto Stock Exchange.
Toronto-based Denison Mines Corp. closed at $3.11 on March 10, $3.19 on March 11, and dropped to $2.28 on March 16. It, too, has regained some of its losses, closing at $2.41 Monday. Uranium One Inc. , another Toronto-based player, closed at $5.93 on March 10 and at $4.01 on Monday. Size was no saviour: Industry giant Cameco Corp. , of Saskatoon, also took a beating, closing at $36.51 on March 10 before skidding to $27.73 on March 17; it closed at $29.87 Monday.
Uranium executives accept that their stocks have crashed since the Japanese crisis, but they expect the price of the metal to rally. The challenge will be holding their companies together to benefit from the rebound.
"Everything was going beautifully until we got back from PDAC," Gary Steele, Energy Fuels' senior vice-president of corporate marketing, said in an interview. He added that the company "had a couple long days" deciding whether to go ahead with its equity and warrant offering.
The deal went ahead and closed last Thursday, but Toronto-based Energy Fuels, which desperately needed cash to deal with reclamation bond obligations for a proposed uranium processing facility in Colorado, raised only $11.5-million, down from its $25-million target. Further, the units, consisting of one share and one purchase warrant, sold for 50 cents each, about half the original expected price.
Initially, part of Energy Fuels' financing was to go toward reviving two mines. "Those will just have to be delayed," Mr. Steele said. "We'll do some of the work, but we cut way back on what our original plan was."
Even companies that have tidy balance sheets and expectations that the nuclear industry and uranium prices will soon perk up are drafting contingency plans. When the triple whammy of disasters hit Japan, Denison was in the midst of deciding whether to reopen a mine in Utah. High uranium prices made the plan attractive, but the recent price collapse - uranium fell about 10 per cent to $60 (U.S.) per pound immediately after the quake, and is now worth $58.50 per pound - has Denison pulling back.
"We will be re-evaluating that now," said Ron Hochstein, Denison's chief executive officer. Uranium needs to sell for $65 per pound to make the Utah mine work, he said. "I think it will still get there, but the startup of that mine may be delayed a bit."
Toronto-based Denison has uranium contracts in place for 2011 and 2012 and beyond, and planned to sell roughly 55 per cent of its production on the spot market this year. Mr. Hochstein believes uranium will rise above $65 this year, but now Denison is considering stockpiling uranium rather than move it at low prices. This would allow the company to keep mining at full speed while avoiding punishing prices.
Adam Schatzker, an analyst at RBC Capital Markets, expects the spot price to ring in at $69 per pound in 2010 and $77.50 per pound in 2012, down from his previous forecast of $80 per pound this year and $100 per pound next year.
Paladin Energy Ltd., an Australian company that listed shares on the TSE in 2005, is still bullish on uranium, despite the events in Japan. "In the long term, and likely in the medium term, this will not have a huge impact," spokesman Greg Taylor said.
By his count, there are 443 nuclear reactors operating in the world, with 62 under construction and 156 planned. "What you're not seeing is a lot of new uranium production coming online," he noted. Mr. Taylor expects China and its Asian neighbours to buoy the market, although China has joined Germany, Japan, and Russia in stalling expansion and approval plans for nuclear plants.
Patricia Mohr, an analyst at Scotia Capital, is in Mr. Taylor's corner when it comes to new nuclear projects. "China, India, South Korea and Russia have plans to add the equivalent of 66 per cent of the world's total nuclear power production," she wrote in a research note. She believes those countries will "almost certainly" move ahead with expansion plans, adding: "The Fukushima-Daiichi event will likely delay rather than derail the 'nuclear renaissance.'"
Carrie Tait