Rob Chang: Is 2013 A Catalyst Year For Uranium?

The Energy Report:

During your last interview with us in May, spot uranium was around $51 per pound ($51/lb), with some apparent stability at that level. Now spot is ~$42.50/lb. What's the source of the downward pressure?

Rob Chang: The excess inventory that was available for sale, most notably from Japan, has been going back into the market, depressing spot prices. Plus, the general market malaise surrounding the commodity contributed as well. But that has notably changed in recent months.

TER: Could a major short-term catalyst move uranium prices higher in the near future, or do you expect a gradual increase over time?

RC: This is the year the well-publicized U.S.-Russian HEU (highly enriched uranium) agreement, or Megatons to Megawatts program, is due to expire. Those 24 million pounds (Mlb) that were available to the market will effectively disappear. The question remains as to what the Russians will do with the remaining material. Our sources and thinking suggest the Russians are probably going to stockpile this material. It's not very cost-effective for them to downblend it, given the low uranium price environment. On top of that, it's a security-of-supply issue. We're forecasting a supply deficit up to 2025, and believe the Russians see the same thing. So it makes sense for the country to keep it in its inventory, rather than to downblend it now. There are no substitutes for uranium in nuclear plants, so to continue operating, it's really important to have a supply of uranium.

This isn't to say the U.S. will be left with nothing. Last year, USEC (Rob Chang has covered the metals and mining space for over eight years for the sell side and the buy side. Prior to Cantor, Chang served on the equity research teams at Versant Partners, Octagon Capital and BMO Capital Markets. His buy-side experience includes managing $3 billion in assets as a director of research/portfolio manager at Middlefield Capital, where his primary resource portfolio outperformed its direct peer and benchmark by over 28% and 18%, respectively. He was also on a five-person multi-strategy hedge fund team, where he specialized in equity and derivative investments. He completed his Master of Business Administration from the University of Toronto's Rotman School of Management.

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DISCLOSURE:
1) Zig Lambo of The Energy Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report: Uranerz Energy Corp., Ur-Energy Inc., Fission Energy Corp., Energy Fuels Inc., Laramide Resources Ltd., European Uranium Resources Ltd., U3O8 Corp. and Virginia Energy Resources Inc. Interviews are edited for clarity.

3) Rob Chang: I personally and/or my family own shares of the following companies mentioned in this interview: Fission Energy Corp. and Energy Fuels Inc. I personally and/or my family am paid by the following companies mentioned in this interview: None.
I was not paid by Streetwise Reports for participating in this interview.