Investors and banks pumped half-a-trillion dollars into emerging markets last year, with China and other Asian economies accounting for the lion's share of such money flows, the Institute of International Finance (IIF) said on Thursday.

Last year's figure of US$502 billion was just slightly below the record level of US$509 billion in 2005, according to an IIF report.

The report by the global association of big financial institutions and banks, showed investors remained upbeat on countries with greater economic risks last year, but that this trend will likely moderate somewhat this year.

The IIF, chaired by Deutsche Bank AG chairman Josef Ackermann, said the volume of private capital flows to emerging markets was likely to total US$469 billion this year.

Although this would mark a slowing of overall capital flows, to the 30 countries covered in the survey, the IIF said it would still represent the third highest level of flows recorded.

The institute, however, cited several risks to its outlook, including "uncertainties about the duration and severity of the ongoing housing slump in the United States, as well as its impact on the rest of the economy."

The IIF said net private capital flows of US$197 billion went to Asia last year, while emerging European economies acccounted for US$218 billion. Some US$46 billion went to Latin America and US$31 billion to Africa.

The IIF said that Asian economic powerhouse China would likely continue to be the recipient of the largest share of net direct investment.

"China will continue to dominate in this category, accounting for US$55 billion of total net direct investment flows to emerging markets," the report said.

Europe's emerging economies are likely to receive the biggest share of commercial bank lending in the coming year, however, "accounting for 70 percent of all such lending to emerging markets," the report said.

The report's authors said they generally expected the world's financial markets to remain stable over the next 12 months.

Growth in Asia is seen exceeding 7.5 percent for the fifth straight year, with China's breakneck economy moderating to "a more sustainable" growth clip of 9.5 percent this year.
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URANIUM miner Energy Resources of Australia looks set to miss out on the immediate benefits from a surging yellowcake price despite posting record production in the December quarter.

ERA produced a record 1662 tonnes of uranium in the fourth quarter of 2006 from its Ranger mine in the Northern Territory, a 3 per cent increase on the previous fourth quarter in 2005 and a 51 per cent increase on the third quarter of 2006. Shares in the uranium miner surged $1.20, or close to 6 per cent, to $21.46 after yesterday's news.

However, despite its record production quarter, ERA will not be able to take advantage of the surging uranium spot price, as it entered into long-term contracts when the price was weaker.

"ERA's average contractual sales price is only partially influenced by the spot market due to its portfolio of contracts containing a range of pricing mechanisms entered into when the uranium oxide market was considerably weaker," ERA said.

The spot price of uranium was $US72 per pound at the end of December compared with $US36.13 a year earlier.

Gold fell slightly on Tuesday after rising to a near two-week high the previous day, but buying interest persisted at lower levels as investors slowly regained confidence in the precious metal.

Spot gold was at 625.10/625.60 an ounce at 0634 GMT, after earlier hitting a high of $626.75.

"The tendency is to buy on dips, mainly from investors. We should test the upside and make our way up to $635 to $637," said a dealer in Singapore.

"For today, we can put the trading range at between $620 and $635," he said.

Gold was quoted at $626.00/627.00 late in London on Monday, when it had risen to as high as $627.80 an ounce, its highest since Jan. 4, on the back of technical buying and a slight dip in the dollar against the euro.

Uranium miner Energy Resources of Australia has shrugged off operational difficulties experienced in the first half of 2006 and posted record quarterly production.

ERA produced a record 1,662 tonnes of uranium in the fourth quarter of 2006 from its Ranger mine in the Northern Territory.

The figure is a three per cent increase on the previous fourth quarter in 2005 and a 51 per cent increase on the third quarter of 2006.

The uranium miner attributed the record production performance to sustained mill throughput and a higher head grade.

Production during the first half of the year was impacted by heavy rainfall from tropical cyclone Monica and difficulties with the acid plant after a planned maintenance shutdown.

