UrAsia Secures uranium contracts in hot market

UrAsia Energy (UUU-V, UAEYF-O, UUU-L) recently announced five new agreements for uranium concentrates from its Akdala uranium mine in Kazakhstan — and then saw its share price drop.

In Toronto, UrAsia shares were off 3 to $3.32 on the news, on roughly 2.4 million shares traded.

But Sally Eyre, vice-president of corporate affairs at UrAsia, sees no correlation between the news and the share price movement.

“We’ve had a phenomenal run over the past two to three weeks,” Eyre says. “Perhaps we’re seeing some profit taking.”

In early November, UrAsia shares had gained roughly 40% since the beginning of October, when they were trading for around $2.40 a share.

In keeping with industry practices, the company did not disclose full details of the new contracts but it did say they are all with North American utilities for a total of roughly 5.75 million lbs. of U3O8 to be delivered between 2007 and 2016.

UrAsia said the contracts range from three to nine years, and from 600,000 lbs. U3O8 to roughly 2.2 million lbs. U3O8. The company says the contracts all have market- related prices, and that it remains unhedged.

Eyre described the current uranium market as a “seller’s market” and said the flood at Cameco’s (CCO-T, CCJ-N) Cigar Lake uranium project drove home the point that there is a squeeze on supply.

The Cigar Lake incident exacerbated an acknowledged gap between mined uranium and nuclear power plant requirements, which has driven uranium prices to new heights. At the beginning of November, the spot price for uranium was around US$60.25 per lb. U3O8.

UrAsia says all of Akdala’s production for 2006 has been sold and that the mine is on track to produce 2.6 million lbs. U3O8 this year.

Founded by Canadian financier Frank Giustra, UrAsia became the fourth publicly traded uranium producer in the world when it was listed on the TSX Venture Exchange in November 2005.

It did so by using some of the $500 million it raised — a Venture Exchange record — to acquire a 70% interest in the Betpak Dala Joint Venture that same month. Betpak Dala owns Akdala.

The move pushed UrAsia ahead of the multitude of other uranium juniors; it immediately became a producer of 1.4 million lbs. U3O8 per year. The company has a stated target of producing 10 million lbs. annually by 2015.

Akdala has a reserve of roughly 13 million tonnes, grading 0.057% uranium for 19.4 million lbs. U3O8. It has an additional indicated resource of nearly 14.5 million tonnes, grading 0.057% uranium for roughly 21.4 million lbs. U3O8.

UrAsia says its focus is on developing low-cost, in-situ leach uranium projects in Central Asia. The company has three uranium projects in Kazakhstan, as well as exploration projects in Kyrgyzstan. Goldcorp (G-T, GG-N) president and chief executive, Ian Telfer, sits as the company’s non-executive chairman.