Sunday, June 21, 2009

Western Nuclear renaissance hits trouble in Areva costs overuns

The prospect from uranium prices are massive, but you need a line of credit to build new the west that will be a problem going forward...

The cracks are showing in the latest atomic showpiece, writes James Kanter.

AS THE world fights climate change by seeking cleaner sources of energy, governments would do well to consider this cautionary tale of a new-generation nuclear reactor site.

The massive power plant under construction on the Finnish island of Olkiluoto was supposed to be the showpiece of a nuclear renaissance. The most powerful reactor built to date, its modular design was supposed to make it faster and cheaper to build. And it was supposed to be safer, too.

But after four years of construction and thousands of defects and deficiencies, the reactor's €3 billion price tag ($A5.2 billion) has climbed at least 50 per cent. And while it was meant to be finished this northern summer, Areva, the French company building it, is no longer willing to say when it will go online.

While the US nuclear industry has predicted clear sailing after its first plants are built, and the debate about nuclear power is returning to the agenda in Australia, the problems in Europe suggest big obstacles ahead.

A new fleet of reactors would be standardised down to the carpeting and wallpaper and that standardisation would lead to big savings, the theory goes. But early experience suggests these reactors will be no easier or cheaper to build than those of a generation ago, when cost overruns — and then accidents at Three Mile Island and Chernobyl — ended the previous nuclear construction boom.

In Flamanville, France, a clone of the Finnish reactor is also behind schedule and over budget. In America, the European experience is causing concern.

"A number of US companies have looked with trepidation on the situation in Finland," said Paul Joskow, a professor of economics at the Massachusetts Institute of Technology. "The roll-out of new nuclear reactors will be a good deal slower than a lot of people were assuming."

For nuclear power to have a high impact on reducing greenhouse gases, an average of 12 reactors would have to be built worldwide each year until 2030, according to the Nuclear Energy Agency at the Organisation for Economic Co-operation and Development. Right now, there are not even enough reactors under construction to replace those reaching the end of their lives.

And of the 45 reactors being built, 22 have encountered construction delays, according to an analysis prepared this year for the German Government by Mycle Schneider, an energy analyst and a critic of the nuclear industry. He added that nine did not have official start-up dates.

Most of the new construction is in China and Russia, where strong central governments have made nuclear energy a national priority. India wants new nuclear technologies to reduce its reliance on imported uranium.

The US generates about one-fifth of its electricity from 104 reactors, most built in the 1960s and 1970s.

France gets about 80 per cent of its power from 58 reactors, but has not completed a new reactor since 1999.

After designing an updated plant with German participation in the 1990s, the French had trouble selling it at home because of a saturated market and opposition from Green Party members in the government.

So Areva, the largely state-owned energy company, turned to Finland, where utilities and energy-hungry industries such as pulp and paper had been lobbying for 15 years for more nuclear power. The project was initially budgeted at $A4.9 billion and Teollisuuden Voima, the Finnish utility, pledged it would be ready in time to help Finland meet its greenhouse gas targets under the Kyoto treaty.

Areva promised electricity could be generated more cheaply than from natural gas plants. Areva also said its model would deliver 1600 megawatts, or about 10 per cent of Finland's power.

In 2001, the parliament narrowly approved a reactor at Olkiluoto, an island on the Baltic Sea. Construction began four years later. Serious problems arose over the vast concrete base slab for the foundation of the reactor building, which the country's Radiation and Nuclear Safety Authority found too porous and prone to corrosion. Since then, the authority has blamed Areva for allowing inexperienced subcontractors to drill holes in the wrong places on a vast steel container that seals the reactor. In December, the authority warned Areva that "the lack of professional knowledge of some persons" at Areva was holding up work on safety systems.

Areva has acknowledged that the cost of a new reactor today would be as much as €6 billion, double the price offered to the Finns. Areva announced a steep drop in earnings last year, which it blamed mostly on mounting losses from the project.

In addition, nuclear safety inspectors in France have found cracks in the concrete base and steel reinforcements in the wrong places at the site in Flamanville. They also warned the utility building the reactor that welders working on the steel container were not properly qualified.

On top of such problems come the recession, weaker energy demand, tight credit and uncertainty over future policies, said Caren Byrd, an executive director at the global utility and power group at Morgan Stanley in New York.

"The warning lights now are flashing more brightly than just a year ago about the cost of new nuclear," she said.


Wednesday, April 22, 2009

Time to buy Uranium stocks ~ Even UNX has signs of life

China's need for uranium could be worth billions to Australia following an announcement it will start building five extra power plants this year.

This comes on top of 24 already under construction and 11 that are in operation.

Australia offers the most obvious solution to a shortage of uranium to fulfil its nuclear power ambitions, according to a Chinese analyst.

``There are not enough uranium resources in China to support the aggressive nuclear power development plan for the next 20 to 30 years,'' Professor Liu Deshun, of China's Institute of Nuclear and Energy Technology told Fairfax Media.

``Australia has the uranium resources that could be exported and in China we have the demand.''

The fast-tracking of China's nuclear power plans stems from mounting concerns about climate change, energy security and the more immediate task of kick-starting the economy.

