Timeline of the 2005-07 Uranium Price Bubble and its Aftermath

February 2013

Jim Green / Friends of the Earth

August 2005 − A release by Yamarna Goldfields said that company had taken an 80% stake in a project on Pacific island country Niue that had “the potential to host uranium mineralisation of equal or greater quantity” than Olympic Dam. The company’s share price rose 22% on the day of the announcement. A director told ABC Radio Australia: “It’s very early days, but it could be up to 10 per cent of the world’s known uranium.” In September, the company was losing interest and in October it announced that “there was insufficient objective evidence to support continuing expenditure on the project.” The Australian Securities and Investments Commission filed charges but later dropped them.

September 2005 − Far East Capital’s Warwick Grigor said: “Companies are out there scrambling to get hold of anything that’s go uranium attached to it, just because they want a seat at the table. So it’s really all happening in boardrooms and in meetings. Very little is actually happening out in the field at present. … Booms are never totally healthy, because they always have a bust afterwards. I think investors need to really have a look, and there’s a lot of rubbish out there, and they need to keep their heads about them. At the moment there’s a lot of inexperienced players in mining racing in to buy anything that’s got uranium attached to it. And it’s got all the signatures of the crazy buying that we saw in the dot-com boom.”

October 2005 − Tim Treadgold writes in the West Australian: “What’s wrong with this equation? Mum and dad speculators continue to play the uranium game by investing in penny dreadful exploration stocks, while three major shareholders in Australia’s biggest pure uranium producer sell. Fairly obvious, isn’t it? … The sellers, in this case, are Cameco of Canada, Cogema of France, and Japan Australian Uranium Resource Development Company. All three have decided to cash in the chips they hold in the Rio Tinto-controlled Energy Resources of Australia (ERA). … Meanwhile, as experienced uranium players exit the game, mum and dad investors continue to ask naïve question such as “which uranium stocks should I buy?” and “do you think they’ll continue to rise?”. The gullibility is stunning. … This comes back to the point about the smart money, which understands the uranium market heading for the exit, while less clued-up people continue to buy uranium penny dreadfuls rather than do something sensible, like bet the house (the wife and the kids) on the horse carrying the jockey wearing pink polka dots in the fourth at Ascot next Saturday.”

March 2006The Australian reports: “Labor has proposed a new worldwide diplomatic group to limit nuclear proliferation, relying on Australia’s influence as the world’s second-biggest uranium supplier. The new diplomatic caucus would be led by Australia and include nuclear suppliers and users to strengthen the Nuclear Non-Proliferation Treaty.” No such group was formed and both Labor and the Coalition have abandoned their previous policy of prohibiting uranium exports to countries that refuse to sign the Nuclear Non-Proliferation Treaty.

March 2006The Age reports: “Uranium’s growing status as the boom metal for investors has been confirmed in spectacular fashion with the sharemarket debut of the Oxiana and Minotaur uranium exploration spin-off, Toro Energy. Gasps and hand-clapping — plus much partying later — were the order of the day when first sales were posted for the stock, an event celebrated by a record number of punters and associated parties that rocked up to the Australian Stock Exchange’s first-floor offices in King William Street, Adelaide.”

March 2006The Australian reports: “It looks like a bubble, it sounds like a bubble. The ranks of listed uranium juniors have nearly doubled in the past year, and half that rise in numbers took place in just three months − and there’s more to come. Most of them don’t have a drilled resource, many of them are exploring in states where governments ban uranium mining. Even when they do have a resource, the gains look extraordinary. … The one Australian company that is developing a mine, Paladin Resources, has still to come into production in Namibia, but is now capitalised at an extraordinary $2.37 billion.”

March 2006 − According to Resource Capital Research, there are 65 uranium juniors listed on the Australian Stock Exchange, a 96% rise over the past 12 months (similar to the 104% increase in Canada). According to The Age, by December 2006 the number of companies claiming to be involved in uranium exploration was approaching 100. The World Nuclear Association claims that more than 200 Australian companies professed an interest in uranium during 2006, compared with 34 the previous year.

April 2006 − Tim Boreham writes in The Australian: “The current valuations being ascribed to even the most rag-tag uranium hopefuls might look reasonable in a decade’s time. But it’s just as likely that we’ve solved the Middle East’s woes and sent a man to Mars by then as well. … As with all manias, investors are spoiled for choice in terms of options to do their dough.”

April 2006The Bulletin, ‘Atomic Boom’: “Yellowcake is the new black, as share floats by new uranium prospectors give hot returns. … The fortunate few are clearly enjoying a kind of radioactive heaven.”

May 2006 − The Sydney Morning Herald reports: “Beleaguered iron ore hopeful Cazaly Resources is to sell off its uranium assets to Southern Cross Uranium, a new company which plans to list. … The junior explorer made an application for the tenement after Rio Tinto failed to renew its lease. But Cazaly shares were gutted last month after the WA Government handed the lease back to Rio Tinto, on what it said were public interest grounds.”

