The past year proved to be an extraordinarily volatile one in business and in markets. Events like the European debt crisis and the potential shutdown of the United States government dominated headlines in 2011 and caused it to be, in large part, a year best forgotten. Against this macro backdrop, the most important headline of the year for the nuclear industry was unquestionably the tsunami in Japan and the resulting events which took place at Fukushima. After a promising early start to 2011 - in which spot uranium prices rallied to just above $70 per pound and seemed to validate the potential for a nuclear "renaissance" - the magnitude of what had transpired in Japan began to sink in and support for all things nuclear (and especially uranium mining shares) quickly evaporated. This came as no surprise to us as we predicted a 12-18 month period of penance in the proverbial "penalty box" in our annual shareholder message and we are now approximately halfway through serving our time.
We also expected that a wide-ranging, transparent, and global reassessment process would take place in order to win back public approval for nuclear, and this process seems well under way. While too early to draw definitive conclusions on the ultimate public sentiment, the early returns are encouraging with most nations that have nuclear power or were considering it believing strongly that nuclear needs to be in their future energy and electricity generation mix. Markets, by and large, seem to confirm this view and the price of uranium shares seem finally to have stabilised, albeit at very low levels. Spot uranium prices also appear to have stabilised in the fourth quarter of 2011 in the low $50 price range and this was accomplished on record trading volumes: indeed, new volume records were set for both monthly (December) and annual trading volumes in the spot market.
Recent news flow is also constructive and encouraging, particularly on the corporate front where takeover activity in the uranium sector intensified markedly as 2011 progressed. A long rumored takeover for Extract's massive Namibian deposit was launched in December and this followed the heated battle for Hathor, which began as a hostile bid and featured two of the industry's biggest players, Cameco and Rio Tinto, vying to control future uranium reserves in a first world, Rule of Law jurisdiction. That the resultant winning bid translates into a resource in the ground metric approaching $10 per current pound should be at least as much reason to celebrate as the fact that the winning bidder was Rio Tinto. Rio, one of the world's largest mining companies, is a highly successful and globally diversified commodities producer, so their strategic decision to expand in uranium mining beyond Australia and Namibia at this particular juncture could be a viewed as a powerful endorsement that nuclear and uranium not only have a future but that it is likely to be a bright, highly profitable one.
We certainly continue to believe that at Laramide and we also think we are well positioned within a peer group that continues to shrink, due to either takeovers or challenging industry conditions. Our flagship Westmoreland project in Australia remains one of the highest quality development assets in the sector and may finally move ahead meaningfully in 2012 following State elections in Queensland which should take place in the next few months. Other material milestones for shareholders to focus on in 2012 are a definitive permitting decision in Utah in Q1 at our La Sal Project and significant permitting progress later this year in New Mexico - both at our La Jara Mesa project (100% owned and operated) and at Churchrock, which is owned and operated by Uranium Resources Inc. A production decision is pending for Churchrock and that will create additional meaningful value for Laramide shareholders through the revenue-based, sliding scale production royalty we hold..
As for the uranium market, it is an unknown for 2012 with most industry analysts and commentators predicting a continuation of the current stability and a narrow range of price action. Any improvement in the price is likely to be a back end loaded and this seems plausible given that the biggest source of secondary supply - the Russian HEU ("Megatons to Megawatts") Agreement - concludes in early 2013, following which nuclear utilities should theoretically be more reliant on newly mined supply.
A strong finish after a weak start would be the diametric opposite to last year's price action and would likely be welcomed by shareholders. Certainly, we believe the current share price of Laramide, weighed down as it has been by tax loss selling and extremes of pessimism towards nuclear, does not reflect improving industry and corporate fundamentals, and consequently, we as insiders have been significant recent buyers of the stock. This includes shares purchased both in the market and in a recent private placement that was completed last week and positions us financially to enter 2012 on a stronger financial footing.