RENO, NV (Mineweb.com) --Scotiabank Vice President, Industry and Commodity Market Research Patricia Mohr has forecast uranium and zinc as her top picks for investors in 2007, with precious metals, particularly silver, expected to benefit from further weakness in the U.S. dollar.
In her recently published analysis, Mohr said uranium was the third-best performing commodity this year “and will likely be the top performer in 2007.” She forecast that spot uranium prices are expected to average US$80 a pound in 2008, possibly ending 2007 close to $90.
“The current upswing in uranium prices represents a ‘secular’ transformational change in global energy markets—related partly to a shift by utilities from high-priced fossil fuels—rather than a ‘cyclical’ upswing,” Mohr asserted. “Nuclear energy is used for ‘base load’ electricity generation and will be little affected by an expected modest slowdown in global growth in 2007 (4.7% down from 5.2% in 2006), using ‘purchasing power parity’ estimates.”
Mohr noted that international utilities are currently seeking 60 million pounds of term commitments from miners, although U.S. utilities have built up some inventory. “While exploration activity has surged for uranium—across Canada, Australia, Africa and in Kazakhstan—there has been little improvement in mine production,” she said, explaining that a 10-year lag between deposit discovery and new mine development is typical. While higher prices have encouraged the reactivation of some mines and increased production at others, actual mine output probably dropped this year, Mohr suggested, noting the technical difficulties of Australia’s Olympic Dam and the fact that the McArthur River expansion in northern Saskatchewan has yet to receive regulatory approval.
Mohr forecast that mine production gains will be limited next year. The woes of Cigar Lake compound the supply problem because it would have been “the first big increase in global supply in many years (ramping up to 18 million pounds).”
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