Uranium Stocks Continue To Fall As Uranium Spot Prices Sink

Uranium miner stocks continued to fall Tuesday on fears that reactor problems in Japan will halt the worldwide growth of nuclear power and the consumption of the radioactive metal.

The uncertainty about the situation in Japan, where three reactors continue to overheat and at least one has suffered a partial meltdown, has largely halted trading in the uranium spot market according to a person familiar with the matter, and caused prices to fall nearly 10% to $60 a pound.

Spot uranium was trading at $66.50 a pound as of March 7, according to Ux Consulting Co., which publishes spot prices for the industry.

Shares of Cameco Corp. (CCJ), the largest publicly owned uranium company, declined 9.1% to $29.65 in recent trading on the New York Stock Exchange following a 12.7% drop on Monday. Shares of Australia's Bannerman Resources Ltd. (BMN.AU) saw the steepest drop, down 33% on Tuesday and losing roughly half their value since the trouble with Japan's reactors began.

Analysts, who were mostly positive about uranium equities, said the drop in stock prices was largely overdone. Nevertheless, they hesitated to recommend jumping into the sector due to the uncertainty about the situation in Japan and whether the public reaction would slow the growth of nuclear power.

Dundee Capital Markets analyst David Talbot said "normally we would be pounding the table" for investors to buy Uranium Participation Corp. (U.T), which is down 26% from last week, but he said the outlook was especially uncertain.

"Investors are now entering a period where speculation and misinformation may run rampant," Talbot wrote in a note to clients. "We believe this may not go away for some time and struggle to predict market direction. How this Japanese situation evolves will play a large role on how the public (and governments) will ultimately accept nuclear power."

UBS Securities analysts told clients that the troubles in Japan are "likely to undermine demand growth for uranium, some steel raw materials and base metals for the next 6-12 months."

The spot price for uranium may also fall further, due to a combination of Japanese utilities affected by the earthquake and tsunami deferring deliveries, and as traders that had been speculating in a rising uranium price exit the market.

Cameco Chief Executive Jerry Grandey said Monday that Cameco would still be well within its guidance for the year even if all 11 Japanese reactors in the earthquake zone deferred deliveries. Uranium deliveries to Japan makes up 18% to 20% of Cameco's long-term revenue forecasts, and 10% to 12% of its revenue for 2011.

There are 442 nuclear power plants in the world, 54 of which are in Japan, and about 60 reactors currently under construction or refurbishment in 12 countries.

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; [e-mail]