A recent US Energy Information Agency (EIA) report highlighted that for 2015, US uranium production dropped to its lowest in ten years. Similarly, the agency also highlighted that fourth quarter production was the lowest since 2002.
EIA figures show that for the fourth quarter of 2015, the US produced 585,048 pounds of U3O8, which was a notable 24 percent lower than the previous quarter, and an even more significant 46 percent lower than the same period in 2014. In fact, looking between the first quarter and the final quarter of 2015, there was a 49 percent drop in production.
Four fewer production centers were in operation at the end of 2015, which included Cameco’s (TSX:CCO) Nebraska Crow Butte operation and its Wyoming-based Smith Ranch-Highland. Also based in Wyoming are Ur-Energy’s (TSX:URE) Lost Creek and Energy Fuels‘ (TSX:EFR) Nichols Ranch. The operations are all in-situ leach operations.
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The Agency also noted that Strata Energy’s Ross central processing plant located in Wyoming became operational, however it was not producing in the fourth quarter of last year. Furthermore, there were three facilities that did not contribute to production in the fourth quarter compared to the third, White Mesa in Utah, Hobson ISR plant/La Palangana in Texas and the Willow Creek Project in Wyoming.
Looking at the year as a whole, US uranium concentrate production reached a total of 3,303,977 pounds of U3O8 in 2015. Compared to 2014, this figure is 32 percent less than the 4,891,1332 pounds produced. It is also the lowest production in the US since 2005. The Agency noted that the 2015 production figures represent 7 percent of the anticipated uranium requirements needed for the US civilian nuclear power reactors.
One of the main factors the EIA is attributing to the slump in production for the year is the “continued low market price of uranium.” And rightly so.
Since the 2011 Fukushima disaster, uranium prices have been struggling to maintain any significant gains. U3O8 spot prices are currently trading at $33.50, roughly a 40 percent lower than in March of 2011.
Earlier in February, Cameco CEO Tim Gitzel warned that a recovery to the slumping industry was not as imminent as the market would hope. “We’re still waiting on a recovery that has been expected to come sooner,” Tim Gitzel said on a company conference call.
Still, as while prices remain low, removing further production incentives, the market will soon run into the situation —as predicted by analyst and market watchers alike — that there will be a supply shortfall. When this happens, investors will see a sharp increase in prices, which will bring incentive to produce back into the market.
“Long-term, we know good things are in store.” Gitzel said.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.
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