Minister for Resources Martin Ferguson told Fairfax he welcomed China's move to fast-track nuclear power.

``It is this government's policy to encourage the further development of the Australian uranium industry,'' he said.

The move could prove a windfall for WA, following the Liberal government's ending of a ban on uranium mining in the state shortly after their win in the September state election.

Sunday, November 9, 2008

China ups target for nukes

News wires in China were yesterday reporting that China is considering increasing its total installed nuclear power generating capacity to 70 GW by 2020. According to the reports Huang Li, head of energy conservation and equipment at the National Energy Administration has indicated at a meeting in Chengdu, Sichuan province that "The severe winter weather earlier this year in southern China that paralyzed electricity supplies and coal transportation exposed risks and vulnerability in the traditional power supply system." She added, "The global efforts to reduce greenhouse gas emissions had prompted China, which relied heavily on coal, to revise its energy strategy and increase the proportion of clean energy."
The current installed capacity of nuclear power is only about 9 GW, or 1.3% of the total installed electricity generating capacity. Huge capacity for nuclear generation growth...which is good for near term uranium AGS

Tuesday, July 15, 2008

Uranium looking up here

Increased corporate action in the global uranium sector, and indications that spot prices may have troughed, could signal the end of a vicious bear market, according to some top investment ideas coming off specialised trading desks on both sides of the Atlantic.

There are rumours that specialist physical uranium trade entities Ux Consulting and TradeTech will likely report spot uranium prices rising to around USD 64/lb in latest weekly fixings, from multi-year lows of USD 58/lb reported last month, a level well less than half the peak USD 138/lb reported in June 2007.

On the corporate front, London-listed Nufcor Uranium is known to be involved in the marketing of a possible Toronto listing for its uranium investment vehicle. This follows last week's news that mining major Rio Tinto, itself a significant uranium producer, had reached agreement to sell its unlisted Kintyre uranium project in Western Australia to a joint venture consortium comprising subsidiaries of Cameco, the world's biggest producer, and Mitsubishi Development, for USD $495m.

This has left more than 100 listed explorer and developer uranium stocks in the cold for the meantime, but the Kintyre deal was the biggest in the global uranium sector since the August 2007 acquisition by Areva, the world's No 3 uranium miner, of Uramin, for USD 2.5bn.

Analysis of portfolio flows over the past month or so shows that investors have increasingly been switching selected funds into listed uranium stocks, suggesting that sentiment towards the beleaguered sector may have turned. Just a month ago, specialist analysts at RBC Capital Markets warned that the-then spot market price level for uranium "will likely have far reaching implications if it remains at such low levels for too long.

"Most importantly" RBCCM continued, "in our view, will be disinterested equity markets that might cease funding uranium exploration and development. We believe that the absence of equity market participation in the uranium industry would constrain the ability of uranium supply to meet the growing demand, which, in turn, could threaten the ability of global utilities' new reactor build programs".

According to a London-based sales-trader, speaking on Monday, uranium term (contract) prices have remained at USD 85 to 90/lb for most uranium volumes, for many months in a row. He added that "an oil price approaching USD 150 a barrel on the threat of an Israeli strike on Iran's nuclear facilities demands a re-rating of the entire energy complex and uranium has been unfashionable for a year now".

Tuesday, June 24, 2008

1000 new reactor builds by 2050

Deutsche Bank Uranium Sector: Using IEA's 2050 IEA calls for 1000 new reactor builds by 2050 - Thanks to a subscriber for this enlightening report by Paul Young, Joel Crane and Brendan Fitzpatrick which focuses on Australian uranium companies. The full report is posted in the Subscriber's Area but here is a section:

Energy mix targets we estimate that uranium demand could increase by 215% under the ACT Scenario, and by 290% under the BLUE scenario, to 243kt and 300kt of U3O8 per annum respectively (see Figures 3 and 4). Even if either scenario is achieved, which is heavily reliant on international legislation and government willingness to adopt and embrace change, we believe that world is on the verge of a uranium renaissance. In our opinion, the financial markets continue to underestimate the potential for a rapid increase in uranium demand going forward. Saying that, we do acknowledge that the increase in demand may be slow, and we forecast just a 2% demand increase between 2008 and 2010, but a 17% increase between 2010 and 2015.

In our opinion, the biggest impediment to achieving the IEA's ACT and BLUE targets is not global legislation change but the potential inability of uranium supply to respond to a likely spike in demand from 2015 onwards. To put it into context, the world's largest uranium development project is the well documented expansion of the Olympic Dam mine, located in South Australia, with a total uranium resource (measured, indicated, inferred) of ~2,240kt of uranium. We believe that the proposed expansion of Olympic Dam involving a large open cut mine and expanded processing facilities could deliver an additional 15ktpa of uranium from 2016 onwards. However, the world would need to find and develop an additional ten Olympic Dam sized mines by 2050 to supply sufficient uranium to the world's nuclear reactors under the ACT scenario and an additional 15 Olympic Dam sized mines under the BLUE scenario. Severe under investment in the uranium sector has resulted in few if any significant new uranium discoveries since 1980. Therefore we believe that supply could struggle to respond to the potential increase in uranium demand between 2010 and 2050.

