Sunday, November 9, 2008
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 producers....eg AGS
Tuesday, July 15, 2008
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
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
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
What's next for U308? - Part II
BY FRANK BARBERA, CMT
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
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,
Thursday, March 13, 2008
There stands the only plant in the world, a survivor of Allied bombing in World War II, capable of producing the central part of a nuclear reactor's containment vessel in a single piece, reducing the risk of a radiation leak.
Utilities that won't need the equipment for years are making $100 million down payments now on components Japan Steel makes from 600-ton ingots. Each year the Tokyo-based company can turn out just four of the steel forgings that contain the radioactivity in a nuclear reactor. Even after it doubles capacity in the next two years, there won't be enough production to meet building plans.
``If there are 50 to 100 reactors or more to be built, there will be a real shortage and real delays in deliveries, so it's a good hedge to get in line now,'' said Ron Pitts, senior vice president for nuclear operations at the construction and engineering company Fluor Corp. in Irving, Texas.
Pitts estimated the cost of heavy forgings, including reactor containment vessels, steam generators and pressurizers, at $300 million to $350 million for each generating unit. Japan Steel wouldn't comment on the size of the down payment, which Pitts estimated at $100 million.
UniStar Nuclear Energy LLC in Baltimore, a venture between Constellation Energy Group and Electricite de France SA, reserved slots for Japan Steel gear in 2006, even though it doesn't expect to complete its first reactor until 2015. It plans to build reactors based on technology from Areva SA of France.
``You need metal on the ground right now to make 2015,'' said Ray Ganthner, senior vice president of new plant deployment at Areva NP Inc. in Lynchburg, Virginia.
Orders for nuclear generators are multiplying as electricity use surges worldwide and governments pressure companies to cut carbon emissions to fight global warming. As many as 237 reactors may be built globally by 2030, an average of more than 10 a year, according to the World Nuclear Association in London. That compares with 78, or fewer than four a year, started since the 1986 Chernobyl meltdown in Ukraine.
Given Japan Steel's limited capacity, the math just doesn't work, said Mycle Schneider, an independent nuclear industry consultant near Paris. Japan Steel caters to all nuclear reactor makers except in Russia, which makes its own heavy forgings.
``I find it just amazing that so many people jumped on the bandwagon of this renaissance without ever looking at the industrial side of it,'' Schneider said.
It would take any competitor more than five years to catch up with Japan Steel's technology, said the company's chief executive officer, Masahisa Nagata.
Rivals are working to break the Japan Steel stranglehold, including South Korea's Doosan Heavy Industries & Construction Co. and Japan Casting & Forging Corp., a joint venture of Nippon Steel Corp. and Mitsubishi Steel Manufacturing Co.
Doosan may make the heavy forgings for the second of Westinghouse Electric Co.'s reactors being built in China, while subcontracting those needed for the first reactor to China First Heavy Industries, said Dan Lipman, senior vice president for nuclear power plants at Westinghouse. Doosan and China First Heavy Industries may ``potentially'' be able to produce them in the future, Lipman said in an e-mail.
Areva, the world's biggest reactor builder, is considering modifying its newest design to be able to make the central reactor-vessel part from a 350-ton ingot instead of more than 500 tons as required today, said Pascal Van Dorsselaer, manager of an Areva plant in France's Burgundy wine region.
`Definitely a Bottleneck'
Areva would be able to produce the ingot itself with an investment of about 100 million euros ($155 million), he said as workers coated the inside of a Japan Steel reactor shell part with stainless steel to prevent rust.
``There is definitely a bottleneck,'' Van Dorsselaer said. ``It's a real issue for us.''
Another alternative is to turn back the technological clock and weld together two smaller forgings, said John Fees, CEO of McDermott International Inc.'s Babcock & Wilcox Co., which built the Three Mile Island reactor. That technique was used over the past 40 years in the U.S. and France and is still applied in China.
``It shouldn't be off the table,'' he said at Babcock's headquarters, also in Lynchburg, Virginia.
Even with the appetite for its nuclear products, Japan Steel is cautious about expanding too rapidly. Orders plummeted after a German coalition government including the Green Party pledged in 1998 to phase out nuclear power. Japan Steel was unprofitable for three straight years.
`Concern Is the U.S.'
The company will decide by June whether to further expand production, said Ikuo Sato, a manager of the Muroran plant on Hokkaido.
``Our concern is the U.S.,'' Sato said. President George W. Bush's ``administration is aggressive in building nuclear plants, but we wonder how many plants will actually be built.''
On Feb. 13, NRG Energy Inc., the second-largest Texas power producer, put its application for two new reactors on hold while it works out pricing and other details with suppliers. It has already reserved forging slots at Japan Steel for the plant.
