Uranium in 2013: A Preview

The state of the uranium is slated to take a turn for the better if the inversion of supply and demand currently available is any indication. Industry leaders like Amir Adnani – CEO, president and director of Uranium Energy Corp. – is among the most positive of uranium executives. He has plenty of reason to be upbeat based on forecasts for 2013. Uranium Energy Corp. have some of the largest U.S. uranium mines in its portfolio with the Palangana in-situ recover project, which is ramping up initial production, and the Goliad in-situ project which is about to conclude mine permitting, both located in south Texas. Along with the company’s vast resources, Uranium Energy Corp.’s competitors are bowing out of the race due to low prices for the resource. BHP Billiton has delayed its $30 billion expansion of the Olympic Dam mine in Australia, and Cameco, AREVA and ARMZ have canceled or delayed development of uranium projects due to the current uranium price of $42. Adnani spent time speaking with Energy & Mining International to discuss the restart of nuclear reactors in Japan, the effect of these shut down projects and what’s next for the U.S. uranium industry. Energy & Mining International: How will the restart of some of Japan’s nuclear reactors affect the uranium market in coming months? Amir Adnani: Japan pre-Fukushima was operating with 54 nuclear reactors, which generated a third of its electricity. Now, just a third of their reactors are operating, and this caused problems with higher energy costs in japan, which is not sustainable in the long run. On Dec. 16, there’s an election in Japan that will determine when, if and how a number of reactors will be turned on in Japan. Any general increase will be very positive for uranium prices because it will start to add consumption of uranium back to the demand side of equation, which had been absent from the market since Fukushima. It comes down to how many reactors they turn on. Each reactor will consume 600,000 to 700,000 pounds of uranium per year, and if they restart 10 reactors, that could add up to 7 million pounds of uranium to the demand equation. Worldwide demand is 180 million pounds. So that’s roughly a 4 percent increase to the market. EMI: To what extent will the recent decisions by BHP Billiton, Cameco, AREVA and ARMZ to cancel or delay long-planned uranium projects influence global demand? AA: You need to look at supply and demand. The demand is 180 million pounds per year, and supply from mining activity is 140 million per year. It has been filled through secondary supplies, including from Russian warhead materials through the Enriched Uranium (HEU) agreement between the U.S. and Russia, which is set to expire at the end of 2013. So 24 million pounds will be lost next year, creating more of a supply imbalance because a good chunk of secondary suppliers in the Russian HEU won't be there as of next year. The only way to make this up is to bring new uranium mines online. Due to poor prices, this implies there won't be enough supply side expansion taking place in the next few years. What it does is put it in a position where there is a fairly visible supply crunch coming up, which is the driver of higher uranium prices, at which point there will be higher economic drivers. There are a number of reports that have come out this year that says it needs to reach at least $80 per pound or higher to be new incentive price for mine construction. EMI: The number of nuclear reactors currently under construction totals 64 in 13 different countries, with China, India, Russia and South Korea all reaffirming their commitment to nuclear energy. What will it take to bring that type of production to North America? AA: As far as nuclear reactors go, difference here is due to relative energy needs here. Most of the demand for new electricity for next 20 to 30 years is coming from OECD (Organization for Economic Co-operation and Development) nations. That's where 1.5 billion people don't have electricity today. In china, India and even in Saudi Arabia, they are planning to build 16 nuclear reactors, where the real growth is. In the U.S., there is $54 billion in loan guarantees to fund nine new nuclear reactors, and four are licensed for construction in the U.S., including two being developed by Georgia. There is definitely a market for growth here, but it will never be the same rate in non-OECD countries because the sheer demand isn’t here.

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