We note that uranium is significantly underperforming other energy commodities in 2008 (shown in Figure 6). In our opinion, the current spot price of US$59/lb may not be high enough to encourage new uranium supply, from both greenfields and brownfields projects, particularly from projects in high cost construction countries such as Canada, Australia and the US.

Over the past week Ux Consulting has reported that two utilities are seeking uranium in the spot market (one for 100,000 pounds and the other for 300,000 pounds), and that they may have found suppliers only willing to offer at or above the $60 level. We believe that continual supply issues and the likelihood of increased demand from utilities should drive the spot price higher in 3Q 2008.

My view - The speculative excesses that fuelled the massive run up in uranium-related companies ended when the commodity price had its first downtick, following a spectacular advance which climaxed in 2007. We have long said that uranium is the best of the long-term energy plays; however it remains in a predictable medium-term correction which has yet to bottom conclusively. A large number of speculative stocks were IPOed on the back of the initial run-up, and those that had much less uranium than they claimed have disappeared during this correction. Stocks with no earnings remain considerably higher risk than those with a steady income, in this, or any other sector.

Since mid-2007 uranium has more than halved and remains in a medium-term downtrend which is losing momentum. An upward dynamic would indicate that at least a short-term floor has been reached; while a sustained move above $95 is needed to break the progression of lower highs and suggest that the bulls are regaining the upper hand.

All of the companies mentioned in this report can be found in the Chart Library. While most uranium related equities are unlikely to outperform other commodity related stocks, before the uranium price shows signs that it is recovering, a number have weathered the current drawdown better than others.

Saturday, May 31, 2008

Commercial use of thorium in light water reactors

The term considered most apt by the nuclear industry to describe the next 20 to 30 years for their business is “renaissance”. Not growth, or revival; these words are not large enough. In terms of scale and cultural associations, as a transformation from what came before, this is going to be a rebirth.

For several reasons, “the global nuclear renaissance”, to use the full, preferred title, is well named. To be born again, you need to have died; and from Chernobyl onwards, with exceptions such as France, Japan and South Korea, the nuclear power industry has been impressively still. The last time planning permission was granted for a nuclear reactor in the UK was 1987. No new reactor has been built in the US since 1979, when an accident at the Three Mile Island power plant caused the reactor core to melt. Of the 439 nuclear power plants in the world today, 70 per cent are more than 20 years old. While global electricity demand grew by more than 60 per cent from 1980 to 2004, the number of new nuclear reactors being built halved every 10 years. During the 1990s, early developers of nuclear power such as Italy and Germany promised to phase out their nuclear energy altogether, while the United Kingdom Atomic Energy Authority became a decommissioning body.

Compare this slow death with the promise of the years ahead. Almost by process of elimination, nuclear power has emerged, once again, as the energy of the future. With world electricity demand forecast to double by 2030 – and about 25 per cent of all existing power stations due for replacement in the same period – nuclear power stands alone in its ability to deliver massive quantities of energy without carbon emissions. For countries without oil and gas supplies, it offers energy security; and for those with their own natural resources, it provides a way of diversifying their energy mix while preserving their fossil fuels for export. After years of not doing very much, the nuclear industry is now looking forward to building reactors on every inhabited continent. In Europe, Finland is leading the way: its first new plant since 1982 is scheduled to open in 2011. Britain is considering 10 new reactors, and the US Nuclear Regulatory Commission is expecting as many as 32 applications for new reactors by 2010 – after a 20-year pause.

And if that still sounds like a mere revival, then it is in India and China, as well as in countries still outside the pale of atomic technology, that something grander is starting to stir. India, despite being outside the Non-Proliferation Treaty, making it unable to trade in nuclear wares, plans to quintuple its nuclear capacity by 2020. China, which has 11 reactors, wants 10 times that number. And then come countries hoping to go nuclear for the first time. According to the World Nuclear Association, these include: Chile, Nigeria, Vietnam, Ireland, Turkey and Indonesia. In the past few years, nearly 30 governments have announced their intentions to launch peaceful nuclear programmes and most of them (not including Yemen) are being taken seriously. There is little doubt, for instance, about the likelihood of nuclear power in the Middle East. Between February 2006 and January 2007, no fewer than 13 governments in the region announced a need for nuclear reactors.

But does a lot of activity constitute a renaissance? And will nuclear power and all the concerns attached to it be any different this time round? Right now, there is no way of knowing, but there are certainly some doubts. One of these centres on the fact that technology changes slowly in the nuclear world. Most of the reactors built in the first half of the 21st century will look a lot like the ones built in the 1970s and 1980s. The long-promised “fourth generation” of nuclear plants – with “breeder” and “fast” reactors that use recycled fuel and make less waste – remains a distant promise. Only one such reactor currently operates on a commercial scale. Of the 34 reactors under construction in the world, 26 of them are based on designs largely unchanged since the 1960s.

