Uranium Week: Nuclear Energy In Need Of Innovation

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As the weekly uranium spot price continues to be range bound, two separate reports highlight the need for innovative mining techniques and advanced technology in the uranium sector. 

– Red book highlights innovative technology needed to meet uranium demand
– Kazakhstan has a -15% drop in output in 2020
– Uranium spot price remains range bound

By Mark Woodruff

Welcome back to readers for the first edition of Uranium Week for 2021. Any relevant industry news that has occurred since the last update just prior to Christmas on December 22 will be covered.

The latest edition of the OECD Nuclear Energy Agency (NEA) and International Atomic Energy Agency (IAEA) joint report on uranium resources, production and demand was published on 23 December. The report, also known as the Red Book, shows that global uranium resources have increased, but less than in previous years.

It notes that sufficient uranium resources exist to support the long-term, sustainable use of nuclear energy for low-carbon electricity generation. There would also be sufficient resources for other uses, such as industrial heat applications and hydrogen production. However, the impact of the ongoing covid-19 pandemic on the industry, and recent reductions in uranium production and exploration, could affect available supplies.

The biennial report suggests that timely investment in innovative mining and processing techniques would help assure that uranium resources are brought to market when they are needed. It notes a high case demand scenario would consume 87% of all currently known resources that would be capable of being mined at a cost of less than US$30/lb.

Worldwide exploration further decreased as did mine development expenditures. This forms part of a downward trend over several years, which “could signal market issues in the longer term”.

The report also notes global uranium mine production decreased by -10.8% over the 2017-2018 period, due to production cuts resulting from poor market conditions. Production then increased slightly in 2019. It also noted planned uranium production cuts in early 2020 were deepened by the onset of the covid-19 pandemic, and effects may be felt through 2021 and beyond.

An analysis of uranium demand, shows that nuclear capacity “is expected to rise for the foreseeable future as global energy demand is projected to increase due to the growing need for a clean energy transition.”
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The US Department of Energy's Office of Nuclear Energy (NE) has released a report that outlines plans for continued technology innovation for existing nuclear, advanced nuclear, nuclear waste, and fuel cycles.

The “Strategic Vision”, published on January 8, suggests nuclear energy will be pivotal to US energy, environmental, and economic needs. This aligns with key policy priorities outlined by the incoming Biden administration, which support nuclear as key to combating climate change. 

The report also identifies five goals the NE is pursuing to address key challenges in the nuclear sector, and it describes first-of-their-kind projects that have secured or are seeking federal funding.

The intention of the five goals is to address challenges in the nuclear energy sector, help realise the potential of advanced technology, and leverage the government's role in spurring innovation. This includes support for the continued operation of existing US nuclear power plants. It also includes enabling the deployment of advanced reactors. 

Near-term goals include demonstration of a scalable hydrogen generation pilot plant by 2022, and to begin replacing existing fuel in US commercial reactors with accident-tolerant fuel by 2025.

Conversion Market 

Industry consultant TradeTech notes market participants have been closely monitoring developments at Orano's Malvesi conversion facility in France, where a strike by the local CGT trade union temporarily shut down operations in October through early January. 

Conversion supply has been vulnerable because of the prolonged shutdown of the Metropolis Works Facility in the US. The closure of the Metropolis facility and the slowdown in production at Malvesi has put increasing pressure on a particularly tight spot conversion situation. 

Only a few parties are able to supply conversion services for spot delivery. So a shrinking secondary supply, along with the loss of primary capacity, has kept US utilities, in particular, focused on the conversion market.

Country News

Kazakhstan, the global leader in uranium production, experienced a -15% drop in output in 2020 compared to 2019, according to comments by Minister of Energy Nurlan Nogayev during a government meeting on January 12.

TradeTech reports lower production last year can be linked to earlier policy by state-controlled uranium producer JSC National Atomic Company Kazatomprom to flex down production amid operating challenges related to the covid-19 pandemic. This decision compounded a -20% reduction to planned production aimed at addressing persistently low uranium prices.  

On 1 February Kazatomprom will release its Operations and Trading Update for the fourth quarter and the 12 months to 2020.  Investors will be watching closely for confirmation of 2020 Kazakh production numbers. They will also be looking for an indication of how covid-19 related operational challenges may impact 2021 production.

