Special Report: How to Invest in Uranium
And the Future of Nuclear Power
I’m forever telling anyone who’ll listen that for all the money that has been thrown at green energy tech in the last 20 years, 84% of global energy still derives from the burning of fossil fuels. Just 4% is nuclear.
Energy use breaks down into three main categories: transportation, heating and electricity. One third of demand for energy is accounted for by electricity; 63% of electricity in turn stems from burning fossil fuels. Wind power makes up just 5%, solar less than 3% and nuclear power 10%.
We see the above illustrated in the table below:
Whenever I mention those statistics, I am almost always met with the following response, no matter what the political bent. “I can’t believe only 10% of global demand for electricity derives from nuclear. It’s the most efficient, it’s the least damaging to the environment, it’s the most carbon-neutral.”
Environmentalists such as Gaia author James Lovelock, Bryony Worthington, a lead author of the Climate Change Act and activist Mark Lynas all now support the adoption of nuclear power. It’s only the extremists who want to “end capitalism” who don’t.
And yet we learn from the annual World Nuclear Industry Status Report that the share of nuclear power in global gross electricity generation has fallen to the lowest level since the 1980s.
The cleanest, safest and cheapest form of mass energy generation has been shunned for decades. This is what happens when governments who pander to lobbyists dictate energy policy.
For whatever reason (there are those who say it was a deliberate attack by the fossil fuel industry) an anti-nuclear narrative took hold in the 1980s. Disasters such as Chernobyl and Three Mile Island, along with the Cold War and the threat of nuclear fallout, helped fuel anti-nuclear sentiment that became entrenched in the international psyche.
Never mind the fact that the death toll from nuclear is far lower than it is for fossil fuel (think of the air pollution from coal alone), the perception was that nuclear is more dangerous. Normally so wrong about everything (!), only the French, with 70% of their electricity now stemming from nuclear, have risen above the fear, uncertainty and doubt.
The EU changes its tune
It looked as though the narrative was changing in the 2000s as fears of Peak Oil – the idea that oil was about to run out – took hold. But then came the Fukushima disaster in 2011 and any revival of nuclear power was dead for a decade, especially in Western Europe. Under the guidance of Angela Merkel, Germany accelerated plans to close nuclear reactors. Belgium and Switzerland changed their policies to phase out all nuclear energy operations. Italy held a referendum and 94% voted against the government’s plans to build new nuclear power plants.
But the EU has now changed its tune and decided that nuclear is green and sustainable. So has the UK. The narrative is reversing. The need for nuclear power is now very apparent, even to politicians.
What is the key ingredient of nuclear power? Uranium. How many new uranium mines have come into production in this last decade? Beyond Kazakhstan, I can only recall closures.
Australia has the world’s largest uranium reserves (28% of global resources), followed by Kazakhstan (15%), Canada (9%) and Russia (8%). But Kazakhstan is the world’s largest producer (comprising 45% of world supply), followed by Namibia (12%) and Canada (10%).
It’s an incredibly centralised industry. The ten largest mines in the world provide over half of annual production. Cameco’s Cigar Lake mine in North America alone providing 10%. Over 90% of annual supply comes from just ten companies. One of them, Kazak national miner Kazatomprom, produces 25%.
Interestingly, more than half of annual global production comes from state-owned miners, which tend to prioritise secure supply over profit.
Here we see global supply broken down by company.
An abundant metal
Uranium is surprisingly common. There are traces of it almost everywhere, even in the ocean, but in such low concentration as to be uneconomic (three parts per million, or ppm). You need grades above 1,000- 2,000ppm, or 0.1%-0.2%, for a mine to have a chance of working, according to the World Nuclear Association. (My instinct is to avoid mines with low grades. In Canada grades can be as high as 20%.)
Uranium is about as abundant as tin, but it trades at around $50/lb, over four and a half times tin’s price, having doubled from historically low levels in three years. Most of the premium reflects the cost of regulation and the other numerous problems associated with putting a uranium mine into production.
Annual production stands around 57,000 tonnes and annual global demand at around 67,000. Secondary sources such as stockpiles cover the shortfall. Most uranium is used for making electricity, with a small proportion used for producing medical isotopes.
There have been many false dawns in the uranium market. We saw one in 2020. This may be another, though somehow it feels different. But caveat emptor: one should always remember just how quickly sentiment can turn against uranium.
The regulatory process to build a nuclear power station, never mind a uranium mine, is complex, slow and cumbersome, so it takes years. This long lead time between building and operation adds to costs and deters investment. There is too much time for something to go wrong. Changing attitudes and political uncertainty are why so many recent proposals for nuclear power stations in the UK have been abandoned. Hinkley C in Somerset is the only ongoing project.
SMRs - safer than a power station
The generally held view now among enthusiasts is is that the future of nuclear power lies in SMRs – small modular reactors. We have been using them in submarines, aircraft carriers and ice-breakers for over 60 years, so the technology, as well as being relatively simple, is proven and safe – safer than a nuclear power station. Now serious attention is being paid to developing land-based SMRs for commercial electricity generation.
They can be manufactured off site and erected on site. They use very high energy-density fuel and thus require a lot less land than a solar or wind farm, with little impact on the landscape. A 440 megawatt (MW) SMR would require 25 acres of land and produce 3.5 terrawatt hours (TWh) of electricity per year, enough for 1.2 million homes or a county the size of Devon.
For the same output, a solar farm would require about 13,000 acres and wind farms around 32,000. Alternative sources would then be needed for when the wind doesn’t blow or the sun doesn’t shine – not the case with SMRs. 25 acres versus 32,000 acres - how is this even an argument?
They can even be built underground and out of sight, though now the idea is to construct them on the redundant sites of closed power stations: brownfield land where grid connections are available. The power generation they provide can be adjusted as demand for electricity fluctuates, and they can positively benefit the reliability and stability of the grid. But to get anything nuclear made is still a political battle.
How to invest
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