This caution reflects how expensive nuclear power plants are – about £1bn each – and a reluctance to tinker with something that has been rendered largely safe. But it also means that some of the problems bound up in traditional nuclear technology will remain. The first of these is waste. Even after 51 years of commercial nuclear power, Britain has no long-term strategy for dealing with the concoction of unburned fuel and radioactive isotopes that emerge from conventional reactors. Likewise the US, which in 1977 suspended “reprocessing”, in which plutonium and other valuable elements are separated from waste to be burned again. Instead, America decided it would bury all its nuclear waste deep underground, within Yucca Mountain, 100 miles north-west of Las Vegas. But even that hasn't happened: nine years after the site was supposed to open, the plan is still stuck in Congress.

The reason the US halted nuclear-fuel reprocessing was that the products can also supply the ingredients needed for nuclear weapons. In 1974, India used spent fuel from a Canadian-built reactor to detonate a nuclear bomb. This is the second great awkwardness of nuclear power, and its legacy from the military-industrial complexes of the 1950s: the overlap between what you need to have a peaceful nuclear programme and what you could be using to make a bomb. It's the ambiguity currently personified – not very convincingly – by Iran.

Resolving the questions of waste and proliferation will help make the second life of nuclear much happier than its first. But there is plenty of scepticism about whether the existing companies, technologies and international institutions can achieve it. “The people who say they are going to bring us this renaissance are the people who brought us the Dark Ages,” one industry critic told me. “This is Torquemada bringing us the idea of the Renaissance.”

. . .

Where, then, is nuclear's Leonardo da Vinci? What if there was, say, a small technology company that claimed there was a different way of doing things? What if it was developing a nuclear fuel that produced 70 per cent less waste and nothing that you could use to make a bomb? Let's say it was chaired by one of the world's leading non-proliferation experts and advised by Hans Blix, former head of the International Atomic Energy Agency (IAEA) and UN weapons inspector. What if it had just been appointed consultant to the United Arab Emirates, which is expected to be the first Middle Eastern country, after Iran, to generate nuclear power? That might sound promising. But it would also probably sound too good to be true.

The company is called Thorium Power, and I met Seth Grae, its president and CEO, on a damp April morning in Moscow. Grae is a lawyer from Staten Island, New York, who became a nuclear entrepreneur in his late twenties after studying Soviet law and representing a Russian refusenik scientist in the late 1980s. Now 45, he has wavy, receding hair and, although not tall, stands with a slight hunch that gives him a permanent urgency, as if he is forever on the point of saying something or darting somewhere.

Thorium Power has been working in Moscow since the mid-1990s, when it was part-funded by the US Department of Energy as a way of keeping former Soviet scientists occupied. Now privately funded, it is testing a new nuclear fuel, based on the chemical element thorium, in a research reactor on the edge of the city.

In the back seat of a car on the way to the company's laboratory, Grae explained what Thorium Power was trying to achieve. He compared its work, which has cost more than $20m so far, to the development of unleaded petrol in the 1980s. The company is not trying to build a new kind of reactor or power plant, he said, just a new fuel element that can be retro-fitted or placed into conventional uranium-run reactors, which make up about 80 per cent of the world's nuclear power stations. Once the technology is proven and its benefits shown, the plan is to license it to the world's big nuclear manufacturers.

“When you try to develop a new nuclear technology, it's a lot like drug development,” said Grae. “You can't just leap to the latter stages, to human testing. You have to start with the lab work, years of experiments.” Now just two years away from using its fuel technology in a commercial Russian reactor, the company is beginning to sense the rewards.

Grae is aiming his hopes at the furthest edges of the nuclear renaissance: those countries going nuclear for the first time. According to Thorium Power's calculations, one-third of the new light water reactors expected to be built by 2027 – or about 40 – will be in countries that have not had atomic energy before. It is in these countries, which do not have weapons programmes but may have sceptical neighbours or international lenders, that Grae thinks a proliferation-proof nuclear fuel will be attractive, a guarantee of good intentions. “The issue of weaponisation relates to financing,” he said. “People need to know the political risk. Is a country's reactor going to get bombed because its neighbours think it is trying to develop a bomb?”

After half an hour, we arrived at the Kurchatov Institute, where the thorium fuel cycle is being tested. Glowering over the car park was a bust of Igor Kurchatov, the father of the Russian nuclear weapons programme, who grew a beard in 1941 and swore not to cut it until the Nazis were defeated. (“The Beard”, as he became known, ended up sticking with it.) Because of a problem with my paperwork, I was not allowed inside IR-8, the 50-year-old nuclear reactor where the thorium fuel cycle has been running for the past five years. Instead, an in-house photographer was sent to take pictures, and I was introduced to Yaroslav Shtrombakh, the first deputy director of the Kurchatov Institute, who agreed that the great potential for thorium lay in new nuclear settings. “We must not give these new countries dangerous toys like uranium and plutonium to play with,” said Shtrombakh. “In this case, thorium is a very promise-able thing.”

Over lunch, Grae described the early days of Thorium Power, which was incorporated just outside Washington in 1992. As he spoke, it became clear not only that the group's non-proliferation idea had been around for some time, but that it had an unlikely first proponent.

