Australia uranium miners set for growth - Citigroup
SYDNEY, July 8 (Reuters) - Australian uranium companies are set for a new era of growth as a deficit builds up in the global uranium market, Citigroup analysts said in a report on the sector on Wednesday. The firm's Australian mining analysts said a deficit was likely after 2012 due to delays in starting new mines and expanding existing projects, while less uranium was coming onto the market from secondary sources.
Citi expects the spot price for uranium oxide, or yellowcake, to edge up to $60 a pound (lb) in 2010/11 from a current spot price of $52/lb, although the price could move higher if there was further supply disruptions.
Prices above $50/lb were likely to encourage new mine development and the expansion of existing mines, they said.
Expansion plans are already being put in place by companies such as BHP Billiton (BHP.AX) (BLT.L), the owner of the Olympic Dam project that contains about one-third of the world's known uranium. There are also dozens of small uranium exploration companies in Australia hoping to move into production when market conditions are suitable.
The firm's analysts said demand growth through to 2015 was largely pre-determined as new nuclear reactors came on-stream, tough demand from China might be stronger than anticipated.
Citigroup upped its recommendation on Australia's top two listed pure uranium miners, Energy Resources Australia Ltd (ERA.AX) and Paladin Energy Ltd (PDN.AX), to buy.
The firm put a price target of A$25.30 on ERA, up from a previous target of A$22.60. The stock was trading down 3.7 percent at A$20.06 at 0119 GMT.
Paladin's price target was raised to A$5.40 from A$4.10. The stock was down 5 percent at A$4.17 on Wednesday.
ERA, controlled by Rio Tinto Ltd (RIO.AX)(RIO.L), operates the Ranger uranium mine in Australia's Northern Territory while Paladin operates the Langer Heinrich uranium mine in Namibia, which it is expanding to a 5.2 million pounds a year operation. (Reporting by Bruce Hextall; Editing by James Thornhill)
