Wednesday, March 28, 2007

Russia to invest $5.75bn in nuclear energy

[RIA Novosti, 27 March] Russia will invest more than 150 billion rubles ($5.75 billion) in nuclear energy in 2009-2010 from its federal budget, according to Russia's deputy prime minister, Alexander Zhukov. Expediture for 2008 will be more than triple that in 2007. In addition, he said, the three-year budget envisages financing electric power grid networks in Russia and reducing cross subsidizing in the power sector.

Sunday, March 25, 2007

Radioactive Elements in Coal and Fly Ash - a primer

Coal is largely composed of organic matter, but it is the inorganic matter in coal—minerals and trace elements— that have been cited as possible causes of health, environmental, and technological problems associated with the use of coal. Some trace elements in coal are naturally radioactive. These radioactive elements include uranium (U), thorium (Th), and their numerous decay products, including radium (Ra) and radon (Rn). Although these elements are less chemically toxic than other coal constituents such as arsenic, selenium, or mercury, questions have been raised concerning possible risk from radiation. In order to accurately address these questions and to predict the mobility of radioactive elements during the coal fuel-cycle, it is important to determine the concentration, distribution, and form of radioactive elements in coal and fly ash.

Abundance of Radioactive Elements in Coal and Fly Ash

Assessment of the radiation exposure from coal burning is critically dependent on the concentration of radioactive elements in coal and in the fly ash that remains after combustion. Data for uranium and thorium content in coal is available from the U.S. Geological Survey (USGS), which maintains the largest database of infor-mation on the chemical composition of U.S. coal. This database is searchable on the World Wide Web at: CoalQual/intro.htm. Figure 1 displays the frequency distribution of uranium concentration for approximately 2,000 coal samples from the Western United States and approximately 300 coals from the Illinois Basin. In the majority of samples, concentrations of uranium fall in the range from slightly below 1 to 4 parts per million (ppm). Similar uranium concentrations are found in a variety of common rocks and soils, as indicated in figure 2. Coals with more than 20 ppm uranium are rare in the United States. Thorium concentrations in coal fall within a similar 1–4 ppm range, compared to an average crustal abundance of approximately 10 ppm. Coals with more than 20 ppm thorium are extremely rare.
During coal combustion most of the uranium, thorium, and their decay products are released from the original coal matrix and are distributed between the gas phase and solid combustion products.


Thursday, March 22, 2007

Nuclear plants are very safe

"Nuclear plants are very safe," asserted Forrest J. Remick, professor emeritus of nuclear engineering, adding, "It helps to compare their safety record with that of other major industries." In 2005, the industrial accident rate for nuclear power plant workers was 0.24 per 200,000 worker hours, compared with 3.5 accidents per 200,000 worker hours for all manufacturing industries (14.6 times greater). But what about those of us who live near nuclear plants? Said Remick, "No member of the public has been killed or injured from radiation during the nearly 50 years that commercial nuclear power plants have been operating in the U.S."

Many of the 104 nuclear plants in the nation today are approaching the end of their 40-year licenses. But instead of utilities shutting down these profitable facilities, virtually all are expected to apply for 20-year license renewals. To date, the Nuclear Regulatory Commission (NRC) has renewed the operating licenses of 47 plants, and a number of others are currently under review. "The NRC is very thorough in inspecting for safety," said Remick, citing an average of 22 months for the NRC to sign off on a license renewal for a given plant.

"Almost all of the equipment in a plant, with the exception of the pressure vessel" -- the structure, made of ductile, high-strength steel, that holds the reactor core -- "is replaceable: motors, pumps, pipes, wiring and so on," he said. "The integrity of the pressure vessel itself is monitored through the use of sample coupons of the same material, which are irradiated within the reactor vessel and are periodically removed for evaluation to determine effects of aging."

As of early 2007, the NRC had received around 30 indications from U.S. utilities that they will soon apply to build new nukes. According to Remick, a new generation of reactors has been designed to include passive safety features. "Instead of having a safety system operated by motors and pumps," he noted, "the new designs rely on water stored at an elevation higher than the core, so that if you have an emergency and need cooling water, it automatically arrives by gravity." Operators can replenish the cooling water later by mechanical means, including tanker trucks. "In older designs, you might need electricity to open a valve for cooling," said Remick. "In many of the new designs, spring-loaded valves require electricity to remain shut and open automatically in the event of a loss of power." (Remick hastened to add that today's operating nuclear plants have multi-tiered backup systems for delivering electric current in the event of a power failure.)