The founding myth of Thorium Power is a meeting organised 25 years ago by the reputed model for Dr Strangelove, Edward Teller, the maker of the hydrogen bomb. Teller is not a familiar pin-up for the non-proliferation movement; he is better known for his decade-long labours that led to the explosion of his 65-ton “super” bomb in 1952, offering a glimpse of Armageddon and catalysing the cold war.

But by 1983, a 75-year-old Teller had undergone a change of heart. He arranged to meet a former student, Alvin Radkowsky, one of America's most prolific reactor designers, to talk about his fears about the next age of nuclear power. Teller foresaw more and more countries adopting atomic energy and the spread of uranium-fuelled reactors to all corners of the world – and with them their by-product: plutonium.

Teller had contacted Radkowsky, an Orthodox Jew from New Jersey who designed reactors for the world's first nuclear submarine and America's first commercial nuclear power plant, because Radkowsky had worked with an element called thorium. A radioactive metal long considered a possible alternative fuel to uranium, thorium does not produce nearly as much plutonium when it is irradiated in a reactor. At their meeting, Teller suggested that Radkowsky use it to design a proliferation-proof fuel cycle.

After eight years of work, Radkowsky, who was by now in his seventies, was ready to set up a nuclear technology company. He approached Grae, then recently qualified in international commercial law. Grae initially refused the quiet scientist. “It didn't sound like billable hours,” he recalled, “even if he was who he said he was.”

Radkowsky died in 2002, Teller a year later. Grae now believes their conversation in 1983 was highly prophetic. A standard uranium light water reactor produces about 200kg of plutonium a year. Although far from being ideal for use in a nuclear weapon, reactor-grade plutonium can be reprocessed or at the very least used to make a “dirty bomb”. It is the prospect of dozens of plutonium-producing reactors in countries and regions of the world where there has never before been nuclear power that alarms Grae, despite the safeguards and inspections of the International Atomic Energy Agency.

But the wider nuclear power industry disagrees about the risk of proliferation. Before I went to Moscow, I spoke to John Ritch, director general of the World Nuclear Association, which represents the industry. He told me that the vast majority of reactors built in the 21st century would be in countries that already had nuclear power, and that the IAEA regime was well equipped to monitor new nuclear players. “I do not think the global nuclear renaissance carries with it an inherent proliferation risk,” he said. “Weapons do not arise by accident, and we can expect IAEA safeguards to give early warning of any illicit programme.”

But when I mentioned this to Grae, he asked why the plutonium had to be there in the first place. “It's the same as if these plants were producing massive amounts of arsenic. [Ritch's] argument would be that it is controlled. That we are in a world that knows how to handle this... How would you feel about hundreds of new plants in tens of new countries making massive amounts of arsenic? This [plutonium] is much more dangerous. This can destroy cities.”

It was not until that evening that I learned more about the science of Radkowsky's thorium fuel cycle. Back at Grae's hotel, I met Alexei Morozov, the Russian physicist who has been testing the technology since 1994. Morozov, who is 62, worked for 25 years on the Soviet nuclear ice-breaker programme and other advanced reactors before being hired by Thorium Power. For most of our conversation, he sat rigidly in his chair, but he relaxed when I asked him to choose a Russian word to describe Radkowsky's designs. “Elegantni,” he replied.

. . .

Thorium has always intrigued nuclear physicists; the question has been how best to use it. A silvery metal, it has similar radioactive properties to Uranium 238, the isotope which makes up the bulk of all nuclear fuels. But it is thought to be between three and four times more abundant in nature. Named after the Norse god of thunder by Jons Jacob Berzelius, the Swedish chemist who discovered it in 1828, thorium occurs in mineral-rich monazite sand, of which the world's largest deposits are in Australia, north America, Turkey and India.

Thorium and fission

Since the early 1950s, when uranium was in short supply, physicists have designed fuel cycles to run on thorium. Like U-238, thorium (T-232) will absorb neutrons from another fissile material, such as enriched uranium (U-235), and start to break down, releasing huge amounts of energy. The difference comes in the family of radioactive elements and isotopes that are created as a result. The key absence from the thorium reaction is large quantities of the manmade element plutonium, particularly in the Pu-239 form favoured as a weapons material.
Instead, thorium breaks down into several unstable uranium isotopes, chief among them U-233, and, to a lesser extent, U-232, an unpleasant, gamma-radiating by-product. These provide what physicists call thorium's nuclear “burn” – a process made attractive by U-233, which degrades efficiently, and by thorium's high boiling point (about 500°C higher than uranium's) which has potential safety advantages.

Thorium's behaviour has enticed scientists for a variety of reasons – not all wholesome. John Simpson, a historian and non-proliferation expert at the University of Southampton, believes that Britain first experimented with thorium in the 1950s because of mistaken rumours that it had been used in the hydrogen bomb. The intentions of India, the only country to have maintained long-standing research into thorium because of its large domestic supply, are also viewed as ambiguous: it focused on breeding as much U-233 as possible, reprocessing it for use elsewhere. U-233 on its own is considered a proliferation risk.

