Issue link: http://resourceworld.uberflip.com/i/1037672
36 www.resourceworld.com O C T O B E R / N O V E M B E R 2 0 1 8 Cameco said it has been partially shel- tered from the full impact of weak prices by its portfolio of long term contracts, but those contracts are running out and it is necessary to position the company today to generate cash flow if prices do not improve. Announced curtailments from the world's largest producers will cause the uranium market to be in a small primary supply deficit in 2018, research analyst Colin Healey said in a Haywood Securities report. "This sets up well for global inven- tory reduction and the first real visibility we have seen in more than half a decade on the potential for a balanced supply/ demand uranium market, where we believe higher uranium prices must pre- vail to ensure a sustainable supply in the future," Healey said. But positive sentiment stemming from the production cuts continues to be overshadowed by concerns that Japan's inventory of uranium fuel that has been delivered to idled reactors, could be dumped on the market. Analysts say the low uranium price has prompted utilities to believe that it would be cheaper to buy uranium on the open market than to enter into long term sup- ply contract at a fixed higher price with producers. That's the reason investors hoping to see prices rebound towards pre- Fukushima levels may have to be patient, says Rick Rule, CEO and President of Sprott US Holdings Inc. "Well, there is certainly a supply defi- cit if you look at new mine production relative to uranium consumption. But we still have relatively high inventories and stock piles," Rule said during a recent interview with Sprott U.S. Media Inc. "So in the very near term what we have to consider is the pace of Japanese restarts, which is at once, the key to larger near term consumption and the removal of supplies from inventory," he said. Japan had restarted five reactors in 2018, bringing to nine the number of reactors operating there. Another two are expected to come back into service later this year. Russia commissioned two new reactors in 2018. All-in, there are 71 new reactors under construction globally and another 165 in the planning stage. In the longer term, China's rapid nuclear expansion will result in it over- taking the US as the nation with the largest atomic power capacity by 2026, according to a report by BMI Research, a London-based market analysis firm. Rule is among investment industry officials who believe that a rebound in the price of uranium is inevitable. It is a view that is shared by founders of Yellow Cake Plc, which is trading on the London Stock Exchange's AIM market following the completion of a $200 million IPO. Yellowcake was founded by Bacchus Capital as a specialized company to operate in the uranium sector, holding URANIUM