The NRC has issued design certification for four advanced, next-generation nuclear power plant designs. These plants will be simpler and cheaper to build than older ones, thanks to increasing standardization and the ability to assemble many components off-site.

New designs are more efficient than older designs, and they are safer. One, known as VHTR (Very High Temperature Reactor), will include a helium-cooled reactor that uses tiny pellets of uranium fuel encased in graphite. "If you lose cooling in such a reactor," said Remick, "those little pellets will absorb heat without failing and releasing radioactivity." The concept has been demonstrated in test reactors in the United States, Germany, China and South Africa.

"Existing nuclear plants are cash cows for utilities," Remick said. "Although fairly expensive to build, nuclear plants are much less expensive to operate than oil or gas plants and slightly less expensive to run than coal-burners. Also, they're non-polluting."

The industry has come a long way in understanding how to safely produce power since the 1979 accident at the Unit 2 assembly at Three Mile Island (TMI), near Harrisburg, that resulted in a partial core meltdown. Although considered the worst accident in U.S. commercial nuclear power-generating history, the mishap led to no deaths or injuries among plant workers or members of the local community. Since then, noted Remick, "TMI has twice set world records for consecutive days of operation without a shutdown for refueling or to repair or replace malfunctioning equipment."

Lack of fuel may limit US nuclear power expansion

Lack of fuel may limit US nuclear power expansion Discussion at PhysOrgForum
Limited supplies of fuel for nuclear power plants may thwart the renewed and growing interest in nuclear energy in the United States and other nations, says an MIT expert on the industry.

Over the past 20 years, safety concerns dampened all aspects of development of nuclear energy: No new reactors were ordered and there was investment neither in new uranium mines nor in building facilities to produce fuel for existing reactors. Instead, the industry lived off commercial and government inventories, which are now nearly gone. Worldwide, uranium production meets only about 65 percent of current reactor requirements.

That shortage of uranium and of processing facilities worldwide leaves a gap between the potential increase in demand for nuclear energy and the ability to supply fuel for it, said Dr. Thomas Neff, a research affiliate at MIT's Center for International Studies.

"Just as large numbers of new reactors are being planned, we are only starting to emerge from 20 years of underinvestment in the production capacity for the nuclear fuel to operate them. There has been a nuclear industry myopia; they didn't take a long-term view," Neff said. For example, only a few years ago uranium inventories were being sold at $10 per pound; the current price is $85 per pound.

Neff has been giving a series of talks at industry meetings and investment conferences around the world about the nature of the fuel supply problem and its implications for the so-called "nuclear renaissance," pointing out both the sharply rising cost of nuclear fuel and the lack of capacity to produce it.

Currently, much of the uranium used by the United States is coming from mines in such countries as Australia, Canada, Namibia, and, most recently, Kazakhstan. Small amounts are mined in the western United States, but the United States is largely reliant on overseas supplies. The United States also relies for half its fuel on Russia under a "swords to ploughshares" deal that Neff originated in 1991. This deal is converting about 20,000 Russian nuclear weapons to fuel for U.S. nuclear power plants, but it ends in 2013, leaving a substantial supply gap for the United States.

Further, China, India, and even Russia have plans for massive deployments of nuclear power and are trying to lock up supplies from countries on which the United States has traditionally relied. As a result, the United States could be the "last one to buy, and it could pay the highest prices, if it can get uranium at all," Neff said. "The take-home message is that if we're going to increase use of nuclear power, we need massive new investments in capacity to mine uranium and facilities to process it."

Mined uranium comes in several forms, or isotopes. For starting a nuclear chain reaction in a reactor, the only important isotope is uranium-235, which accounts for JUST 7 out of 1000 atoms in the mined product. To fuel a nuclear reactor, the concentration of uranium-235 has to be increased to 40 to 50 out of 1000 atoms. This is done by separating isotopes in an enrichment plant to achieve the higher concentration.

As Neff points out, reactor operators could increase the amount of fuel made from a given amount of natural uranium by buying more enrichment services to recover more uranium-235 atoms. Current enrichment capacity is enough to recover only about 4 out of 7 uranium-235 atoms. Limited uranium supplies could be stretched if industry could recover 5 or 6 of these atoms, but there is not enough processing capacity worldwide to do so.

