Uranium prices have remained under $40 per pound since the start of this year, nearly 50% below the levels they traded before the Fukushima power plant disaster in Japan four years ago.
The nuclear power plant accident, caused by an earthquake and tsunami, had led to the shutdown of all nuclear reactors in Japan. In 2012, the then Japanese government even considered completely phasing out nuclear from Japan’s energy mix.
This, not surprisingly, had a negative impact on uranium prices. Before Fukushima, nuclear accounted for nearly a third of Japan’s energy mix. If Japan completely phased out nuclear from its energy mix, it would have had a significant impact on uranium demand.
Although public opinion has been against nuclear, the new Japanese government believes that nuclear has a future in Japan. In fact, the country will be restarting its nuclear reactors in a phased manner after necessary safety checks. This has improved the outlook for uranium. Another factor is China. The world’s second-largest economy is expected to make significant investments in nuclear energy as it looks to cut down reliance on dirty coal.
Indeed, many analysts expect uranium prices to regain the pre-Fukushima levels. However, the near-term outlook remains bearish as spot prices are likely to remain at current depressed levels due to oversupply.
Still, the improving long-term outlook for uranium prices augurs well for uranium miners such as Fission Uranium Corp. (TSX:FCU). The Kelowna, British Colombia-based Company is focusing on the exploration and development of the Patterson Lake South uranium property.
Earlier today, FCU announced that it signed a letter of engagement with Dundee Securities Ltd. under which a syndicate of underwriters led by Dundee agreed to acquire 10,000,000 flow-through common shares of FCU on a "bought-deal"basis. The shares will be acquired by the syndicate, which includes BMO Capital Markets, Macquarie Capital Markets Canada Ltd., Raymond James Ltd., and TD Securities Inc., at a price per Flow-Through Share of $1.50. The gross proceeds from the offering will be $15 million.
FCU plans to use the proceeds from the offering for Canadian exploration expenses.
The news of the offering comes a day after FCU had reported results from fifteen angled holes drilled on R600W, ROOE, R780E and R1620E zones at the Patterson Lake South property.
While these recent developments are a positive for FCU, they may not reflect in the stock until there is a recovery in uranium prices. But, given the improving outlook for uranium market and its own strong fundamentals, FCU should be a stock to watch.
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