Uranium producers have fared badly in the past five years, which could leave utilities struggling to find adequate fuel supplies until new mines are built. The double punch of the 2008 economic crisis and the Fukushima nuclear disaster in Japan in 2011 has meant uranium has a particularly steep hill to climb. With countries including the UAE, Jordan, China and India among those committed to nuclear power, the price of uranium has begun a fragile recovery, although few investors in the sector are ready to back new production. This could mean that as reactors come online, utilities may find themselves competing for supply until mining output catches up. For a time, uranium production was a good place to be. At its peak in 2007, the mineral was trading above US$130 per pound of uranium oxide as giddy investors piled in, in anticipation of predicted new builds around the world; a savage correction brought it down to a more realistic $70, a still profitable level for producers. Then came Fukushima. The flooding of the Daiichi reactor plant following an earthquake and tsunami stopped the emerging nuclear renaissance in its tracks, sending the price of uranium to the floor. For much of last year it traded under $30 a pound, at which level most mining houses were losing cash. Late last year came a fillip: a southern prefecture in Japan approved the restarting of two reactors that had been idle since Fukushima. The spot price reacted quickly, leaping from below $30 to where it is now at $39, and the long-term price indicator – the critical one for new projects – a little higher at $49. The news sent a collective cheer through listed uranium stocks. Australia’s Paladin Energy, which put its Kayelekera operation in Malawi into care and maintenance in 2014, rallied 12 per cent on the news. Other uranium plays on Australia’s ASX, Toronto’s TSX and Britain’s AIM stock exchanges enjoyed their best day in years. “The uranium price itself just jumped $5 mainly due to Japanese reactor restarts and the fact that their stockpile will now be used and not released on to the world market,” says Gennen McDowall, a seasoned explorer on various Africa uranium projects and the non-executive chairman of the TSX-listed Northern Uranium. “Whether or not this will translate to more financing remains to be seen, but at least we are going in the right direction.” Interest in African projects had grown considerably in the decade leading up to Fukushima, as memories of Chernobyl in Russia faded and nuclear projects enjoyed a comeback. China and India began aggressive plant-building programmes. It may be a little early to see an influx of new mining projects, but for those already in place and limping along, the boost in price was welcome news. In June one of the world’s largest open pit uranium operations, Rössing in Namibia, announced a round of retrenchments it said were “a strategic move to keep operating and avoid care and maintenance or closure”. The company is majority owned by Australia’s Rio Tinto; the Iranian government also holds a 15 per cent share. Should a price recovery be sustained, Rössing could stave off a shutdown. There are signs that growth in demand will pick up and the remaining mines will come under pressure to fill customers’ needs. Globally, the World Nuclear Association (WNA) says more than 60 reactors are under construction in 13 countries. The UAE decided to embark on nuclear power in 2008, becoming in 2012 the first “newcomer” country in 27 years to start constructing its first reactor. Three of the four reactors planned are already being built. The country is cooperating with experienced nuclear countries to ensure a smooth transition to atomic status. “Transfer of technology, nuclear material and knowledge can only be done through a robust international nuclear cooperation framework,” says ambassador Hamad Al Kaabi, the resident representative of the UAE to the International Atomic Energy Agency (IAEA). “The UAE has concluded nine bilateral nuclear cooperation agreements with responsible and experienced nuclear countries, mainly suppliers and those with good track record in nuclear power development and management. “Both government-to-government agreements and industry-to-industry arrangements, early on in the programme, have proven key to the UAE’s programme in several aspects such as safety and security, transfer of technology and human resource development,” Mr Al Kaabi says. Elsewhere, China now has 24 reactors in operation, 25 under construction, and more still in the planning stage. India, too, has a flourishing and largely indigenous nuclear power programme and expects to have 14,600 megawatts of nuclear capacity on line by 2020. It aims to supply 25 per cent of electricity from nuclear power by 2050, says the WNA. India also wants to increase the almost 3 per cent of its generation capacity it gets from 21 reactors to closer to 10 per cent. The question is, where precisely will the fuel to power these plants come from? Today, uranium mines operate in about 20 countries, although just over half of world production comes from just 10 mines in six countries, with Canada’s giant McArthur River operation supplying 14 per cent of global consumption. A single mine closure of a significant producer would have a material impact on supply. This puts a focus on the political situations of the countries that produce the mineral. The uranium sector in Russia – which besides producing uranium is also one of the biggest processors of spent nuclear fuel in the world – is, given its importance to the market, unlikely to fall under western retaliatory measures against the president Vladimir Putin’s external policies. However, banking sanctions will indeed affect the ability of traders to access finance to secure supplies – a potential supply disrupter. Already, Deutsche Bank has rejected a uranium deal for that very reason, Mining Market, a Canadian industry resource publication, reports, noting that Russian suppliers are being shunned because of the additional risk management involved. At the same time as supply stagnates, an additional 27,000 tonnes of yellowcake will be needed between 2014 and 2020. Yellowcake is the name given to a type of uranium concentrate powder, part of an intermediate step in the processing of uranium ores. The step in the processing of uranium comes after the mineral has been mined, but before fuel fabrication or enrichment. The world is not short of uranium, as some in the anti-nuclear lobby argue. There is plenty of it in the ground – India, for instance, can supply its new and future reactors for 50 years from its own resources. But what is missing is the money to dig it up. Mining is an expensive business, particularly for off-grid operations that must supply their own water, electricity and frequently, expatriate skills. The industry consensus is that most miners would not get out of bed with a uranium price of under $80 a pound, or about twice what it is now. Unless there is a substantial and sustained recovery of the uranium price, much of the world’s reserves will remain in the ground. And that could put the brakes on countries wanting to fast-track their nuclear ambitions. business@thenational.ae Follow The National's Business section on <a href="https://twitter.com/Ind_Insights">Twitter</a>
