Uranium to be focus of M&A, says Australian broker
19th March 2012
PERTH (miningweekly.com) – The uranium sector would be the focus of merger and acquisition (M&A) activity in 2012, as demand from emerging nations returned after a tough year post the Fukushima nuclear accident, Australia’s Foster Stockbroking said on Monday.Uranium spot prices plunged after the Japanese nuclear disaster of 2011, eroding equity valuations of uranium companies.
But Foster believes sentiment has turned in the sector and that a rerating is under way.
“In 2012, we believe sentiment is returning to the sector with the inventory overhang winding back as safety tests on uranium plants worldwide conclude and Japan commences to restart its reactors in April,” it added.
Foster noted that the long-term fundamentals for uranium demand remained intact with current demand, which amounted to some 170-million pounds, set to soar with 60 nuclear reactors under construction globally and an additional 163 on schedule for development.
Growth was driven predominately by the energy requirements of China, South Korea, India and Russia, which together comprise 75% of new reactor constructions.
With the US-Russia highly enriched uranium deal ending in 2013, reducing supply by some 24-million pounds a year, and delays to large scale uranium projects, the stockbroking firm was predicting lagging supply, with the market being in deficit by 2013 and existing producers benefitting from a rising uranium price and small-cap developers/explorers likely to see investor interest return in the sector.
“We believe the uranium sector will be the focus of M&A activity given the growing demand from emerging nations coupled with the steep discount in equity valuations,” the company said.
