.Fuel for thought.
Canada's uranium boom
Last Updated Jan. 22, 2007
CBC News
There's no commodity quite like uranium. After processing, it's used primarily as fuel in nuclear power reactors to generate electricity. But unlike other fuels, such as oil, coal, or natural gas, the cost of uranium doesn't really seem to affect the demand. That's because the price of uranium is just a small fraction of the cost of a multi-billion-dollar reactor. And lately, that price has been charging higher at a frantic rate.
It's no wonder, then, that Canada is in the midst of a surge of uranium exploration and mining. In this country, the industry is shifting from low-grade underground mines to spectacularly high-grade projects, where the raw ore is up to 24 per cent uranium oxide concentrate (known as U3O8). For Canada's uranium mining industry, the fundamentals have never been brighter.
Uranium prices soar
Uranium prices in the last six years have gone only one way — straight up. In January 2007, the spot price of U3O8 (milled uranium oxide) was $72 US a pound. That's almost double where it started in 2006, and is a ten-fold increase since 2001. Forecasts of $85 US, $100 US, even $200 US a pound aren't too difficult to find. Prices of many Canadian-listed uranium miners have taken off.
Why the price jumps? Several reasons. And all of them affect the mineral's supply and demand fundamentals.
1.The resurgence of nuclear power. After years when nuclear reactor orders could best be described as anything but electric, the world has rediscovered nuclear power. Whether it's the perceived high cost of conventional energy sources or worries about greenhouse gas emissions (nuclear power doesn't produce any), many countries — Canada included — are opting for the nuclear option for a significant part of their future energy needs. Nuclear energy already provides 15 per cent of Canada's electricity (51 per cent of Ontario's). Globally, the World Nuclear Association says 30 reactors are now under construction, 64 more are planned, and another 158 are being proposed. China wants to quadruple its nuclear capacity by 2020.
2.Consumption outweighs production. The world currently produces barely half of the uranium it consumes. With the increasing demand for fuel for nuclear reactors, and the difficult and time-consuming process of finding and developing new mines, that shortfall is likely to linger for years to come.
3.The Cigar Lake flood. Cameco Corp. is the world's biggest uranium producer. Its mine at Cigar Lake, in northern Saskatchewan, is the biggest undeveloped high-grade uranium deposit in the world. It was to start producing in 2008. The market was counting on that one mine to supply as much as a sixth of the world's uranium. But in October 2006, a major flood hit the mine while it was being developed, delaying production by at least a year and sending spot uranium prices further into the stratosphere.
Canada is the biggest producer of uranium in the world, responsible for almost 28 per cent of the globe's production in 2005, followed by Australia, Kazakhstan, and Russia.
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