Uranium production for 2006 came in at 4,748 tonnes, 20 per cent lower than the 2005 figure of 5,910 tonnes, which was impacted by an elevated water level in the pit following high rainfall.

SXR Uranium One’s Dominion project in South Africa is among the top ten uranium deposits in the world and accounts for half of South Africa’s uranium resources.

Officials have said said the company would not mine deeper than 500 metres in its first ten years of production. Dominion has a life of 80 years in terms of current production plans, but Uranium One is working on increasing the rate of production.

The average mining depth in South African is around 3 500 or 3 700 metres.

The CEO said the increase in uranium demand, stemming from countries such as India and China, has not filtered through to the uranium price yet.

“The reasons are that we are being very conservative in the industry regarding forecasting increases in demand. I think constrained supply is driving the uranium price at this stage. We are not even seeing the benefit of increased demand yet.”

Froneman said the industry could not afford a number of failures like Cigar Lake, but has to deliver for people to invest billions of dollars in new nuclear power plants.

The fact that a competent company such as Cameco suffered a failure of this size meant that end-users realised how difficult it was to see new uranium coming into production.

Production costs at Dominion will be in the region of $14,5/lb, while the current spot price for uranium is $72 per pound.

Uranium One announced four new sales contracts with “western” power plants for delivery of 3,2m pounds of uranium between 2008 and 2012 on Thursday. This brings production that has been contracted to buyers to 28% of production in this period.

The price of uranium oxide is expected to climb as high as $100 a pound this year for the first time in history on the back of speculative interest in the commodity as well as strong demand from the nuclear power sector.

After falling to a multi-year low of $6.40 in the first quarter of 2000, the price of uranium rocketed elevenfold.

The last quoted price for uranium oxide was a record $72 a pound.

Adam Schatzker, a Toronto-based analyst for RBC Capital Markets, expected the price of uranium to climb to $100 a pound this year. He expected the global market for uranium to be in deficit this year and next year.

For next year, Schatzker forecast a uranium price of $85 a pound, followed by $75 a pound in both 2009 and 2010, and then $50 a pound from 2011 to 2015. The long-term price was $25, he added.

The average price last year was $47.56 a pound compared with $27.89 in 2005.

Uranium One chief executive Neal Froneman forecasts that uranium will break $100 a pound this year.

Schatzker said: "We continue to believe that strong uranium prices should provide sufficient incentive for exploration and investment, and ensure that the supply-demand gap will be filled after 2013."

Toronto-based Scotiabank commodity market analyst Patricia Mohr expected uranium oxide to climb as high as $90 a pound this year. She said uranium should average close to $80 a pound during the year.

The price of uranium would continue to climb due to the very tight spot market for the commodity.

There was a great deal of interest from power utilities around the world in entering into contracts for the supply of uranium, Mohr said. Many utilities needed to restock with the metal.

It was estimated that 168 new nuclear power stations would need to be built before 2020.

Uranium is used as fuel for nuclear reactors and the explosive material for nuclear weapons.

Depleted uranium is used in armour plating.

After nearly doubling last year, the price of uranium appears poised to continue its bull run in 2007 as demand for the radioactive fuel continues to outstrip supply, analysts say.

"It is a commodity that has for years been under a lot of pressure from excess supply and now the seeds have been sown and we're beginning to see the flip side of that," said RBC Capital Markets analyst Adam Schatzker, who has forecast the price will average US$100 per pound in 2007.

"There is not a lot of mine production. The inventories that were being sold into the market are disappearing and we're actually in a supply-demand deficit."

Though hedge funds and other speculators are beginning to move into the uranium market, he said the biggest driver to the recent increase in price is a shortfall in supply and growing demand.

New nuclear power plants are being built in China and other parts of the world, while few new major deposits have been developed, leading to demand that is 40 per cent ahead of current supply.

For years the price of uranium removed the incentive to spend the money building any new production or searching for new deposits. With governments selling their inventories the markets were flooded with cheap uranium and there was no need to dig up new deposits.

