New York/Moscow: Bankrupt Lehman Brothers Holdings Inc. is sitting on enough uranium cake to make a nuclear bomb as it waits for prices of the commodity to rebound, according to traders and nuclear experts.
The bank, in the throes of paying off creditors, acquired uranium cake under a matured commodities contract and plans to sell it when the market improves to realize best prices, chief executive officer Bryan Marsal said.
Lehman, once the fourth-largest investment bank, has an estimated $200 billion (around Rs10 trillion) in unsecured liabilities left to pay. The uranium, which may be as much as 500,000 pounds, might fetch $20 million at today’s prices of about $40 per pound, said traders who asked not to be named because of the confidential nature of the data.
Uranium has dropped for five straight months from $55 a pound on 1 December on concerns that countries including China and India would delay nuclear power projects because of the global economic crisis, and because Lehman might dump its radioactive material on the market, the traders said.
More than 43 million pounds of uranium-oxide concentrate, or yellowcake equivalent was sold on the spot market last year, doubling the 2007 trading volume, according to Roswell, Georgia-based Ux Consulting Co.
The oversupply in an illiquid market pushed prices down about 30% between September and November, spurring sales by speculative investors, such as hedge funds, said John Wong, a fund manager in London at CQS UK Llp., which has $6 billion under management including shares of funds that own uranium. Uranium typically trades through broker-dealers, including MF Global Ltd and Tullett Prebon Plc., or in direct sales between mining companies and nuclear utilities.
Utilities buy processed ore known as yellowcake, which is enriched and fabricated into fuel rods. A supply of 500,000 pounds is just slightly less than the amount needed to make one bomb, or fuel one nuclear power reactor for a year, if the latest enrichment technologies are used, said Gennady Pshakin, a Russia-based nonproliferation expert.