New York - The rump of the bankrupt bank Lehman Brothers is sitting on a stockpile of 450,000 lb of uranium "yellowcake" which could be used to power a nuclear reactor or, theoretically, to make a bomb.

"Lehman Brothers is sitting on a stockpile of 450,000 lb of uranium 'yellowcake' which could be used to power a nuclear reactor or, theoretically, to make a bomb." (Photo courtesy of Cogema, Inc.)

    Lehman's potentially explosive asset is a hangover from a commodities trading contract undertaken before the Wall Street bank went bust in September. The substance, yellowcake, is a solid form of mined uranium which is yet to be enriched.

    Liquidators have been trying to offload the stuff for months. But the price of uranium has been dropping steadily, leaving Lehman's yellowcake languishing in a variety of secure storage facilities, some of which are in Canada.

    Bryan Marshal, Lehman's chief executive, who was appointed to salvage value for creditors, told Bloomberg News that the stockpile, which is worth about $18m, would be sold responsibly.

    "We plan on gradually selling this material over the next two years," he said. "We are not dumping this on the market and have no fire-sale mentality."

    The price of uranium has slumped from $65 per pound to $40.50 over the last six months as pressure on recession-hit commodity inv?stors to liquidate their assets has eased.

    Yellowcake can be purified and enriched to fuel nuclear reactors or, notionally, weapons. A lively financial market in uranium trading has developed in recent years. While commodities such as oil and precious metals are dealt in futures contracts which rarely see delivery, the relative immaturity of uranium trading means that trading firms sometimes end up taking ownership of the stuff.

    "Uranium is a liberalising marketplace. It's not as mature as most other exchange-traded commodities," said Scott Lawrence, head of nuclear fuel trading at MF Global in London. "It's certainly not unusual for a wide range of parties to have legal title to the material."

    Lehman's ownership is governed by tight regulations. Its yellowcake must be stored at licensed facilities and the substance cannot be transported around freely. One trader said: "They're not holding it in Canary Wharf. There are very strict rules about what you can do with it."

    Some 43m lb of yellowcake was sold on the spot market last year. Market participants say Lehman tried to sell its stockpile in one block but was unsuccessful and may try to sell it on a piece-by-piece basis instead.

    Lehman's brokerage operation was bought in September by Barclays Capital, which took on about 10,000 of the bankrupt firm's staff. The remaining chunk of Lehman has outstanding debts estimated at $200bn.

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