July 2006The Age reports: “Stand by for a second bull run in local uranium exploration / development stocks − one driven by a frenzy of merger and acquisition activity. The second bull run is just starting to take shape and already it has emerged that there is likely to be three key playmakers — Canadian/Australian Mega Uranium, John Borshoff’s Paladin and Toro Energy. … It was the first bull run in uranium stocks that gave those groups their firepower. It ran out of puff in March after 15 months on the go, with the subsequent repricing of uranium equities at lower levels in April-June setting the scene for the launch of the second, and merger-and-acquisition-driven, bull run.”

August 2006 − Clive Roffey said: “What is of major concern is that for the past year a serious proportion of the rise in the spot price of uranium has been attributed to ‘investors’. This is just syntax for speculators. Hedge funds have become active players in the uranium market. This buying group is reported to have accounted for just over 25% of the total 2005 spot volume. … There are very few major miners and refiners of uranium. But there are a multitude of wannabees. Paul van Eerden sums them up as unsuccessful gold, silver, copper, nickel, platinum and palladium ambulance chasers. Almost every mining exchange has a plethora of uranium ‘exploration or development’ companies, most of them promoting a debatable set of drilling results or estimated reserves.”

November 2006ninemsn reports that “shares in fancied prospecting hopeful Deep Yellow Limited have trebled to 39¢ after statements it’s ready to start drilling its untested Lochness prospect near Mt Isa − once it finds a drilling rig.” Four months later, The Australian reports that Deep Yellow “has truly ridden the uranium wave to have a market capitalisation of more than $440 million”, despite taking a large hit in late 2005 after poor drilling results from the Napperby uranium deposit in the NT. Deep Yellow hoped that Toro Energy would purchase the Napperby project, but Toro Energy allowed its purchase option to expire in May 2010. As of late 2012, Deep Yellow was in the process of divestment of its Australian assets.

November 2006 − “There’s nothing to stop the rally in uranium, unless nuclear has a big accident,” said Thomas Neff from the Massachusetts Institute of Technology.

December 2006 − A trading frenzy, mostly from day traders, helped push Goldsearch shares more than 351% higher in the space of seven trading sessions over the final few days of 2006 and into the new year. A director sells about one-third of his Goldsearch holdings in the midst of the market hype over drilling results from its Mary Kathleen uranium prospect. The ASX suspended trading of Goldsearch on 29 December 2006. On 2 January 2007, Goldsearch was the most traded stock on the Australian Stock Exchange. Goldsearch says directors were not aware of any news that could be influencing the interest in the company’s shares. Drilling samples had been sent for assay but the results had not been received. “Some traders expressed scepticism, suspecting blatant ramping or a pump-and-dump, while others scrambled to get on board,” the Daily Diary website stated.

December 2006The Age reports: “Investors have joined the nuclear party by driving equity values sharply higher. ERA, at its closing price yesterday of $19.94, is sporting a 100 per cent gain for the year. Paladin’s $8.25 close gives it a 325 per cent gain. Dozens of explorers and would-be developers have done better still.”

January 2007 − Adam Schwab writes in Crikey: “Uranium King’s rocketing share price is reminiscent of the early 1970s, when nickel miners would double in price after announcing they had staked a claim near Kambalda. That ended even worse than the dot.com boom – just ask the bloke who paid $280 for Poseidon.”

March 2007 − Pepinnini Minerals says it hopes to start supplying uranium to China within three years. However, Pepinnini announced in December 2009 that preliminary modelling at Crocker Well in SA indicated that it was not currently viable, and that Pepinnini and Sinosteel were delaying completion of the bankable feasibility study “until there is a substantial increase in the price of uranium and improvement in the US dollar.”

May 2007 − Academic George Dracoulis, who contributed to the Switkowski Report, said: “We can ask the question: is uranium going to make or break Australia as an exporter?” One wonders why the question needs asking given that uranium would account for around 3% of national export revenue even if Australia supplied entire world demand. We can ask another question: what has George Dracoulis been smoking?

May 2007 − an investment banker tells the Australian Financial Review: “When this bubble pops, people will get hurt. It will happen and everyone will have blood on them − not just those small guys.”

May 2007 − The Sydney Morning Herald reports that the Gold Company’s share’s shot up nearly six-fold in one day in 2007 driven by the company’s announcement that it would buy into Greenland uranium project Kvanefjeld. It was “one of the biggest one-day gains in Australian trading history” according to a report in The Australian. However the Greenland government banned uranium mining. The company said: “It is not possible to receive a mineral licence for the exploration or exploitation of uranium in Greenland. Therefore, the licence does not include uranium.”

May 2007The Australian reports: “The Takeovers Panel has delivered a stunning blow to the credibility of uranium players Summit Resources and Paladin Resources, joint venture partners in one of Australia’s biggest untapped uranium deposits. The panel made a declaration of unacceptable circumstances over Paladin’s $1.3 billion bid for Summit, acting on a complaint by French nuclear giant Areva, which wants to protect lucrative marketing rights over the massive Valhalla/Skal deposit in outback Queensland. … The Takeovers Panel said it was “disappointed” with the quality and timeliness of market disclosure by both Paladin and Summit.”

