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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Here's Another Sign Uranium Prices Are Too Low

The recent rally in uranium prices appears to have stalled. With spot rates for uranium oxide taking their first drop last week since June--down $1 per pound to $35.50.

That ends a run that had seen the metal rise from as low as $28 over the summer. Leaving prices still at very low levels compared to rates seen over the last 10 years.

And that's having a notable effect on production across the uranium mining industry, judging from a key announcement last week from one of the biggest firms in the space.

Related: New Nuclear Fuel Rod Could Increase Output Of Existing Plants

The player in question is France's Areva. Which said that current uranium prices are too low to go ahead with one of the company's major development projects globally: the Kiggavik uranium deposit in Canada's northern Nunavut Territory.

Last week Areva announced that it has submitted a final environmental impact statement to local Nunavut authorities for a potential mine at Kiggavik. A key step in moving the project toward production.

But in the same news release, Areva said that uranium prices are too low to "favour a construction decision" for the project. Leaving the timing of mine building here uncertain.

The interesting thing is that Kiggavik is one of the best uranium development projects in the world right now. Especially outside of Canada's high-grade Athabasca Basin.

Related: We Haven't Seen This in Uranium For Years

All told, the project hosts a massive resource of 130 million pounds of uranium oxide--at a grade of 0.23% uranium, one of the highest for any development project globally.

But even with these leading metrics, Kiggavik still appears to be a no-go at current uranium prices. Implying that few other projects are going to be economic in today's industry environment.

That's a challenge for the business. And a positive signal for investors--when a sector can't afford to bring on new supply, it's usually only a matter of time until supply starts to run short.

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Here's to getting things built,

Dave Forest

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