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Dave Forest

Dave Forest

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

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Uranium Production Costs Fall For The First Time In 5 Years

There was good news in the Uranium sector this week in the form of a report that working conditions appear to be improving for the world’s major producers.

That was the conclusion from research published Tuesday by mining analysts CRU, which claimed that costs are coming down across the global uranium mining industry. Related: Brussel’s Terror Attack Drives Europe Further Into Terrorism Rabbit Hole

CRU found that weighted average site costs for production fell by $1/lb during 2015. This was caused by factors such as currency depreciation against the U.S. dollar in key producing nations such as Kazakhstan, Australia, and Canada. Industry productivity improvements and lower global prices for inputs like sulphuric acid and diesel also played a role.

Here’s the most critical point. CRU said this is the first year since 2010 that uranium production costs have declined. This shows that the downturn in the sector is just now starting to catch up with cost pressures. Related: Record Loss For Petrobras As Political And Economic Crisis Worsen

But the savings being enjoyed are a big boost for miners, with CRU noting that a “majority” of producers are now profitable, even at today’s lower prices. As the chart below shows, 80 percent of uranium mines on CRU’s new cost curve are below the spot price — while 94 percent of mines come in below current contract prices.

(Click to enlarge)

Source: CRU Related: Oil Prices Fall Fast On Huge Inventory Build

Of course, there’s still a fair amount of disparity across the cost curve. With CRU finding that Kazakhstan’s in-situ leach projects are still the world’s lowest-cost producers, followed by Canada’s underground mines.

But the fact that costs are coming down nearly everywhere is very good news for the industry. Watch for stealthily rising profits from producers — and keep an eye on currency exchange rates against the dollar as a key input going forward.

Here’s to bringing it down a notch,

By Dave Forest

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