Western Australia’s Economy & the Rising Demand for Uranium

Speculation increases about the Western Australian economy and the rising demand for uranium, or yellowcake as it likes to be known.

We note with interest a couple of stories from News Limited. "Yellowcake fever to heat up" the report said. It went on to say, "HOTTER days and drier winter months has pushed climate change to the forefront of the political and social agenda, with the quest for cleaner energy heralding a renaissance for the once unfashionable uranium."

They quoted Mark Pervan, analyst at Daiwa Securities, "Uranium is gearing up for the next new wave of demand coming through in the next two to three years.'' He continued, "The real beauty on the supply side is for every one tonne of highly enriched uranium (HEU) that is lost or reduced, you have to replace it with ten tonnes of lowly enriched uranium (LEU) or mined uranium. There is a big multiplier effect in there, this is why there is going to be a big demand for mines and new supply.''

John Wilson, an analyst from Resource Capital Research told News Ltd, "I think the spot price is going to keep going up ... the market indicators are it is going to keep rising. There are concerns there about future supply.''

He also said that consolidation among explorers was likely to continue. "Likely acquirers are going to be companies like Paladin or Denison that have been active this year already, they have the expertise and the capabilities to manage and develop the mines. There is quite a long pipeline of companies that are moving into that category, advanced exploration or early stage development and those are the sort of companies that are going to be prime targets.''

On top of that we read the continued growth of the Western Australian economy. The report says, "In his mid-year budget review, Treasurer Eric Ripper said the economy would grow at 5.75 per cent in 2006-07, up from the initial forecast of 5.25 per cent. Last year's growth rate was 4.9 per cent. Mr Ripper said the state's forecast surplus for the year had risen by $470 million to $1.74 billion."

It quoted Ripper as saying, "They (commodity prices) are still predicted to decline in the future, but off a higher base and later than originally predicted. This is not the Government's surplus, this is the people's surplus, and we are investing it in their future through infrastructure and debt reduction." Would it be too much trouble to let private enterprise do that? Or allow West Australians to spend their money as they see fit rather than watching the government pork-barrel it away on useless grand projects?

He also said, "There are signs the property market is softening. The evidence coming in now shows the property market has come off its peak." Try telling that to WA real estate mogul Willie Porteous, according to Sky News last night, Porteous has a client's property on the market which they have valued at, wait for it... $85 million!! If it is sold at that price it would make it three times the previous record of $25 million for a property sold in Sydney's Point Piper.

It could be a very merry Christmas for someone if that deal goes through.

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