Chinese exploration a matter of time: resources specialist

MARK COLVIN: Investment analysts are predicting that the uranium market in Australia will boom as it prepares to feed China's demand.

Uranium stocks rose by up to 23 per cent today on the news of the Chinese-Australian uranium agreements.

One resources specialist, Mark Niutta, from ASANDAS, says it's only a matter of time before the Chinese invest in local companies, or start exploring in Australia for their own uranium sites.

But he also says Australian resource companies will be careful doing business with China, to prevent the kind of price capping which happened with iron ore.

He spoke to Brigid Glanville.

MARK NIUTTA: Well it will depend on our state governments and Federal Government saying, for starters, "Are we going to let this happen?"

My personal view is down the track, if this is seen as being the fuel for the future, then all states will get to the point of saying, "Yes, we'll let the Chinese invest here in Australia, because it means more jobs locally, it means more money coming into the company." You will also see local companies doing the same.

You'll also get some opposition saying, "Well, how do we know that the Chinese are using it for energy and for the right reasons, so to speak. And why should we be having others come in with money when we should be able to do it ourselves."

So, there's a lot of questions that haven't been answered yet for down the track.

BRIGID GLANVILLE: What will happen to the price of uranium?

MARK NIUTTA: It'll depend on supply and demand, it's that simple.

If things keep going the way they look, and the demand increases and the world as a whole starts to say as a whole, "Well, listen there are fors and against uranium, but we're in a situation, we're going to start putting in some power plants as well," and it starts really taking hold. Then there's going to be more wanted, more will be needed, which means supply and demand, the price will go up, unless a lot more is found.

BRIGID GLANVILLE: Would companies in Australia be reluctant to do business with China, particularly if there interested in putting a price cap, like they did to iron ore?

MARK NIUTTA: The bottom line is if a price cap comes in and it's going to cut profits then people… it'll get to the point people will say, "We're not going to dig it out of the ground," which again means supply and demand.

The downside to that, for Australia, is if Africa for example, which does have a bit of uranium, can come through with the goods, remembering we have the safest resource-driven country, when it comes to our politics, our workforce, et cetera in the world.

So the Chinese know at the end of the day, that even though they tried it with iron ore, you know, we do have a very, very safe supply of iron ore… or uranium. If we say we're going to provide it, natural disasters aside, it usually comes through with the goods.

It's not as if there's going to be a civil riot, or whatever. So, personally I think they can't just start saying, "We're going to whack a price limit on it, you can't charge more than this." If they want the stuff, it'll come down to supply and demand in the world and who can do it for the best price.

BRIGID GLANVILLE: What about the fact, if you look at the deal that China did with liquid natural gas coming from WA (Western Australia) to China and they locked it in at such a low price that now's there talk that Australia's lost something like $20 billion; could this happen in the uranium market?

MARK NIUTTA: Listen, it could, but it's like saying, "I sold a house 10 years ago, and its gone up a hundred fold," that's business. What do you do?

You can't say that because Woodside locked into an LNG (liquefied natural gas) contract a few years ago when oil prices were lower they made a mistake. That was simply market price, and they didn't realise the phenomenal growth that China were going to have. So I reckon this time around people will be a bit different.

MARK COLVIN: Resource specialist Mark Niutta from ASANDAS, speaking to Brigid Glanville.