According to Thorium Power, Radkowsky's fuel cycle design is unique because it is intended to use up as much of the fuel as possible in a single stage, making it impossible to extract any weapons-usable isotopes afterwards. “It's not the thorium, it's the design that matters,” said Grae. A “seed” of enriched uranium starts a chain reaction in a “blanket” of thorium, which is then “spiked” with U-238 to prevent the U-233 from being easily separated afterwards.


How a nuclear reactor works

1. The heating unit The nuclear reactions take place in the fuel rods. In traditional power plants, this involves uranium. In Thorium Power's model, a “seed” of plutonium kick-starts a nuclear reaction in a “blanket” of uranium and thorium surrounding it.

2. The steam Thorium Power's Kurchatov reactor is not attached to a steam generator or turbine. But the technology is designed to fit into existing power plants, so a thorium-fuelled plant would look much like this one: only the fuel rods would be different.

3. The waste Traditional uranium reactions – which take place in a power plant's fuel rods – produce a range of isotopes, many of which don't break down for hundreds of thousands of years. Thorium produces similar material but in smaller quantities – and in forms that can't be used to create nuclear bombs


Morozov told me that, with the fuel arranged this way, he has achieved a yield of 100MW days per kg of fuel, which compares with an average of about 60MW days in most uranium-run reactors. As well as being more efficient, Morozov repeated the company's central claims about the fuel: that it produces 70 per cent less waste by weight (50 per cent by volume) and 85 per cent less plutonium than standard light-water reactors, none of it viable for making a weapon.

Because of rising uranium demand and the long time that the thorium “blanket” can be burned in a reactor – up to nine years, as opposed to three for ordinary uranium fuel – the company also believes that a thorium cycle could be as much as 10 per cent cheaper than a uranium-run process. I asked Morozov if his experiments could really work on a commercial scale. “This is not an unrealistic idea,” he replied.

Still, Thorium Power faces a sceptical public. According to Grae, once the fuel has run for three years in a Russian VVER-1000 reactor (the standard Russian uranium reactor), it will be commercially proven. That should happen in 2013. But this is the cautious world of nuclear. Mujid Kazimi, the director of MIT's Center for Advanced Nuclear Energy Systems, is one of the few scientists to study the Radkowsky design in detail, and he believes the company must do more publicly to demonstrate its claims. “They should be reporting on it more in the open literature than there has been thus far,” he said. “I think that's obviously the dilemma here. How do you gain the confidence [and] at the same time retain the commercial edge?”

Kazimi said his own experiments show the Radkowsky design to be feasible and support its central claim – that it reduces the amount of plutonium generated in the reactor. But he said there were other complications, particularly related to the smaller but highly radioactive quantities of waste, that were yet to be resolved. “This is an arena where the risk of the unknown is taken very seriously,” he said.

If scientific support for the fuel is one thing, political support is another. Just as Grae has tended Thorium Power's team of Russian scientists, so he has spent years nurturing politicians on Capitol Hill and assembling a group of non-proliferation experts to sell thorium to the world. He hired Tom Graham, the American diplomat who led the indefinite extension of the Non-Proliferation Treaty in 1995, to be the company's executive chairman in 1997. Hans Blix joined the company as a consultant in February. Since last year, the company has also been working with opponents of the Yucca Mountain repository plan, including Harry Reid, the US Senate majority leader, on placing a bill before Congress supporting more research into thorium.

Not everyone appreciates this assertiveness. The argument for thorium, particularly on non-proliferation grounds, can sound like an argument against the dangers of the nuclear industry as a whole. Ritch, of the World Nuclear Association, stopped short of accusing Thorium Power of scare-mongering, but not by much. “People who are commercially active in the area of thorium will of course advertise the non-proliferation characteristics of their technology as an advantage,” he said. “That's fair enough, but I don't like to grant that a fundamental problem exists.” And even Blix stressed that building a nuclear weapon is more than just a crime of opportunity – it takes more than a spare pile of plutonium. “The basic thing that drives proliferation, I think, is not the possession of fuel or spent fuel but fear and perceived security risks,” he said. “And so, while in Washington they might feel that practically anyone outside the Beltway is a proliferation risk, the world does not look that way.”

Nonetheless, it is Thorium Power's spotless non-proliferation credentials – enhanced by Graham and Blix – that are winning its first commercial work. Earlier this month, the company announced that it was advising the United Arab Emirates on how to implement what a senior US State Department official described to me as “a model civilian nuclear programme”, just 50 miles from Iran. Thorium Power has already collected about $10m in consulting fees on the deal and is advising the Executive Affairs Authority of Abu Dhabi, which is overseeing the programme, as it aims to build its first reactor by 2017. Although there is no guarantee that the reactor will run on thorium, Grae insists the technology will be ready to install. “Given that we started with a vision that seems to be coming true,” he had told me in Moscow. “There's no reason for us to stop now, to not seize this.”

