The negative sentiment around uranium is starting to change, writes James Stafford of Oilprice.com, as the world is starting to build more nuclear reactors. He notes that “billionaire investors” are already placing heavy bets on a uranium recovery. Analysts expect prices to double by 2018.
It’s been a very tough few years for uranium. But it now looks like we’ve reached the bottom, and the future demand equation says there’s nowhere to go but up—significantly up.
Uranium analyst David Talbot of Dundee Capital Markets is forecasting 6 percent compound annual demand growth through 2020, which is enough, he says, to “kick-start” uranium prices up to and beyond 2007 levels. Morningstar analyst David Wang predicts prices will double within the next two years.
Mining Weekly expects “the period from 2017-2020 to be a landmark period for the nuclear sector and uranium stocks, as the global operating nuclear reactor fleet expands.”
“It’s impossible to find another natural resource that is so fundamentally necessary and yet has carried such negative sentiment as uranium. The market has been skewed by negative sentiments that ignore the supply and demand fundamentals,” says Paul D. Gray, President and CEO of Zadar Ventures Ltd., a North American uranium and lithium explorer.
A total of 65 new reactors are already going up, another 165 are planned and yet another 331 proposed
But “the toxicity levels have dissipated, and nuclear energy is rebounding as a cleaner power source with next generation safeguards. The fundamentals are again ruling the day, and this will be the key year for uranium,” Gray told Oilprice.com.
Why sentiment is changing
The negative sentiment on uranium was largely made in Japan. The 2011 disaster at Fukushima created an irrational disconnect between sentiment and uranium fundamentals.
Now that enough time has passed since Fukushima, this negative sentiment is losing steam as it appears that Japan has succeeded in bringing some of its reactors back online – four of its reactors have already restarted operations. So the world is refocusing on what are arguably brilliant fundamentals, which actually have been there all along.
“Nuclear energy’s clean bona fides may be its saving grace in a wobbling global energy market that is trying to balance climate change ambitions, skittish economies and low prices for oil and natural gas”
First and foremost, the world is building a great many nuclear reactors right now, despite Fukushima. A total of 65 new reactors are already going up, another 165 are planned and yet another 331 proposed.
Powering all of these developments will require an impressive amount of uranium. Right now, existing nuclear reactors use 174 million pounds of uranium every year. That will increase by a dramatic one-fifth with the new reactors under construction. But in the meantime, uranium producers have reduced output due to market prices and put caps on expansion. As a result, supplies are dwindling.
Spectre of accidents
The world is increasingly recognizing nuclear energy as the cheaper, cleaner, and greener option—as indicated by the number of reactors being built.
As the specter of nuclear accidents wanes in the aftermath of Fukushima and climate change fears move to the top of the chain, uranium is set for a global sentiment transformation.
As Scientific American opines, “Nuclear energy’s clean bona fides may be its saving grace in a wobbling global energy market that is trying to balance climate change ambitions, skittish economies and low prices for oil and natural gas.”
According to Bloomberg, in Asia alone, approximately $800 billion in new reactors are being developed.
The minute the market catches on to the massive amount of reactors coming online combined with the pending uranium supply shortage, uranium will experience a price surge
The market hasn’t quite caught on yet to what this massive nuclear development means for uranium because it’s still stuck in the Fukushima sentiment.
At the same time, the uranium industry is not producing the uranium needed to feed the hundreds of new reactors slated to come online. Not even close. The uranium is not being produced because producers can’t turn a profit at today’s spot prices.
The minute the market catches on to the massive amount of reactors coming online combined with the pending uranium supply shortage, uranium will experience a price surge. Up to 20 percent of the uranium supply needed to operate the world’s existing 437 nuclear reactors for the rest of this year and next is not covered, according to uranium market analyst David Talbot.
Determining when the break-out will come, exactly, is part and parcel of playing this rally with an eye to massive returns. But all bets are that this year we’ll see the first new reactors come online, and then it will snowball from there, transforming from a buyers’ market into a sellers’ market.