But those inventories are depleting and uranium users still need the fuel for their reactors.

The price of uranium averaged US$28.15 per pound in 2005 and jumped to and average of $48.10 per pound in 2006. However the spot price for the radioactive metal was a whopping US$72 per pound at the end of the year.

Scotiabank commodity specialist Patricia Mohr has suggested that the current upswing in uranium prices is a "secular" change in global energy markets, due to the price of oil and that nuclear power generation emits virtually no greenhouse gases.

"While exploration activity has surged for uranium - across Canada, Australia, Africa and in Kazakhstan - there has been little improvement in mine production," Mohr wrote in a recent report forecasting an average price of US$80 in 2007, ending the year close to $90.

She suggested mine production gains this year will be limited as Cameco (TSX:CCO) and Areva will likely boost output in Kazakhstan, the Dominion project will start up in South Africa and Smith Ranch may be expanded in the United States.

The shortfall in supply was made worse when Saskatoon-based Cameco, the world's biggest uranium producer, reported flooding at its Cigar Lake mine in northern Saskatchewan, a project it had hoped to bring into production in 2008.

Construction at the deposit, which has proven and probable reserves of more than 232 million pounds of uranium at an average grade of 19 per cent, began in January 2005, but came to a halt last year after a flood that pushed back completion by at least a year.

Though the company has started round-the-clock work drilling holes to the source of the water inflow so it can pump in concrete, it is not known when the mine will actually be able to come into production.

Some market watchers have speculated that the Cigar Lake mine may never begin commercial production.

Schatzker said the flood at the mine that is expected to produce 18 million pounds a year when it comes does come into production, had a "fundamental impact on the market."

"The range of expectations of where that might go is all over the place because really a lack of information and a lack of clarity," he said.

But even with the trouble, Salman Partners analyst Raymond Goldie still rated Cameco a top pick for the year.

"We believe that investors have been overly concerned about the link between oil prices and uranium prices and about the flood at Cameco's Cigar Lake uranium project," said Goldie, who has a C$55.95 12-month price target on the stock.

"However, as investors realize that what Cameco loses at Cigar Lake on volume, it more than makes up on price, Cameco's share price continues to recover."

Investors have been flocking to uranium stocks, particularly those of junior companies with a lower stock price.

For example, Paladin Resources Ltd. (TSX:PDN), a small Australian miner that trades on the TSX and has uranium properties in South Africa, has been a top trading stock for several weeks on the Canadian markets.

SxR Uranium One Inc. (TSX:SXR), a Toronto-based resources company, has also been a popular investment as has been Denison Mines Corp. (TSX:DML), an intermediate uranium producer, with mining assets in the Athabasca Basin of Saskatchewan, and the southwestern U.S. as well as exploration properties in the U.S., Canada and Mongolia.

Investors have been drawn to Denison because the company owns parts of two of the four uranium mills operating in North America today, giving the company a diversified mining asset base as well as milling infrastructure.

The Toronto company recently got C$100 million in financing to back its bid to acquire OmegaCorp Ltd., an Australian-traded miner with uranium projects in southern Africa, including the advanced stage Kariba Project in Zambia.

Energy Metals Corp., an advanced uranium exploration company, is rated "buy" by Brian Mok, an analyst with Research Capital Corp.

The shares closed yesterday at $10.75, up 65 cents on the S&P/TSX. Mr. Mok initiated coverage of the company with a 12-month share price target of $13.

Energy Metals is developing uranium properties in Texas and in the Powder River Basin and Great Divide Basin in Wyoming. It also holds properties in Colorado, Utah, Nevada, Oregon and Arizona.

During the past 12 months, Energy Metals has acquired two companies and it is in the process of acquiring a third as part of its plan to "accelerate the pace towards production," Mr. Mok said. The company's uranium production could reach five million pounds a year by 2012, according to his report. Uranium recently traded at $72 (U.S.) a pound.