The uranium industry is setting up for an accelerated rise in prices with a supply deficit looming and demand growing as governments target ‘cleaner and greener’ energy sources – a sector in which nuclear power didn’t seem to be considered until now.
Nuclear power has been sidelined by governments for years, hampered by its dangerous association with the atomic bomb and radioactive disasters. However, it is recently regaining attraction for its low emissions, ability to reliably provide baseload electricity around the clock and its relatively low cost as a generation fuel.
One of the first tasks new US President Joe Biden undertook in January was the country’s reinstatement to the Paris climate agreement and while it’s not clear as yet what he’ll do to meet the pact’s emissions goals, nuclear power has been getting bipartisan support in Congress.
Billionaire software mogul and climate crusader Bill Gates has even been spruiking its benefits recently, saying new innovations in technology are making nuclear energy safer, more affordable and ‘politically palatable’.
He told reporters that reducing greenhouse gas emissions to zero by 2050 will be the “hardest thing humanity’s ever done” but nuclear power was a more practical option compared to the unreliability of solar and wind energy.
“We either need a miracle invention to make batteries that are 20 times cheaper, so you can do that seasonal storage … Or you need 25% of your generation to be available, independent of the weather, and nuclear fission and fusion are really the only things that can work at that scale,” Mr Gates was quoted as saying.
Japan’s energy minister Hiroshi Kajiyama also told media a month ago that nuclear power will be essential for the country to reach its net zero emissions target by 2050, as power shortages during periods of heavy snowfall recently brought the issue to the forefront.
Uranium supply shortage to drive up prices
The ongoing subdued spot price of uranium and production constraints due to the pandemic led to the delay of new mines last year, intensifying uranium’s supply deficit.
According to a presentation by Namibia-focused Marenica Energy (ASX: MEY), total world uranium production stood at 170Mlb in 2020, while demand from existing nuclear plants surpassed this figure at 200Mlb.
The deficit could reach as much as 50Mlb as mine production has been suspended due to COVID-19, Marenica chief executive officer Murray Hill told media late last year.
While the spot price remains below US$30 per pound (A$38/lb) this week, analysts forecast dwindling supplies will push prices past US$50/lb (A$63/lb), making new projects more attractive.
In addition, the Bank of America (BofA) recently warned that delays to nuclear plant closures in the US could increase uranium demand forecasts by 26Mlb a year.
New nuclear projects
In the US, about 20% of total annual electricity generation comes from nuclear power. A new plant is being constructed by Southern Nuclear at Vogtle in Georgia and the new reactors, due to come online in 2021 and 2022, are some of the “world’s most advanced” according to the US Department of Energy’s Office of Nuclear Energy.
There are also plenty of nuclear reactors currently under construction outside of the US – in China, India, South Korea, the United Arab Emirates, Russia, the United Kingdom and Turkey, to name a few.
World Nuclear Association senior communication manager Jonathan Cobb told US media outlet CNBC that the potential of nuclear energy as a part of a broad, low carbon-generation portfolio is becoming clearer for governments focused on climate change action.
“The United Arab Emirates is looking beyond its fossil fuel history and has just started up the first of four nuclear reactors, which by the middle of this decade will supply 25% of its electricity, and Turkey and Bangladesh are constructing their first nuclear reactors,” he said.
“Other countries, such as Poland and Egypt are intending to build their first nuclear power plants in the future,” Mr Cobb added.
Australian uranium producers
In Australia, uranium comprises about one-quarter of energy exports and hosts the world’s largest known uranium resources, although only two mines are currently operating – BHP’s (ASX: BHP) Olympic Dam and Quasar Resources’ Beverley-Four Mile mines in South Australia.
Boss Energy’s (ASX: BOE) Honeymoon project in SA is the next most advanced project with the company anticipating results from an enhanced feasibility study this current quarter.
The study aims to deliver an improved base-case scenario to fast-track the project to production based on only 35.9Mlb of the current resource.
It builds on a feasibility study published in January 2020 that estimated capital expenditure of US$63.2 million is required to re-start mining at the project, which was closed by its previous owner in 2013 due to low uranium prices.
ASX uranium stocks surge
Boss Energy’s stock has been gaining at great pace since the start of the year as it takes steps to secure project finance for its Honeymoon project, more than doubling its share price in the last three months including a 55% rise in the last month.
The rally is continuing with many other ASX-listed uranium stocks including Deep Yellow (ASX: DYL), which kicked off definitive feasibility work at its Tumas project in Namibia last month and has been trading 184% higher in the last six months, currently up about 7.6% this week.
Other big movers in this week’s trade include Bannerman Resources (ASX: BMN), another Namibia play; Toro Energy (ASX: TOE) with its Wiluna uranium project in Western Australia; Paladin Energy (ASX: PDN) focused on restarting its 75% owned Langer Heinrich uranium mine in Namibia; Peninsula Energy (ASX: PEN) with its wholly-owned Lance uranium project in the US; and Vimy Resources (ASX: VMY) which holds one of Australia’s largest undeveloped uranium resources at Mulga Rock in WA.
Uranium explorer 92 Energy, with interests in Canada and eastern Europe, is the latest ASX hopeful to throw its hat in the ring with a reported $7 million initial public offering lobbed this week and eyes on a mid-April listing.