Tuesday, March 13, 2007

Trading Climate Change

Chris Rogers, utilities analyst at JP Morgan, believes that nuclear energy will be key to a zero-greenhouse gas hydrogen economy and that, if they want to be part of it, oil companies will have few options other than embracing nuclear power.

JP Morgan’s report, Trading Climate Change, suggests that within the next decade nuclear energy will be at the top of the world’s agenda, with the resurgence of nuclear a key element both in the drive to reduce carbon emissions from power generation and to develop zero-emission hydrogen-fuelled transport. In fact, the report envisages nuclear energy’s contribution to vehicle fuel services in 10 years’ time to be as important as ethanol is today.

Describing nuclear as the "renewable energy that dare not speak its name," Rogers said that he believes that oil giants BP and Shell may already be looking at nuclear in their strategic plans, although both those companies played down any nuclear interest in press reports. However French oil company Total has already spoken up for future involvement in nuclear, with incoming CEO Christophe de Margerie declaring that the company will one day have to be part of the nuclear industry. Total chairman Thierry Desmarest has also confirmed that the company would be interested in moving into nuclear if a suitable opportunity arose.

Future visions of a so-called hydrogen economy, in which hydrogen replaces hydrocarbons for transport, will require the production of hydrogen without associated carbon dioxide emissions. However the production of hydrogen is energy intensive, and nuclear power would provide an economic means of providing that energy without producing carbon dioxide. The JP Morgan report notes that nuclear-hydrogen offers a good value source of fuel to replace existing hydrocarbon sources, at a US Department of Energy cost estimate of $2.5 per gallon of gasoline equivalent compared to current traditional gasoline production costs are $1.5-2.0 per gallon ($5.68-7.57 per liter). On the downside, it notes that new nuclear build faces is not without challenges on the environmental, economic and planning fronts.

Tuesday, March 6, 2007

Calculating NPV of Paladin

I have set i at 6%, which is probably about 50 basis points too high for a long term interest rate, but it leaves us with a conservative estimate of the value of Paladin’s uranium deposits.
In addition, the uranium deposits have been assigned a future value based on the current spot price of uranium of $85/lb. As the uranium price appears poised to climb above $100 and is likely to stay there for quite some time, $85/lb may ultimately prove to be too conservative in valuing these assets. For the longer term assets, however, this will probably prove to be an accurate assessment.
Langer Heinrich–In yesterday’s analysis I calculated the value of the deposit at $4.6 billion. However, because Paladin is paying 3% royalties to the government of Namibia, it is only worth $4.45 billion to Paladin. Based on Paladin’s expectation to produce 2.6 million pounds per year, the mine will be in operation for 21.5 years. So by using $4.45 billion as the future value, 6 percent as the risk free interest rate, and 21.5 years as the period, we can calculate that the present value of Langer Heinrich is $1.31 billion.
Kayelkeera–Given Paladin’s stake is worth $2.55 billion and Paladin projects the mine to be operational for 11 years, Kayelkeera has a present value of $1.34 billion.
Isa Joint Venture–Paladin has not given much guidance for the duration of mining activities here. However, they have said that they anticipate production in 2012, and given that the deposit is approximately the same size as Langer Heinrich, I have estimated that the mine will be operational for about 20 years. Therefore, the total time period I have used is 25 years. Given that Paladin’s stake is worth $2.8 billion, with a period of 25 years, the present value of Paladin’s stake is about $0.65 billion.
Bigrlyi–Given the smaller size of this deposit and the more accommodating mining laws in the Northern Territory, I have estimated the total time period for this deposit to be 15 years. Given that Paladin’s stake is worth $0.5 billion, the present value of this deposit would be approximately $0.21 billion.
Therefore, by summing these four deposits, we can derive a present value for all of Paladin’s uranium deposits. This present value comes out to approximately $3.5 billion. This estimate does not include any assets that would be gained in the Summit acquisition.
Given Friday’s closing price of $6.35, Paladin has a market cap of only $3.1 billion. Even if we subtract the $15 million in long term debt and the $250 million from the recent convertible bond placement, Paladin is still trading at a discount to the present value of its currently owned uranium deposits (at a valuation of $85/lb).
In addition, there is significant reason to believe Paladin should receive a valuation above the present value of those deposits. Paladin has already stated that it expects to find more uranium as it continues exploration around the Kayelkeera mine in Malawi. In addition, higher uranium prices will make the deposits more valuable, and will also lead to an increase in uranium reserves because lower grades can be mined economically at higher prices. With most analysts predicting $100 uranium in the near term, it would be rational for the market to price Paladin’s deposits at slightly above $85/lb. Finally, given Paladin’s experience in Africa, there is reason to believe the company will be able to find and bring into production more uranium mines there and in Australia over the longer term. Management has shown its desire to grow both through acquisitions and through exploration, and this is a wild card that could send Paladin shares much higher in the longer term. Given all of these future catalysts, Paladin deserves to trade at a premium to the present value of its uranium deposits, but at the moment, it is actually trading at a discount to the value of these deposits. There appears to be very little downside left here for Paladin, and I believe the stock will begin to carry a more appropriate valuation once this market selloff runs its course.
Finally, a quick note about the Summit acquisition. Some people might be questioning why Paladin is willing to pay $900 million for Summit when the present value of Summit’s 50% stake (ie same as Paladin’s above) in the Isa JV is only $650 million at current uranium prices. I would respond to this by pointing to the following:
1) Paladin expects higher uranium prices in the future, and is willing to bet on that by paying a premium now.
2) Summit also has exploration rights in several other areas in Australia, and although these are difficult to value, Paladin obviously believes they have some worth.
3) Summit also has a gold and mineral division which Paladin expects to sell off if they manage to acquire Summit. I have not looked into the potential value of this unit, but it will clearly lower the price of the transaction when the sale price of this unit is taken into account.
Therefore, the Summit acquisition would be a good deal for Paladin, as it provides known quantities of uranium and significant exploration prospects at a price not too much above the present value of Summit’s known reserves. In fact, Paladin could probably raise the price of the deal by about 15 percent and still pay a reasonably advantageous price. It is my view that Paladin will likely raise the bid here, and will ultimately pay about $1.0 billion for Summit. As a Paladin investor, I would be quite happy with that sort of price.

