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Financials

Going nuclear: Australia's Macquarie buys Deutsche uranium book -source

* Australian bank continues push into commodities trading

* Deal includes uranium stockpiles valued at around $200 mln

LONDON, Oct 21 (Reuters) - Australian investment bank Macquarie Group has bought Deutsche Bank’s uranium book, a source familiar with the matter said, as the increasingly commodities-focused lender pushes deeper into global energy trading.

The deal includes Deutsche’s long-term trading contracts and stockpiles of low-grade uranium yellowcake, which were valued at the end of last year at around $200 million.

Industry experts say they comprise enough uranium to fuel around 10 average-sized nuclear power plants for 12-18 months.

The source said the deal was completed late this summer, but did not reveal how much it was worth.

Macquarie has been growing its global energy business and is now seen as a top-five player amongst banks in raw materials trading, with the Australian firm expanding even as rivals retreat in the face of tighter regulations and lower margins.

The Australian bank previously looked at buying Goldman Sachs’ uranium trading business at the beginning of this year, sources said, but that deal appears to have fallen by the wayside. Goldman was the only other investment bank known to trade uranium in early 2014.

A spokeswoman for Macquarie in London declined any comment.

In the 12 months to March, Macquarie earned A$1.1 billion ($970 million) in net income from commodities trading, propelling it into the big leagues of much-larger American rivals who have long dominated the sector.

The top 10 banks tracked by British consulting company Coalition (not including Macquarie) together made $4.5 billion trading commodities in 2013, a report from the firm said earlier this year, down from more than triple that in 2008.

Walter Pye, who heads up Macquarie’s fixed-income, currency and commodities division for the Americas, has described its natural resource trading operations as like a “commodity company within a bank”.

For a bank that has financed a large part of Australia’s natural resources boom over the last decade, including uranium miners, the trading operation is seen by some as a good fit.

While prices of yellowcake - known as U308 UX-U3O8-SPT in the industry - have declined markedly since the Fukushima disaster in Japan, hitting a nine-year low of $28 a pound in June, they have rallied by around 25 percent since then.

Macquarie’s own mining and metals analysts have cautioned, however, that the price jump may not last, with oversupply still dominating a market that traded closer to $70 a pound before Fukushima sharply curbed demand in early 2011.

Deutsche announced it was largely exiting commodity trading in December, with Citigroup Inc buying most of its energy and metals book.

URANIUM SUPERPOWER

Australia’s uranium reserves are the world’s largest, according to the World Nuclear Association (WNA), accounting for almost a third of known global deposits. New mines are planned, the WNA said in an updated country profile this month.

The country’s existing three mines produced 7,488 tonnes of U3O8 last year, making it the world’s third-largest uranium producer after Kazakhstan and Canada.

About 80 percent of global uranium supplies are traded via long-term contracts between producers and utilities, but around 20 percent of deals are done in the spot market, which sets the marginal price, according to the WNA.

Goldman and Deutsche entered the uranium market in 2009, when tightening supplies threatened to send prices soaring before Fukushima. They would grow to handle almost a third of all uranium trades in the spot market, according to sources.

Market participants say yellowcake trading is safe, with banks taking no risk in transporting the radioactive material, only taking title to the yellowcake once it is in secure storage facilities.

Trading firms hold uranium stockpiles in warehouses specially licensed to store the fuel, like U.S. conglomerate Honeywell International Inc’s ConverDyn facility in Illinois; Cameco’s Port Hope facility in Ontario; and Areva SA’s facility in France. ($1 = 1.1331 Australian dollar) (Reporting by David Sheppard; Editing by Crispian Balmer)

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