Daniel Major, Bryn Jones, Peter Dasler, Gabriel Didham and Antony Froggatt.
Demand for nuclear power holds game-changing prospects for uranium companies, explorers tell Objective Capital Uranium Investment Forum in London, By James Brewer
An upsurge in nuclear power generation will revitalise prospects for uranium exploration companies which were frustrated by the industry slowdown following Japan’s Fukushima disaster in 2011 and by the sluggish pace of reactor construction across the world.
Explorers are looking to the soaring electricity requirements of China, India and other nations, and cite scientific breakthroughs such as the ability to build a reactor the size of a shipping container.
Peter Dasler
The complex global power picture was elucidated by speakers at corporate research specialist Objective Capital’s Uranium Investment Forum in London.
Gabriel Didham, managing director of Objective Capital, said the background to the gathering was renewed interest in the industry. Recent catalysts included a court decision in Japan that opened the way to restarting two reactors, ending the post-Fukushima embargo on this source of power. Japan has said it aims to go back to a 20% share for nuclear in its power mix.
“The real question is: when will the expected uranium supply shortage bite?” said Mr Didham. According to Rio Tinto, the commodity price needed to be much higher to bring new supplies into the market (a subsidiary of the mining giant had a few days earlier shelved a plan to expand its uranium operation in the Northern Territory, Australia).
Other speakers referred to plans to build small modular nuclear reactors aimed at reducing the financial risk involved in full-scale nuclear schemes.
The Canadian Nuclear Association, representing the nuclear industry in its home country, contends that fuel and operational costs for nuclear power are comparatively low, citing the US Department of Energy Transparent Cost Database as putting the figure per kilowatt-hour for onshore wind at $5.80, nuclear $6.20, natural gas $6.40, hydro-electric $7.30, bio-power $7.60, coal $8.30, offshore wind $12.20 and solar photovoltaics $30.10.
Co-incidentally, on the day of the Objective Capital conference the UK government announced it would bring forward the end of its subsidy scheme for wind power by one year, to March 2016, throwing doubt on the 1, 000 wind farm projects seeking planning permission, and making it unlikely that Britain will meet its 2020 targets for renewable energy production.
Bryn Jones and Daniel Major.
Independent consultant Antony Froggatt, author of the World Nuclear Status Report, spelled out to the audience the challenges for uranium suppliers, saying that there was stagnation in terms of plant newbuildings. As of April 2015 there were 61 reactors under construction. Of these, 23 were for China, although 20 were delayed. The number of projects in China mirrored the country’s aspirations in other energy sectors, including coal, gas and wind power. Of the 61 under construction globally, 49 were delayed – of which eight had been under construction for the last 20 years. Financing, technology, regulatory matters, political issues – the reasons for hold-ups varied from one reactor to another, and “each one has a different story, ” said Mr Froggatt.
There were just under 400 reactors operating: France, the US, Russia, South Korea and China provided two thirds of the world’s nuclear electricity; while the US and France together supplied half. France produces 50% of the European Union’s nuclear electricity.
The average age of reactors had increased: the mean age of 388 units was, as of July 2014, 28.5 years. Life extension was a critical issue, but had its own costs. Nuclear capacity had decreased since 2000. “Globally the industry is declining, with the exception of China. It is losing its market share. Investment in new renewable energy far exceeds that in nuclear. Solar costs are now much cheaper than nuclear, ” said Mr Frogatt. He added that overall in Europe, the market price for electricity was falling.
Mr Froggatt considered that there was over-optimism about what nuclear capacity would be built. He underlined the importance of the systems used for operation, alongside the cost and availability of the different fuels.
Event organiser: Objective Capital
Daniel Major, chief executive of GoviEx Uranium, said that by 2030, China was expected to consume nearly half of global uranium production. China was currently producing about 1% of its power from nuclear, and “when you get to 20% that is a lot of power.” Mr Major admitted: “There are very few mines that can produce a profit at today’s prices.”
Peter Dasler, chief executive of CanAlaska Uranium, which has land positions over a vast part of northern Canada, endorsed recent industry comments that there would be a violent price spike in uranium, and that China would move to building one new reactor per month. “I believe these things are going to happen.”
In addition to Chinese demand, five reactors were being built in the US. “The US government is creating jobs through the building of reactors, ” said Mr Dasler. The US is the world’s largest consumer of uranium at more than 50m lb per year, of which it produces only about 4.7m lb annually.
“There is a demand that cannot be satisfied by production from current mines. We are expecting increased prices and increased market.” He summarised: “There are game-changing events right in front of us.”
In early 2004, Mr Dasler positioned the predecessor company of CanAlaska Uranium to become a significant presence in Canadian exploration by staking mineral claims near proven deposits in the Athabasca Basin. Similar in area to Switzerland, the region boasts uranium deposits 100 times richer than elsewhere, and 100 times bigger. Mr Dasler put together a geological team to carry out over $50m worth of exploration. Since 2012, CanAlaska has concentrated on developing new joint ventures, and has done $14m worth of deals.
CanAlaska is targeting two large blocks near the giant McArthur River mine of Cameco, one of the largest publicly traded uranium companies. CanAlaska, which has two years’ worth of cash in the bank, plans to raise around $600, 000 to drill one of its strategic projects with its partners – which are Japanese, South Korean and Chinese, “the kind of partners that nobody else has.” The company is looking for private equity partners for further projects.
GoviEx, recently listed on the Canadian Securities Exchange, is conducting a large exploration programme in two of its seven tenements, in its holdings of 1, 596 sq km in the middle of the Sahara Desert in Niger, which has been a major uranium producer since the 1970s, and is the world’s fourth largest producer. The senior producer in the area, Areva, has never missed a scheduled shipment from its mines, which are next to the GoviEx deposits.
Mr Major said that he had come into the industry convinced that it could make a contribution to the environment by providing clean generation to substitute for polluting forms of energy. He said that the nuclear industry’s safety record was far better than generally realised and it was subject to intense regulatory controls.
A representative of Australian Securities Exchange-listed exploration company Uranium Equities told the investment forum that it was “pursing a billion-dollar prize in a world-class uranium province.” Non-executive director Bryn Jones said that the company’s Nabarlek project in the Alligator Rivers uranium province in the Northern Territory was based on the potential for an offset extension of what historically was Australia’s highest grade orebody. The company believed there was much similarity there in endowment and geology to the Athabasca Basin.
The original find of a small but very rich deposit by a company named Queensland Mines in 1970 sparked a frenzy in the share market. Although there is opposition to uranium mining and exploration by some Australian states, the Northern Territory has sanctioned and encouraged mining for 30 years.