Monday, March 5, 2007

Chinese advanced reactor decisions

Light shed on Chinese advanced reactor decisions02 March 2007 Westinghouse and its partner Shaw have signed a framework agreement to build four reactors in China. The sites mentioned shed light on rumours for Areva units planned for China.A framework agreement has been signed between Westinghouse with its partner Shaw and China's State Nuclear Power Technology Company to supply four AP1000 third-generation nuclear power reactors. The sites specified for the 1100 MWe units are Haiyang in Shandong province for one pair, and Sanmen in Zhejian province for the second pair.Final contracts would be signed in mid 2007, construction is expected to start in 2009 with first power in 2013. A December 2006 announcement from Westinghouse had mentioned the Yanjiang site in Guangdong province. This site is now apparently open for a pair of 1650 MWe Areva EPR reactors in line with a cooperation agreement signed last month by Electricité de France (EdF) and China Guangdong Nuclear Power Company (CGNPC) based on two EPRs.CGNPC has an established preference for French technology. Their four operating reactors, and two more under construction at Lingao, are based on French developments of designs originally licensed from Westinghouse. CGNP's first two units, at Daya Bay near Hong Kong, which started up in 1994 were built with the involvement of EdF and chinese engineers to standard French designs.

Sunday, March 4, 2007

Summit reject Paladin Resources bid.

Summit Resources, 2 March] Summit Resources has rejected Paladin Resources' A$1 billion ($792 million) hostile takeover bid, describing the offer as "opportunistic and inadequate." Summit's managing director, Alan Eggers, said that the offer did not reflect the value of its uranium, base metal and iron projects. Summit controls the Valhalla uranium deposit in northwest Queensland, with 26,000 tonnes U3O8 as indicated and inferred resources, but which is open and likely to increase. Another 11,500 tonnes of resources nearby are also part of the Isa Uranium Joint Venture. Last year Paladin bought a 50% interest in the joint venture, so the takeover bid would have brought several prospective properties under Paladin’s full ownership. Eggers said, "We believe Paladin now recognises the inherent value of the Mount Isa uranium province, which is one of the most prospective uranium provinces in the world today." He also noted that the offer came just two weeks before the Australian Labor Party (ALP) is expected to change its 'no mines' policy.

World Nuclear News