In August 2020, Kazatomprom said it intended to continue flexing down production by -20% through 2022, compared to the planned levels under Subsoil Use Contracts. The company is also maintaining its -20% reduction against Subsoil Use Contracts in 2021, with no additional production planned to replace volumes lost in 2020.

According to Kazatomprom, full implementation of the decision would remove up to -14.3m lbs U3O8 from anticipated global primary supply in 2022, with uranium production in Kazakhstan staying similar to the level expected in 2021.

Policy News

Japan's Atomic Industry Forum (JAIF) Chairman Takashi Imai said on January 5 that to achieve the country's 2050 net-zero carbon emissions target, the use of nuclear power as a source of low-carbon energy will be essential. "To achieve carbon neutrality and improve energy self-sufficiency, Japan will have to restart the remaining idle nuclear reactors as soon as possible, and endeavor to replace older plants and build additional new ones," he has been quoted.

Japan's 2018 Basic Energy Plan, which is scheduled for an update this year as the Sixth Strategic Energy Plan, targets nuclear for a 20-22% share of the country's energy mix by 2030.  The role of nuclear energy in Japan’s energy mix was under the spotlight last week after Japan suffered crippling energy shortages coupled with increasing power costs due to skyrocketing LNG spot prices.

Company News

On the day of writing, ASX-listed Silex Systems ((SLX)) received notice from the US Department of Treasury, Committee on Foreign Investment in the United States (CFIUS). The committee has approved the Global Laser Enrichment (GLE) restructure, meaning all key US government approvals have now been received.

The restructure will result in Silex acquiring a 51% interest in GLE along with uranium and nuclear fuel supplier Cameco increasing its interest to 49% from 24%.

In December 2019, a binding Membership Interest Purchase Agreement (MIPA) was executed between Silex, GE-Hitachi Nuclear Energy (GEH) and Cameco Corp for the restructure of SILEX technology Licensee Global Laser Enrichment.

The path to market for GLE and the SILEX technology is underpinned by the agreement between GLE and the US Department of Energy (DOE) under which DOE tails inventories will be made available for the proposed Paducah Laser Enrichment Facility project to produce natural grade uranium.

Equity market news

Investor sentiment has continued to improve for most stock exchange listed uranium companies with unusually high levels of activity between Christmas and New Year and further appreciation in the first half of January. 

The largest Exchange Traded Fund (ETF) in the uranium sector, the Global X Uranium ETF will rebalance on 29 January, adding several junior uranium companies to its Index.  The ETF has had a substantial influx of funds that have seen its assets under management swell to more than US$280m.

Uranium Pricing

TradeTech's Weekly U3O8 Spot Price Indicator is US$30.20/lb, unchanged from that reported on 22 December 2020, the last FNArena report prior to Christmas.

The average weekly uranium spot price in 2021 is US$30.33/lb, US$0.62/lb above the 2020 average.

TradeTech's term price indicators are US$34/lb (mid) and US$37.00/lb (long). 

US utilities remain largely on the sidelines of the term uranium market as they continue to evaluate their procurement strategies for 2021. Many utilities, especially those in the US, postponed buying decisions due to a variety of legislative and trade issues that cast uncertainty over the market in 2020.

Sellers remain focused on market fundamentals and point to production shutdowns, curtailments, and renewed energy surrounding nuclear energy policy as reasons for optimism about the future.

Month end Uranium pricing

TradeTech's monthly spot price, the Exchange Value, for December 31 was US$30.40/lb, an increase of US$0.50 from the November 30 Exchange Value.

The uranium spot price again exhibited marginal volatility in December. 

TradeTech's Weekly Spot Price Indicator gained an average of 0.3% per week through the month. The monthly uranium spot price indicator (Exchange Value) gained an average of nearly 2.0% per month in 2020. The average Exchange Value for 2020 was US30.15/lb, nearly 18% higher than the 2019 average of US$25.60/lb.

Activity for the month of December was muted especially when examined against the record-breaking spot uranium volume of 62.5m lbs U308 equivalent logged for 2020. A mere 1.4m lbs traded hands in the spot uranium market in December.

In spite of the lack of significant spot activity in December, the spot uranium price fluctuated throughout the month. It spanned a range as low as US$29.50 to a high of US$30.75 before settling out at the end of the year at US$30.40/lb, where it has resided since December 21.

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