Uranium prices have struggled recently, but the longer term fundamentals are still in the radioactive metal’s favour says Justin Chan at Numis.
Hopes that last year’s decision by major producer Kazakhstan to rein back on its output might boost prices have not yet come to pass.
Chan says the large power consuming utilities have yet to commit new long term contracts, which has left the price largely determined by short-term trading by metal houses.
But long-term demand forecasts exceed long-term supply.
WATCH: Short-term oversupply still weighing heavily on uranium price - analyst Justin Chan
There are also approximately 50 under new power stations under construction and Chan is confident that new supply will offset a decline as older power stations are shut down.
Chan’s best uranium plays are Australia –listed but US focused Peninsula Energy, (ASX: PEN) which has ten-year contracts in place at more than US$50 per pound compared to a spot price at present of US$20.
Denison Mines Corp (NYSEMKT:DNN) is one for the medium term as a current low uranium price is not going to affect it at this stage of its production cycle.
Berkeley Energia Ltd (LON:BKY), with its Salamanca project, should respond once more offtake agreements are signed, argues Chan.