The billionaires’ sixth sense
Billionaire investors are lining up behind uranium with major acquisitions, betting that they are on the edge of a price break-out.
Earlier in June, Hong Kong billionaire investor Li Kashing, though his CK Hutchinson Holdings and CEF holdings, said he would buy $60 million in convertible bonds from NexGen Energy targeting uranium projects in Canada’s Saskatchewan province.
“The current spot prices seem low, but the fundamentals indicate there’s going to be a very large demand and supply gap — that’s what you’re making a call on,” NexGen CEO Leigh Curyer said of the deal. NexGen is slated to start production in the 2020s.
Mr. Li’s $60-million bet on Saskatchewan uranium is near another uranium company, Zadar Ventures Ltd, which has four projects in Saskatchewan and one in Alberta, and stands to benefit from the high-dollar renewed focus on this resource.
The Athabasca Basin is elephant country in terms of uranium deposits. It represents the world’s highest-grade uranium deposits and is the home to all of the major uranium producers, developers and explorers.
Considering that nearly half of the U.S.’ 57 million pounds of uranium imports last year came from Canada and Kazakhstan, with Canada providing 17 million pounds—these producers are extremely well-positioned for what comes next.
This is shaping up to be the the Year of Uranium, but while the market sleeps, big investors don’t
Talbot predicts that the uranium pound price could reach $65 within two years, and notes that some mines will be extremely profitable at this price—particularly those in the Athabasca Basin and in the western and southwestern U.S., while development of uranium deposits in Africa will require higher prices.
The Athabasca Basin is precisely where Zadar and NexGen operate, along with other promising contenders, including Cameco Corp. (TSX:CCO) and Denison Mines Corp. (DML:TSX).
Last month, billionaire D.E. Shaw let us all know that he’d acquired 1.4 million shares in Cameco, eyeing rising uranium prices, tightening supplies and growing demand—and joining the ranks alongside George Soros. And others have lined up, too, including well-known money managers Ken Griffin, Ray Dalio and Steve Cohen.
Then we have Bill Gates—who has jumped on the uranium bandwagon with great determination. Through his TerraPower company, Gates is developing a Fourth Generation nuclear reactor that would run on depleted uranium, rather than enriched uranium.
Increasingly, this is shaping up to be the the Year of Uranium, but while the market sleeps, big investors don’t: They’ll be all set when uranium experiences a violent upswing, and those operating around the Athabasca Basin are likely to be among the first to benefit from the upward price trend and shrinking supply.
Editor’s Note
This article was first published on Oilprice.com and is republished here with permission.
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onesecond says
Lol. No word of all the reactors that are going to be phased out due to age and whole countries opting out of this technology? The 65 reactors are not enough to replace the exiting reactors by a long shot (if some of them are actually making it online after decades), and all the planning and proposing won’t help either because renewables will take their lunch away ever more quickly, therefore the probability of nuclear reactors actually getting the go ahead shrinks every year. Looks like someone wants to hype the Uranium price whatever it takes.
Jens says
The average use of Uranium per produced unit of nuclear power has been lowered over many years and that trend will most likely continue.
The driver behind the coming drop in Uranium per kWh demand is the introduction of new fuel rods with Thorium.
Thorium is not fissile but fertile so it can transmute into U233.
Thoriums key benefits are highlighted here: http://www.ltbridge.com/fueltechnology/thoriumbasedseedandblanketfuel
Lightbridge has a Norwegian competitor http://thorenergy.no that is ahead of Lightbridge because they have gotten their fuel rods approved.
Based on the achievable Uranium consumption drop I would expect Uranium prices to drop rather than increase.
Longterm Uranium prices may also drop due to technical advancement of the SILEX technology or from new nuclear power plant based upon spent fuel such as Moltex or Terrestrial Energy etc.