Uranium (chemical element U, better known as U3O8) in its pure form is a silvery white metal of very high density -- even denser, than lead. Uranium can take many chemical forms, but in nature it is generally found as an oxide (in combination with oxygen). Triuranium octoxide (U3O8) is the most stable form of uranium oxide and is the form most commonly found in nature.Uranium decays slowly by emitting an alpha particle. The half-life of uranium-238 is about 4.47 billion years and that of uranium-235 is 704 million years, making them useful in dating the age of the Earth.World uranium production is dominated by Kazakhstan, Canada and Australia which, together, produce about 60% of annual mine supply. These countries are followed by Niger, Russia and Namibia. These leading producers account for approximately 84% of worldwide mine production. In 2013, world production of uranium was about 155M lbs of uranium.Canada, Australia and Kazakhstan are estimated to account for over half of the world's resources of uranium, which are estimated to total approximately 4.74 million tonnes. Australia has approximately 30% of World resources, Kazakhstan 17% and Canada 12%.

Many industrialized nations are heavily dependent on nuclear power generation, with nuclear electricity representing a major component in such countries as the United States (20%), Germany (30%), Hungary (36%), Sweden (46%), and particularly France (78%) and Lithuania (80%). Worldwide, there are 435 nuclear power reactors operating in 31 countries with total installed capacity of 370,000 MWe. The scale of the world's nuclear industry is considerable and growing. Japan used to be one of the biggest nuclear electricity producers (34%), but since the Fukushima disaster in 2011 all nuclear reactors have been shut down. Since Q3, 2014, Japan is planning on restarting the first reactors again which caused some optimism regarding the uranium prices, but the latest news is the Japanese courts are hesitant to approve restarts, and only granted approval for 2 reactors so far. The government is very pro nuclear energy so expectations about the prospect of a fleet wide restart remain high.

As of January 2015, there were 72 reactors under construction, 173 planned (approved and funded) and another 310 proposed (intended but not approved or funded). New construction is currently concentrated in Asia with China and India in the forefront. There are also a substantial number of reactors being phased out, so it is expected around 2020 to have a net addition of 70-80 reactors worldwide, of which 50-55 are located in Asia.

Uranium deposits are found all over the world. The largest deposits of uranium are found in Australia, Kazakhstan and Canada. High-grade deposits (>20% U3O8) are only found in Canada, in the famous Athabasca Basin (taken from a early presentation of Fission Uranium):

Uranium ore can be mined in one of three ways depending on the characteristics of the deposit and the value of the uranium (as the price of uranium rises, formerly uneconomic deposits may become economic). Uranium deposits close to the surface can be recovered using the open pit mining method, while underground mining methods are used for deep deposits. Given the right hydrology and geology, the ore may be mined by in situ recovery (ISR) leaching; a process that dissolves the uranium by circulating oxygenated solutions through the uranium-bearing rock formations. In 2014 worldwide production of uranium came from underground (41%), open pit (24%) and ISR mines (26%). As mentioned earlier, uranium frequently occurs as a trace element in other mineral deposits such as copper, gold or phosphates. Approximately 9% of the 2014 worldwide uranium production originated from such by-product recovery operations.

When uranium ore is present within 100-200m of the surface, it is typically extracted with open pit mining techniques.
When an ore body is located more than 100 metres below the surface, underground mining methods are necessary as the costs to remove the overlying rocks (overburden) would be prohibitive. For example, Cameco's McArthur River ore body is located more than 500 metres below the surface and is mined using an underground mining method.
In certain sandstone deposits geological and hydrological conditions allow uranium to be dissolved directly by pumping an oxygenated lixiviant underground where it dissolves the uranium, pumping it back to the surface, extracting the dissolved uranium in ion exchange columns and recycling the barren solution back underground to repeat the process. With this in situ recovery (ISR) process there is limited surface environmental disturbance. Leaching is another word for dissolving and 'in situ' means in the original position or place. A majority of the uranium produced in the USA, Kazakhstan and in Western Australia is produced by this environmentally benign and comparatively inexpensive technology.

In 1993 the USA and Russia entered into the so-called "Megatons-to-Megawatts" agreement whereby each country would dismantle a significant fraction of its nuclear weapons and recycle the contained Highly Enriched Uranium (approximately 90% 235U) to Low Enriched Uranium (4-5% 235U) for use as fuel in nuclear power reactors. This program has come to a close in Q4, 2013, however not sparking any worries on demand and consequential uptick in U-spot prices whatsoever. The current state of the uranium spot- and long term prices can be found on the Cameco site:

Prices of uranium are always, just like gold, subject of widespread sentiments and not the result of a healthy supply/demand mechanism, although the uranium markets are well known by the number of utilities in production, under construction, etc. Something that isn't very well understood however is the stockpiling by utilities, usually by fulfilling their long term contracts, like the Japanese appeared to be doing during the shut down since 2011. Because of this, the markets expected a huge stockpile to come on the market sooner or later, when it would be clear Japan would dismantle its nuclear reactors. This development didn't pan out as we know now, and it is expected that Japanese utilities will enter the LT markets in a few years after they restarted.

It is widely agreed upon that the growing net number of reactors will eventually generate increased demand, which would in turn create shortages based on current supply levels. However, this can take a few years to materialize.


An issue not to be taken lightly is the huge spare capacity waiting in Australia (Olympic Dam (BHP) will be expanded as soon as LT uranium prices improve, and the Honeymoon Mine (Uranium One) which was closed in 2013 due to low prices will be reopened again in that case) and possibly Kazachstan, currently globally the largest producer. Cigar Lake (Cameco) is also coming online soon at the time of writing (November 2015), so it is my expectation that uranium prices can hover around current levels for at least a few years more. Nevertheless, as the uranium spot market is very speculative, one or two supply/demand events can overturn my expectations in the blink of an eye.

Market Data - 15m delayed

First Hand CEO Interviews, Site Visits, Presentations & Market Analysis:

Real-time knowledge sharing for global investors: CEO.CA

© 2016-2022 CRITICALINVESTOR.EU   All rights reserved.