Tuesday, April 15, 2008

Revisiting Some Radioactive Ideas:

What's next for U308? - Part II


While we all know that China is ascending as the world's premiere growth economy, with GDP growth rates scaling low double digits, the forward view for China has many serious concerns. Within China today, Oil and Natural Gas supplies are running low, with China now the second largest imported of Crude Oil behind the United States. For China, a decade of rapid fire industrialization and urbanization is threatening rolling blackouts and flicking factory lights. All over the country, old style coal fired power plants belch pollution on a scale seen almost nowhere else in the world. Last year, China became a net importer of coal for the first time. For the world's most populated nation, 16 of 20 major cities top the list of the world's most polluted.

To attempt to combat what seems like a looming environmental catastrophe, China's leadership is reaching out to employ as much alternative energy as possible. Within this realm, no alternative is more front and center than nuclear energy, with China's leaders traveling the world to arrange contracts for nuclear reactors, technology and fuel. As things presently stand, China has already announced plans to construct 30 nuclear power plants committing over 60 billion dollars with a goal of having much of this power on line by 2020. With China, a team of leading scientists have suggested that by 2050, the People's Republic will require nearly 300 gigawatts of nuclear power, a figure which could entail as many as 200 power plants dotting the landscape. While many of these may end up being large scale Western style power stations, China is also considering the potential for building a large number of smaller so called, pebble-bed reactors, which owing to their unique physics do not have the same potential for a Chernobyl or Three Mile Island fiasco. These small scale power plants have not been seen by western eyes, but are said to use a bath of inert Helium to cool the uranium, with total generation of 10 megawatts, enough for a small town.

We ponder the outlook for China because, when it comes to long term demand of Uranium, it is now believed that China's future demand for the radio-active metal could well easily equal the current demand seen by the entire rest of the world combined. Already, over just the last few years, the emergence of Chinese Uranium demand has forced the price of U308 from a low near $6 per pound to a high last June just over $135 per pound. In our view, while Uranium prices have now corrected the initial advance, chances are high that over time the huge demand from developing nations for power hungry industries will continue to sustain and support even higher prices. Thus, the general view of Uranium is that of a secular bull market, with global demand exceeding global supply for years to come. On the charts, the correction in U308 when viewed on an arithmetic scale shows up as a rather normal 50% bull market retracement while on the more important logarithmic chart, we see less then a .25% correction. Using a Fibonacci retracement, the pull back to date has been a minimal .236 fibonacci retracement which is highly indicative of a strong upward underlying trend.

Above: long-term monthly chart U308 has now retraced 50% of the prior 2000-2007 advance
(linear-arithmetic scale).

Above: U308 on a semi-log scale with Fibonacci logarithmic retracement, only a .236 modest Fibonacci retracement.

While the market for Uranium prices has been 'thin' to say the least, and to that end, much technical analysis hasn't mattered as much as it would with a more actively traded commodity, with the pull back in U308 over these last few months we see that the 12 month RSI for U308 has now retraced back to the neutral 50 level. This is precisely the kind of routine correction which would be considered normal within the confines of a continuing bull market advance. In our view, we believe that prices are likely to stage a recovery rally in the months ahead, possibly moving back up to retest resistance at the former highs in the low $100 dollar range. It may even be a year or two, perhaps during the next synchronized global economic recovery, before U308 breaks out cleanly to new highs, but new highs likely lie ahead before this decade is out.

So how can US investors potentially play a continued boom in Uranium prices and nuclear energy in general? As always, several approaches present themselves. For those who want somewhat steadier growth less tied to the violent swings of Uranium Miners, which tend to swing widely with the price of Uranium, engineering companies can be one approach. For US investors, the Shaw Group (SGR) is perhaps the best establish power plant contractor with a partnership in place with Westinghouse Electric, a major contractor for the Chinese. Shaw Group is also hard at work on a number of US power generation projection and has a stable maintenance business servicing a number of nuclear plants here in the USA. Fundamentally, Shaw Group currently sports a .92 PEG Ratio and a .71 Price to Sales Ratio with a 14.88 Trailing P/E and a 25% estimated five year growth rate. On the chart below, we plot the daily bars for Shaw Group overlaid against one of the U308 mining leaders, Cameco Corp. (CCJ). As can be seen on the chart, while shares of Cameco are quite volatile, Shaw Group tends to trade directionally with CCJ, but with somewhat less amplified swings.

Above: Shaw Group (thick) versus Cameco (thin)

Above: Areva of France (converted to US Dollars) and Cameco (CCJ) of Canada

Aside from a few scant engineering plays, the larger proposition available for US investors are the U308 miners, which include majors such as Cameco (CCJ) on the NYSE and Areva Ltd( CEI-Paris), which trades on the Paris Bourse.

