In the wake of Japan’s earthquake and the ensuing nuclear backlash, one of the world’s great mining companies has had to confess that uranium is no longer a profitable proposition.
Rio Tinto’s (RIO, quote) Namibian mines are now more expensive to operate than the value of the radioactive concentrate they unearth, the company’s uranium chief admits.
While specific project-by-project margins are hard to come by, uranium prices have declined 25% over the last six months, so there is a good chance that the Namibian mine was always costly to run.
The deposits Rio Tinto and other companies digging up in Namibia are relatively low grade, which means extracting a pound of uranium entails crunching a vast amount of rock.
When uranium prices are high and demand is strong, these operations can squeeze out a profit through economies of scale.
Currently, with countries such as Germany pulling out of the nuclear power industry entirely, these projects are an incremental drag on RIO and its smaller rivals.
As far as energy metals go, coal is far more lucrative for RIO at the moment.
Traders can get exposure — short or long — to uranium via various specialized funds like URA (quote) and NLR (quote):