``We want to make sure it's done exactly right and we have the right roles for our vendors and the right costs,'' NRG Energy spokesman David Knox said.
Blackened by Soot
Japan Steel stock more than doubled from the start of last year to 2,080 yen in July, before dropping, partly because of a plan to issue shares in case of a hostile takeover bid. They now trade at 1,602 yen, valuing the company at 595 billion yen ($5.8 billion). Hiroshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo, sold his shares in July.
``Nuclear demand seems like it won't grow as expected because of safety concerns and a slowing U.S. economy,'' Chano said.
The Japan Steel factory's rusting, corrugated-metal warehouses, blackened by soot, belie the precision and patience required to fashion a 600-ton steel ingot into a tube with walls 30 centimeters (12 inches) thick. Blue-clad workers, some wearing balaclavas to keep warm, draw on knowledge built up when Japan Steel made the 18-inch gun barrel -- the world's largest at the time -- for the World War II battleship Yamato. A 1945 attack on the Muroran plant killed more than 200 workers.
``Our accumulated technology for cannon barrels helped us make this technical breakthrough in forging,'' plant manager Sato said.
The company's basic product, steel of the highest quality, has the same enduring appeal as the samurai swords still fashioned in limited quantities by craftsmen at the plant.
To make the 600-ton ingot, workers heat steel scrap in an electric furnace to as high as 2,000 degrees Celsius (3,600 degrees Fahrenheit). Then they fill each of five giant ladles with 120 tons of the orange-hot molten metal. Argon gas is injected to eliminate impurities, and manganese, chromium and nickel are added to make the steel harder.
The mixture is poured into a blackened casing to form ingots 4.2 meters wide in the rough shape of a cylinder. Five times over three weeks, the ingots are pressed, reheated and re-pressed under 15,000 tons applied by a machine that rotates them gradually, making the floor tremble as it works.
The heavy forging is needed to make the steel uniformly strong by aligning the crystal lattices of atoms that make up the metal, known as the grain. In a casting, they would be jumbled.
`More Art Than Science'
``What they do is an art more than a science, and that's why they're the critical path,'' said Steven Hucik, senior vice president for nuclear plant projects at GE Hitachi Nuclear Energy in Wilmington, North Carolina. His company has already reserved sufficient capacity at Japan Steel's plant to cover its first wave of new reactors, he said.
Japan Steel's most prized products also include samurai swords, with price tags of about 1 million yen.
They're made in a traditional Japanese wooden hut, up a steep hill from the rest of the Muroran factory. It's decorated with white zigzag papers called ``shide'' used in Shinto shrines, creating a sense of sanctity in the workshop.
Inside, as the factory clangs and hisses below, Tanetada Horii hand-forges broad swords from 1 kilogram (2.2 pound) lumps of Tamahagane steel.
``Making a sword emanating peculiar beauty from the dull substance of stone-like Tamahagane steel is bliss,'' he said.
CEO Nagata says the process goes to the company's heart.
``Samurai swords contain the essence of steelmaking technology,'' he said. ``We've inherited this technology and we don't want it to spill outside of Japan.''
Monday, February 11, 2008
Canada's 2007 total was 11,046 tonnes of U3O8. The country just inched out Australia's production of 10,145 tonnes U3O8 and Kazakhstan's total of 6,637 tonnes.
The Nuclear Energy Institute in the U.S. also reported some interesting news: according to preliminary figures, American nuclear power plants posted all-time record highs in electricity production and efficiency in 2007.
The report states U.S. nuclear plants generated about 807 billion kilowatt-hours (kwh) of electricity last year, beating by two per cent the past record-high of 788.5 billion kwh set in 2004.
And, according to the data, the industry's average electricity production cost is dropping. The average production cost (which looks at expenses for uranium fuel and costs of operations and maintenance) was a record-low 1.68 cents/kwh in 2007.
The previous low was set in 2005 at 1.72 cents/kwh. This marks the ninth straight year the industry's average electricity production cost was below two cents/kwh and the seventh straight year that nuclear plants had the lowest production costs of any major source of electricity, besting coal- and natural gas-fired power plants.
Instability remains in global markets and analysts now predict a few years will pass investors will begin reaping the benefits of uranium's strong long-term fundamentals. The metal's spot prices are now expected to hit US$110 in 2010—compared to earlier estimates of US$50 for that year.
For now, the Ux Consulting long-term price is sitting flat at $95 per pound U3O8 through February. Contracts this month are priced at $78. As for the rest of 2008, March futures are trading at $80, April to May contracts are worth $75 and July to December contracts are worth $85.