Uranium shortage looms as miners race to supply existing and new reactors
The days of buying US$40 per pound uranium are over — and also probably at US$50 or US$60, Cameco chief financial officer, Grant Isaac, said over the weekend.
“We’re going to need new supplies,” he added, reflecting the market view now held by the operator of the world’s largest uranium mine, Cigar Lake in Canada.
The world is fast coming to the same conclusion.
Last week the uranium price rose by 20% over five trading days. On Thursday alone, it was up 4.95% to US$65.5/lb.
Japan gradually restoring its vital nuclear sector, which, before the disaster at Fukushima in 2011 supplied 30% of the country’s electricity is another promising sign.
Last Friday, Kansai Electric Power restarted its 50 year old, No. 2 reactor at the Takahama plant.
Uranium inventory crunch coming
At present, uranium inventories held by US and European utilities are at their lowest levels since 2008.
The reason: energy security clashing with a focus on clean energy.
The result: uranium spot prices are at their highest since the Fukushima disaster in 2011.
Then add other pressures to supply.
It is obvious that too few new mines have come into production, on top of which one of top five, Cameco, has been forced to reduce production due to shortages of technical staff.
At the same time it is expected that demand will rise from 65,650 tonnes this year to 130,000 tonnes by 2040.
Sixty new nuclear plants are under construction worldwide, with another 340 in various stages of planning.
Downstream processing also a problem
The World Nuclear Association reports that 140 reactors are now expected to have their lives extended with about 35 gigawatt hours of small modular capacity is projected to be in operation by 2040.
Press reports out of Europe state that many countries — including France — not only have plans to extend the lives of their nuclear fleet, but to add new capacity.
Then there’s been the coup in Niger which, while affecting only 4% of the world’s uranium supply, has raised the fears of geopolitical disruptions.
The political issues have already hit Orano, France’s nuclear giant, which has been the main customer for Niger’s uranium.
There is also a fear that Moscow could use its power to turn off the uranium tap to European utilities with Russia controlling around 50% of the world’s uranium conversion and enrichment.
A lost decade
Another issue is that since Japan’s Fukushima nuclear plant was disabled by a tsunami, investors have shied away from uranium.
Pre-Fukushima, the spot price was sitting at US$73/lb — but the tsunami put paid to that.
For years after that exploration was desultory and the market remained uninterested in what that work produced.
But then, in early 2022, there was a sharp move in the uranium spot price which was a wake-up call to investors.
It has only been over the past 12 to 18 months that investors have flocked back, stirred by the fact that mainstream media — not just the online sites — have been publishing bullish outlooks and brokers have been spruiking uranium stocks.
Few companies still control the market
The small group of miners have a firm grip on supply.
According to World Nuclear Association figures, 2022 production looked like this:
| Mine | Company | Tonnes |
|---|---|---|
| Cigar Lake, Canada | Cameco/Orana | 6,928 |
| Husab, Namibia | China-Namibia JV | 3,358 |
| Inkai 1-3, Kazakhstan | Kazatomprom | 3,201 |
| Olympic Dam | BHP | 2,813 |
| Karatau, Kazakhstan | Kazatomprom | 2,560 |
| Rossing, Namibia | China Nat Uranium | 2,255 |
| Somair, Niger | Orano | 2,020 |
| Four Mile, Australia | General Atomics (US) | 1,740 |
Australia’s future role
Australia’s future role is facing the continual negotiating of politics.
Two instances: First, Manhattan Corporation (ASX: MHC) was a victim of Western Australia’s labor party policies on uranium and switched to lithium when it decided there was no future for its uranium deposits, one of which contains a 20 million pound resource.
Second, Paladin Energy (ASX: PDN) is moving to re-open its Langer Heinrich mine in Nambia, with first production due in the March quarter in 2024. Work is 75% complete and the company has the $118 million financing needed.
In comparison, Paladin’s Mount Isa uranium project in Queensland, which holds 148.3Mlb over three deposits remains undeveloped once again due to state labor party opposition to uranium mining.
At the federal level, Australian Climate Change and Energy Minister Chris Bowen is remaining obdurate in his opposition to nuclear.
This week his Department of Climate Change and Energy issued a report stating that replacing all Australia’s existing coal-fired stations with nuclear power would cost every Australian $25,000 – making it economically out of consideration.
Next Australian mine opening by Christmas
By the end of the year, the mothballed Australia’s mine Honeymoon will be back in production.
The owner, Boss Energy (ASX: BOE), is now turning up strong results from drilling at Gould’s Dam, a satellite deposit 80km from Honeymoon, which is expected to not only prolong the life of the overall project but raise production levels in its early years.
Boss is also planning to drill another satellite deposit, Jason’s.
In 2024, a number of other ASX companies are expecting to enter production.
US mining declines
Apart from Paladin, these include Peninsula Energy (ASX: PEN) at its Lance project in Wyoming.
The company expects to produce 2 million pounds per annum at a direct operating cost of US$21.69 per pound.
Meanwhile, several years of low prices have driven many US miners out of business.
In 1996 the US companies produced 6.5 million pounds of uranium, but last year managed only 75,000 pounds.
Several ASX companies have positioned themselves in North America to address this US shortfall.
Among them is 92 Energy (ASX: 92E) which is producing very robust drilling results at its Gemini deposit in the prolific Athabasca Basin on Canada.