Uranium in the News

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Ux Weekly - www.uxc.com

January 9, 2009

Uranium Production – A topic that has borne watching almost every year this decade has been uranium production. Ever since the uranium price started its ascent, uranium production has invariably fallen short of producers’ target levels. Last year was no exception, as the planned level of production at the beginning of the year was 124 million pounds, while the actual production is likely to turn out to be more on the order of 115 million pounds. (Total production in 2007 was 107 million pounds.) In past years, this shortfall helped to put or keep upward pressure on price. Last year, hedge fund destocking and previous inventory building on the part of utilities more than made up for the production deficit. Looking forward, what happens with respect to production in Kazakhstan, which stumbled somewhat last year, again will be key, along with the progress (or lack thereof) at Cigar Lake. With lower prices and financing concerns in the wake of the credit crisis, expansion may be more difficult to accomplish going forward. How companies respond to these challenges will be a key determinant in future price formation.

Uranium Price Volatility – While stopping short of a prediction, we noted in last year’s preview that we would not be surprised if the uranium market remained volatile, although not to the degree it was in 2007. This turned out to be the case as 2008 experienced by far the most price volatility of any year except for 2007. We can repeat that same expectation here, as we enter the year in both an uncertain economic climate and also a number of uranium supply uncertainties, including production levels and DOE inventory sales, both key items discussed here.

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