Nuclear industry faces looming uranium shortage

TORONTO Wed Mar 9, 2011 5:42pm EST

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TORONTO (Reuters) - An expected surge in demand for uranium to fuel new reactors may go unfilled if new supply does not soon come on stream, meaning a setback for China, the United States and other countries that are increasingly relying on nuclear energy to power their economies.

While a host of uranium explorers promise to bring projects into production before a major supply crunch develops, most are overestimating their ability to deliver on schedule, industry experts say.

That could leave a vacuum for major uranium producers searching for acquisitions as the most efficient way to ramp up shipments to power utilities that use the radioactive metal to fuel reactors.

"There are juniors out there with projects that are definitely viable," said BMO Capital Markets analyst Edward Sterck. "But I think it'd be fair to say there's an awful lot of juniors who might be challenged to deliver projects on schedule."

At the Prospectors and Developers Conference (PDAC) in Toronto this week, UR-Energy (URE.TO), U308 Corp UWE.V and Toro Resources TRK.CD were part of a crowd of juniors touting "near production" projects.

Toro is in the permitting stage and will need about A$265 million ($268 million) to build its Wiluna project in Australia. Managing Director Greg Hall admits the Australian company faces a rough road in getting the mine into production by 2013.

"These things are not fast," said Hall. "Out of those who say they're going to be in production by 2014 -- let's say there's 40 -- I reckon seven will make it."

That could leave a supply shortage that would have a ripple effect on the global economy should China, India and other Asian powerhouses fail to secure the uranium they need to meet their targets for electricity generation.

China's nuclear generation is set to triple by 2020, while India is looking to double its nuclear output.

In addition, a deal under which the United States buys downgraded weapons uranium from Russia is slated to end after 2013. Uranium from the so-called "megatonnes for megawatts" pact fuels 50 percent of the reactors in the United States.

That makes it critical to get new uranium mines online within a couple of years. But permitting problems, financing issues and a lack of management experience is hindering many projects.

In fact, BMO's Sterck said only one company is looking very attractive as a takeout or joint venture partner right now.

"The big one is Extract Resources," said Sterck. "Huge in-situ resource, grades that are appealing and in a stable country with a well defined mining code."

Extract EXT.AX owns the Husab project, a 257 million pound resource that borders Rio Tinto's (RIO.L) Rossing mine in the southern African nation of Namibia.

Indeed, Extract may already be in play, as a unit of China Guangdong Nuclear Power Holding Corp (CGNPC) is lining up a $1.23 billion offer for Extract's top shareholder Kalahari Minerals. Because Kalahari owns a 43 percent stake in Extract, the bid may automatically trigger a buyout of Extract under Australian takeover rules.

That may put pressure on Rio Tinto, the Anglo-Australian mining giant, and leading uranium producers Areva CEPFi.PA and Cameco (CCO.TO), to make counter-bids to take over Extract and its planned output of 15 million pounds a year.

Last year, Uranium One UUU.TO bid A$1.2 billion to gain control of Mantra Resources MRU.AX, which plans to produce about 8 million pounds a year at its Mkuju River project in Tanzania.

Comparatively, UR-Energy will produce only 1 million pounds a year when it starts up in 2012.

LITTLE TO BUY

Spot uranium prices have risen from $45 a pound in mid-2010 to over $70 earlier this year, and analysts say the time is right for big uranium companies to make acquisitions. The problem is, there's little of substance left to buy.

"I do not expect a frenzy of M&A activity with uranium juniors any time soon, given the shortage of sufficiently developed projects in this space that might pique the interest of the majors," said Darryl Levitt, a Toronto-based M&A lawyer with Macleod Dixon.

Current global demand for uranium is 180 million pounds a year, of which 140 million pounds comes from mine production. The rest is filled by stockpiles and downgraded weapons-grade uranium, according to Cameco.

With China set to boost its nuclear capacity from about 11 gigawatts now to at least 80 gigawatts by 2020, it alone will need up to 60 million pounds of extra uranium a year.

The Asian superpower has already signed long-term deals with Cameco and Areva, shifting pressure on utilities in Europe, the United States and South Korea to find other sources of uranium to fuel their current and future nuclear plants.

And, with Russia set to stop selling downgraded weapons uranium, this has led some countries to start stockpiling the metal again in fear of pending shortages.

For all the warnings, some power companies still may be unprepared for the realities of the upcoming crunch, according to Paladin's Chief Executive John Borshoff.

"The utilities remain blissfully ignorant," said Borshoff last week at the BMO Global Mining Conference, "thinking that somehow, at current prices, well-meaning but totally inadequate juniors will somehow get their operations off the ground in ridiculously short-time frames."

($1=$0.99 Australian)

($1=$0.97 Canadian)

(Additional Reporting by Euan Rocha; Editing by Frank McGurty and Rob Wilson)

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Comments (4)
bzza wrote:
They could just use the excess nuclear weapons. There is enough fuel there to last for a couple of hundred years.

Another option is to finally build the Thorium economy and associated reactors. Thorium fuel is non weapons grade and can be used to consume weapons grade material too.

Oh wait, both of those options require the Elite actually doing something constructive and contributing to world peace and energy issues.

Mar 09, 2011 8:32pm EST  --  Report as abuse
irongamer wrote:
For those interested in liquid thorium reactor history and details.

Some history
http://energyfromthorium.com/2006/04/22/a-brief-history-of-the-liquid-fluoride-reactor/

Excellent overview
http://www.wired.com/magazine/2009/12/ff_new_nukes/all/1

Fancy infographic
http://www.wellhome.com/blog/2010/12/thorium-the-next-generation-of-nuclear-power/

If someone mentions that thorium doesn’t have any real benefits ask them if they are talking about solid fuel designs or liquid fuel designs. Then point them to the links above.

Mar 10, 2011 5:31pm EST  --  Report as abuse
skinnydog wrote:
Uranium Reactors are Old Skool.

Liquid Fluoride Thorium Reactors (LFTRs) create Uranium-233 fuel out of thorium. U-233 is great for reactor fuel, but lousy for building bombs. That’s why we shelved thorium reactor technology during the Cold War, and concentrated on Uranium reactors.

Thorium ore is easily milled, and unlike Uranium, it does not need expensive refinement for reactor use. LFTRs are air-cooled, not water-cooled. They can be installed anywhere on earth. They can even be buried to guard against attack.

Reactor-grade thorium ore is currently $107K per ton. One ton in a LFTR will produce one gigawatt of electricity for one year. The “long-term” waste per ton of thorium used in a LFTR is the size of a basketball, and becomes non-radioactive in just 300 years.

No, that’s not a typo. That’s 300 years, not 300,000 years. Yucca Mountain is obsolete.

The US has plenty of thorium, and so does the rest of the world. In fact, we have enough already-mined thorium to produce all the electricity that we’re currently producing, for the next 400 years.

Coal and Uranium are obsolete. Thorium is the future – clean, green, and safe.

The Molten Salt Reactor (the precursor of the LFTR) is an American invention, developed at Oak Ridge National Labs. Which the Chinese visited in October of 2009. They’re now embarking on a MSR program, but we’re not.

If that isn’t a Sputnik Moment, then I don’t know what is.

See: http://www.wired.com/magazine/2009/12/ff_new_nukes/

Google: LFTR, thorium reactor, liquid fluoride thorium reactor, energy from thorium, molten salt reactor

Mar 10, 2011 9:08pm EST  --  Report as abuse
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