June 2007 − Jamie Freed notes in the Sydney Morning Herald: “These days a uranium explorer doesn’t need any actual uranium in the ground for its float to be nearly four times oversubscribed.” Freed was referring to Fission Energy, a company whose tenements had received little if any drilling in the past, and whose parent company hadn’t found anything mineable since listing in 2001.

July 2007The Australian reports: “Uranium-focused shares took a tumble on the bourse, as the spot price for uranium registered its first fall since 2003 … As the demand side wanes, the market reacted savagely to uranium hopefuls, which had provided heady returns for investors speculating on yellowcake-focused stocks. Junior explorers were the hardest hit …”

July 2007The Age reports: “There has been a distinct cooling down in the share-price performance of the uranium explorers, due more to market saturation in the number of listings than anything else.”

June 2007 − Far East Capital’s Warwick Grigor said: “This is a bull market based on hard factual economics, not fantasies and what-ifs,” he wrote. “At these uranium prices, there are enormous cash flows that can be made.”

July 2007The Age reports: “Will Robinson’s Encounter Resources has not exactly been lost in space since its $4 million float as a uranium explorer in March 2006. It’s now a $44 million company ($7 million cash) and the 20¢ shares from the float closed on Friday at 63¢, down 3¢ on the day. The mainly West Australian-focused explorer could not have timed its float any better, with uranium prices rocketing from $US35 a pound to $US130 a pound since its listing.”

September 2008Ux Weekly reports: “One of the major changes in the spot uranium market over the past several years has been a greater involvement of hedge funds and other financial entities in the market. This makes the market more subject to the vicissitudes of the financial sector – hedge funds that are losing money in one area might have to sell uranium holdings for cash flow or to shore up their returns.”

December 2008 − The market valuation of Australian uranium companies falls by 75% in the 12 months to December 2008 according to Resource Capital Research. RCR managing director John Wilson said: “Producers continue to face significant challenges in financing and developing new projects, including cost pressures and potential delays variously relating to permitting, infrastructure development, commissioning and now credit and equity market weakness.”

March 2009The Australian reports: “The drastic decline in the price has really hit the local sector for six. A check on announcements shows that many local uranium explorers have more or less gone into hibernation, emerging only to file the compulsory quarterlies and financial statements.”

March 2009 − Far East Capital’s Warwick Grigor said: “There are many walking dead companies out there − zombie companies.” He said he expected about 10 serious uranium companies to survive and maybe 10 more not-so-serious companies. “Some companies will merge and some companies will be taken over, but in many cases it won’t even be worth paying the corporate advisory and legal fees to complete mergers.”

September 2009 − Barry FitzGerald and Mathew Murphy write in the Sydney Morning Herald: “A penny dreadful in the early 1990s, Paladin is now a $3.2 billion company on the strength of its African production interests and its plans to be the architect for consolidation amongst uranium groups and explorers. Borshoff has 30 years experience in the uranium sector and warns would-be uranium producers that Paladin’s success will not be repeated easily.” Fast forward to January 13 and S&A Resource Report editor Matt Badiali states in January 2013: “One company I was concerned about was Paladin Energy Ltd. … It has some great assets and a long-term supply contract with one of the French utilities, but it’s experienced some problems turning a profit. … It has a lot of debt. It’s a $712 million ($712M) market value with $830M in debt.”

October 2009The Age reports: “Perth-based uranium explorer Greenland Minerals and Energy has reviewed its books for the 2008 financial year − and revealed a $164 million blow-out … Few companies can rival Greenland Minerals when it comes to having bad news to bury. Fewer have done such a fine job of burying it. … A huge $171 million increase in equity-based payments made by Greenland Minerals last financial year is described in the accounts signed-off by Deloitte as ”$171,378 thousand”. A leading Melbourne taxation accountant who looked over the Greenland Minerals financial statement laughed when he examined the figures. ”I guess that’s how they do things in Perth,” he said.”

March 2010The Age reports: “But, spare a thought for the people of Greenland, who last year voted in a government that is opposed to uranium mining. After the election, GGG [Greenland Minerals & Energy] released a pre-feasibility study stating that Kvanefjeld was worth an estimated $2.2 billion, could produce 3895 tonnes of uranium oxide a year, making it ”a globally significant producer of uranium”, and concluding that ”construction is scheduled to commence in 2013, with first production in 2015”. [Construction has not begun as of February 2013.]

April 2010The Age reports: “The producers are down by 25-35 per cent from their 52-week highs and the explorers are generally showing falls of 50 per cent from their 52-week peaks. … Another way of putting it would have been to say that there is a whole bunch of junior explorers out there that do not have a hope of getting in to production while uranium prices remain in the doldrums. But in 2-5 years it could be a different story. But don’t expect punters in the sector to be hanging around that long. They will be off chasing near-term gains in others sectors.” Most active uranium explorers “are on an official go slow to preserve funds”.

June 2011 − The Australian Uranium Association claims that there are “good prospects that four or five projects in WA will begin operation in the next three to four years” and that the WA Government forecasts uranium export revenue from the state of $675m annually by 2014. As of February 2013, no uranium mines are in operation in WA despite the support of the WA and federal Governments. It is possible that one mine will be producing in 2014 (Wiluna); there is no possibility that two mines could be producing.