From Reuters Nov. 2007
France's Areva seals record $11 bln China deal

SURPRISE! A year ago Areva appeared in danger of losing out on China's nuclear rush, when U.S.-based Westinghouse Electric, now owned by Japan's Toshiba Corp, won a two year battle for a contract to build four "third generation" reactors, which are promoted as safer and more efficient than current ones. But Beijing later surprised both sides by expanding the original tender to six plants from four, giving the French company a fresh chance at pitching its new European pressurized reactors to China, where it has long had a presence. In return for the flow of funds to France, the firm is transferring its technology -- a key demand Beijing also made of Westinghouse -- through a consortium they are setting up with their Chinese partner, Lauvergeon said. The announcement was part of a raft of deals agreed during Nicolas Sarkozy's first visit to China as president of France, which included a framework pact to sell 160 Airbus planes, the planemaker's largest order to date. Sarkozy has pressed Beijing to help curtail Iran's nuclear plans. But a brace of deals announced during his visit showed France is eager to court China's own atomic power sector. Areva and the China National Nuclear Corp agreed to study whether to build a spent nuclear fuel reprocessing-recycling plant in China that could be worth 15 billion euros and to create a joint venture in zirconium.

In recent months, Areva, considered one of the best pure play investments for Uranium, is a monster engineering and construction giant, and a leader in nuclear fuel fabrication. As can be seen on the next chart, Areva trades in very similar price patterns to Cameco (CCJ) and fortunately, for US investors, is now a leading component (3.4%) for the DAX Nuclear Energy Index. For US Investors, a new ETF is now listed on the NYSE known as the Market Vectors Global Nuclear Energy ETF (symbol: NLR) which aims to track as closely as possible, the DAX Nuclear Energy Index. Other major companies within the Holdings of this ETF include Cameco (CCJ), British Energy (BGY), Denison Mines (DNN), and Energy Resources of Australia (ERA). In the 8 months since the ETF has begun trading, we have noticed a good correlation to our own GST Uranium Index with both the GST Index and the "NLR" ETF sporting potential double bottom type patterns.

Above: the GST Uranium Index and Below: the NLR Marketvectors Uranium ETF

While on the subject of ETF's, we should also note that since the beginning of April, Invesco Powershares has also listed a new Uranium oriented Global Nuclear Energy Portfolio which trades as a competing ETF under the symbol PKN. For investors in PKN, France's Areva is the top holding, with other major commitments to Japan's Toshiba (owner of Westinghouse Electric), Thermo Fischer Scientific (TMO) and Emerson Electric (EMR). With the Utilities and Industrials segments comprising nearly 71% of the total fund, and the volatile mining stocks just 13% of the portfolio, this new ETF is likely to have a higher overall stock market correlation and deliver more stable, but likely less leveraged long term results. Thus, between the two new ETF's, there appears to be something for everyone to meet the needs for Uranium investors with different risk profiles. Still, when we reflect upon the potential future demand for U308 and the tight supply outlook, one can't help concluding that a strong emphasis on emerging producers is the formula which will probably result in the greatest overall returns. For the GST Uranium Index, composed entirely of mining stocks, once a bottom is potentially in place in coming weeks, the next move should be a reversion to the secular bull.

Above: GST Uranium Index could be bottoming Primary Wave II in preparation for an even larger, more extended Third Wave advance spread out over many years.

In this vein, we would be surprised to see an initial recovery rally carry Uranium Miners back up across the range of the last 18 months toward the former highs. While those highs are likely to produce yet another medium term top and a downside reaction off the highs, overall such a move offers good upside potential. In the years ahead, once the sector is able to clear the early 2007 peak, I wouldn't be at all surprised to see a large scale third wave advance unfolding over a period of several years with Uranium stocks following an upward 45 degree angle as illustrated in the chart above using an Andrews Pitchfork. Such an extended bull market advance could easily see share prices rising well into the middle of the next decade with compound annual return in excess of 20%.

Above: Uranium Index with 20% Compounded Line

In the final chart above, we ink in a 20% compounding line as the thick middle line for the Andrews Pitchfork Channel. Impossible? We think not. Among the Emerging Producers, Denison Mines (DML-TSE, DNN-Amex) is definitely an up and coming leader which for those with a speculative appetite should be watched closely in the days ahead. In June of last year, when the share price was near $14.00, we suggested that a pull back in the stock could see prices tumble toward the $6.00 to $8.00 range. Since then, the stock has plunged to a recent low of $6.12 on February 8th and is now in a potential basing process. At the present time, the share price is below key resistance at $7.90 and would need to move above that level in order to 'prove itself' and confirm that an important bottom has been seen.

Above: from FSO Update August 2007 – "THEN" 

Below: NOW, Denison Mines today…

Above: Denison Mines, any move above the nearby downtrend line at about $7.90 would probably be a pretty good indication of a completed base, with a move above $8.90 full confirmation of a completed base.

Within the realm of Junior Uranium mining companies, other names of potential interest include Paladin Minerals (PDN-T), Strathmore Minerals (STM-V), Pinetree Capital (PNP-V), JNR Resources (JNN-V), Uranium One (UUU-T) and Mega Uranium(MGA-V), Laramide (LAM-T).

At the close, the S&P 500 ended with a gain of 6.11 to finish at 1334.43, with the DJIA ending higher by 60.41 to close at 12,362.47. On the NASDAQ, prices moved higher to gain 10.63 index points finishing at 2286.45, while the 10 Year Bond moved higher on the yield, with yields edging up by .07 basis points to finish at 3.57%.

That's all for now,

Frank Barbera

World Nuclear News