Uranium was one of the few metals to miss the recent mining rally, but there are signs things are starting to turn.
If so it will be good news for CanAlaska Uranium (CVE:CVV), which has options and royalty deals in place over a swathe of highly prospective acreage in Canada.
According to Cantor Fitzgerald, uranium is likely to reach an inflection point this year as for the first time since the middle of the last decade demand is set to outstrip supply.
It’s an imbalance that is only likely to increase over the coming years.
Although uranium production from both primary and secondary sources is set to increase over the next decade, the rise in demand will outpace this production by some margin.
Kazakh cutbacks offer price recovery hope
Key to this set of forecasts is a recent decision by Kazatomprom to curtail production from its Kazakh mines by 10%.
According to Cantor Fitzgerald, this will amount to a cut of more than 5.2 million pounds of uranium and equates to 3% of global production.
Recent talk in the mining industry has painted Kazakh domination of the uranium supply as something akin to OPEC’s one-time dominance in oil.
In the shadow of the Fukushima disaster any sign of a price rally has been squashed by low cost production from Kazakhstan, which has increased its production of uranium by 360% since 2007.
With the spot price constantly under the cosh, the electricity utilities that are the main source of demand have been under no pressure to buy on long term contracts.
But there may be a shift in mindset in Kazakhstan now that it has 40% of the global market.
If instead of selling at spot it starts to build stocks the effect on the uranium price will be dramatic, says analyst Justin Chan at Numis.
‘Saudi Arabia of Uranium’
CanAlaska Uranium Ltd has a string of work programmes underway in the Athabasca basin of Canada, dubbed the "Saudi Arabia of uranium".
The firm has option deals with Cameco, Denison Mines, Fjordland Exploration and Canterra Minerals covering diamonds and copper-zinc but, as the company’s name suggests, it is uranium that offers some of the biggest potential.
At the West McArthur uranium site, partner Cameco has completed 3,342 metres of drilling at three areas.
A new drilling programme at one of its three Waterbury claims is scheduled to start this quarter.
Canalaska and Cameco are exploring the West McArthur uranium project under a C$12.5mln agreement, which includes drill testing of the grid 5 and grid 1 conductor packages.
The project covers 35,830 hectares close to Cameco's majority owned McArthur River uranium mine and the recently discovered Fox Lake deposit.
Canalaska retains an unencumbered 2% uranium royalty on future production.
Waterbury West an 'opportunity'
The Waterbury West property is 3,764 hectares in size, and is located over the central portion of Waterbury Lake, immediately north east of the Cigar Lake mine.
Canalaska as former operator identified it as an interesting target
"We are very pleased to have AREVA and Cameco carry out the current drill program, as that completes the purchase option for the property, and gives us a very interesting opportunity for a discovery, on which we would hold a significant royalty," said Canalaska president Peter Dasler.
Moon in the east
In December, Denison Mines also resumed exploration on the Moon South property (Moon).
Denison will follow up last year's initial hole that encountered 0.102% U3O8 over 0.5 metres.
Like Waterbury West, the property is on the eastern side of the Athabasca Basin which has the highest-grade uranium deposits and the best mining infrastructure.
At the Alberta diamond project, CanAlaska is evaluating a series of 50 magnetic anomalies detected from a recent 4,000km airborne survey.
At the West Athabasca diamond project, 85 targets have been identified from low level high resolution airborne geophysical surveys.
At the North Ruttan copper zinc project, the firm is in receipt of a Manitoba Government grant (MEAP) for a winter program of drill testing of the target as well as the work permit to complete the drilling.