Gods, speculators, politics, power companies, and the future of U.S. uranium
By: Dorothy Kosich
Posted: '05-DEC-06 08:00' GMT © Mineweb 1997-2006
RENO, NV (Mineweb.com) --A NUCLEAR PRAYER
Lord, we are especially thankful for nuclear power,
The cleanest, safest energy source there is except for solar,
Which is just a pipe dream.
---Homer Simpson
Before hopping on that runaway train to the promised land of riches through uranium investment, it pays to do a little homework and seriously contemplate the future of nuclear power.
During a short course on uranium Monday at the Northwest Mining Association conference, thousands of years of expertise in uranium and nuclear energy was evident among the packed audience of attendees who first cut their teeth on uranium exploration.
The most startling conclusion one could reach by glancing around them is that the future of uranium mining and nuclear power in the United States depends on a graying group of professionals who are rapidly approaching retirement.
As New Mexico attorney John Indall, counsel to the Uranium Producers of America, wryly noted Monday, uranium may be “the most perception-driven market there is.”
Many of the analysts, fund managers, traders and brokers who buy and sell uranium aren’t exactly in uranium because they envision a long, brilliant future for domestic nuclear power. The hedgefund managers seeking a quick profit sucked up excess inventory last year and are still active in what used to be a very predictable, closed market.
As many investors know, hedge funds can be very unpredictable on when they decide to unload their uranium investments. While speculator activity can drive prices even higher in the near term, once those hedge funds are eliminated, expect a drastic price dip as speculator stockpiles are eliminated.
THE BIG FEDERAL GORILLA
Worse news for uranium miners and explorationists is that their biggest competition may turn out to be the federal government, which is planning to put up at least 10% of its stockpiled uranium for sale. In the meantime, the DOE is expected to sell a lot more at auction in the next few years. If Russia appeared to have way too much processed uranium lying around, the feds’ holdings are the 800 pound gorilla of the U.S. uranium industry. The DOE plans to put up 5.5 million pounds for immediate sale, and has given high priority to the sale of an additional 12 million pounds.
Meanwhile, keep in mind that not only is the federal government a potential competitor, it also regulates and licenses power plants, provides the economic incentives to use nuclear energy, but it can also prevent a mining company from ever developing a mine.
The uranium markets don’t operate in the same fashion as commodities and precious metals. So little of the metal is traded on a daily basis internationally there isn’t enough volume to justify an open exchange like an LME for uranium. Despite all the hype of newsletter writers and other mining promoters, uranium experts, such as Treva Klingbiel, President of Trade Tech, say “we are a long way from the thousands of participants” found in other commodity markets.
Uranium also shares a familiar scenario with other mining-related commodities. The long period of depressed uranium prices has stifled investment in the industry, as well as uranium exploration. The fact secondary supplies of uranium are larger than other market segments means a lot more volatility for the metal’s price.
We hear a lot about the nuclear renaissance lately. However, that “renaissance” mostly applies to the United States. In the near term, uranium supplies aren’t exactly endangered. Canada, Australia and Kazakhstan are the big uranium miners with mining remaining in the hands of only a few. Seven companies accounted for 78% of world uranium production last year.
A lot of the mine supply coming on line in the next decade is already spoken for. The flooding problems at Cigar Lake are very bad news for the nuclear power industry, which often buys uranium that hasn’t even been mined yet. No matter how quickly Cameco gets Cigar Lake back on schedule, it will still hurt long-term supplies.
Nowadays, there is absolutely no flexibility whatsoever when it comes to the delivery of uranium for power producers, according to Cheryl Moss Herman of the Ux Consulting Company. When any one big uranium mining project is delayed significantly, it can wreak havoc with the delicate nuclear power balance internationally. For now, secondary supplies of uranium will meet 40% of the world requirement for the immediate future, dropping to 15% in the long run, according to the uranium and nuclear power experts.
Also keep in mind that nuclear enrichment markets shape uranium markets. Basically, uranium can keep producing and producing power until virtually nothing of the physical metal remains. But, the question still lingers, can enrichment supply be developed fast enough and cost-effectively enough to suit most power producers? What to do with that last remaining atom in spent fuel still remains an issue in the United States. If the Democrats of the U.S. Congress seriously consider nuclear energy as a reliable alternative energy, life could be good for the domestic power industry.
For argument’s sake, let’s say the Democrats favor nuclear energy as a power source. Someone has got to transport the stuff through urban areas. Someone else has to be willing to ship uranium and find a port willing to take it. And, with Senate Majority Leader Harry Reid of Nevada firmly in control of the U.S. Senate and time running out for the Bush Administration’s presidency, does anyone really think Yucca Mountain will be approved as a high-level nuclear waste repository in the near future?
FUTURE NUKE EXPERTS OR LACK THEREOF
Lest we forget, the Energy Information Agency, which will probably outlast both Bush Administration and the Senate Democrats, has a strong anti-nuclear bent. But, since the youngest professional on the EIA nuclear energy staff is believed to be 59 years old, no bent whatsoever may exist in the future within the agency.
And, did we mention that the Grand Junction Office of the DOE recently proposed closing four uranium sites in New Mexico, until someone, who thankfully happened to be buying attention, pointed out that the U.S. might actually need those mines in the future?
Being no dummies, the Nuclear Regulatory Commission is out beating the bushes to hire 300 to 350 people a year annually for licensing new nuclear power plants and enrichment facilities. The feds have even budgeted for fellowships and scholarships in nuclear power, if they can find young people willing to consider nuclear energy as a profession. Even utility companies are coughing up scholarships.
Meanwhile, that new generation of state and federal regulators still has to be educated regarding the environmental benefits of in-situ uranium technology. And, one can always count on the environmental NGOs to latch onto a monetarily profitable cause to oppose even if nuclear power is cleaner than oil or coal power. Just last week, former Vice President Al Gore told the Australians he does not support nuclear technology.
However, if an investor has the time and patience, good times could be ahead for domestic nuclear power. The U.S. nuclear industry has invested $1.5 billion to prepare for new reactor development. Numerous domestic nuclear companies have notified the National Regulatory Commission of their intent to submit project applications in 2007 or 2008 before the Bush Administration leaves office. Utility companies have selected domestic power plant sights to house their planned new reactor plants. As many as 20 new plant applications could be reviewed by the NRC in the next few years.
The secondary market is declining and increased uranium demand is expected in just a few years. Each new reactor requires an initial core. With the 168 new reactors planned international, an additional 300 million pounds of uranium will be required strictly to get the new reactors going.
SEEK GUIDANCE IN HOMER
Still to be factored into the uranium supply equation are international relations, such as the U.S./India and U.S./Russia Nuclear Cooperation Agreements, the Global Nuclear Energy Partnership/Institute of Nuclear Power Options multi-lateral nuclear cooperation, and the changing role of the International Atomic Energy Agency in shaping international nuclear policy.
D’Oh ! This reporter can’t even begin to fathom, let alone write with a degree of authority regarding the impact of these aforementioned agreements on the U.S. uranium sector.
Perhaps, would-be uranium investors might be better advised to seek out the opinions, wisdom and spiritual guidance of the world’s best known living U.S.-based nuclear power authority, Homer J. Simpson.
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