Carbon Emissions Concerns Fueling Nuclear Renaissance

Will There Be Sufficient Uranium Mined to Meet the New Demand?

COPYRIGHT © 2007 By StockInterview, Inc. ALL RIGHTS RESERVED. No part of this article may be reproduced without written permission from the editor of StockInterview.com. Links to this website are welcome.


We were surprised today to have received an official letter from the Government of India. Inside the envelope was an order for StockInterview’s “Investing in the Great Uranium Bull Market” for the country’s Department of Atomic Energy. This again reminded us that India is aggressively participating in the nuclear renaissance and expansion of uranium mining. For India this is very much a renaissance because it was one of the first few countries approached during President Eisenhower’s Atoms for Peace program.

China, Russia, South Korea and Japan are no longer alone in this nuclear renaissance. One by one, European and North American politicians are cautiously considering the inclusion of nuclear energy with renewable energy sources as an alternative to more than 800 new coal-fired plants proposed in the United States, India and China. Global warming, Al Gore and especially the United Nations International Panel on Climate Change have sufficiently rung the warning bell to jolt sufficient numbers into realizing where most of their electricity comes from: dirty coal-fired plants.

Yesterday, the Massachusetts Institute of Technology (MIT) released an interdisciplinary faculty group study examining coal’s role in a world where carbon dioxide emissions would be constrained. Co-chairs John Deutch and Ernest Moniz issued the 2003 MIT study, “The Future of Nuclear Power,” which focused on CO2 emissions-free electricity generated from nuclear energy. Deutch, a former director of the Central Intelligence Agency, wrote, “If we don’t have carbon capture and sequestration, coal has a very bleak future.”

On the other side of the coin, nuclear energy’s future continues shining more brightly every week. If not actually moving forward to unconditionally embrace nuclear energy, the subject is being more frequently discussed in the same breath as windmills and solar panels by world leaders and state politicians alike.

This past Tuesday, the Committee on Industry and Trade in Sweden’s parliament ruled that uranium mining should not be forbidden. Early reports suggest the full parliament is unlikely to override the committee’s recommendation. Many had believed uranium mining would never again take place in Sweden. If one correctly remembers, Sweden was to phase out its nuclear fleet over a twenty-five year period. Only two have closed and about fifty percent of the Scandinavian country’s electricity continues to be nuclear- generated.

One of the major items on the agenda for the G 8 Summit in early June at the Baltic Sea resort Heiligendamm in Germany will include global efforts to prevent climate change. European Union leaders are pushing to slash Europe’s CO2 emissions by some 20 percent by 2020 with renewable energy sources. Partly, this is a challenge to persuade the U.S., China and India to participate in reducing carbon emissions. But, many EU member countries believe nuclear energy will play a growing role among the more popular ‘green energy’ sources, such as wind, waves and solar. Exceptions are the usual suspects: Australia, Ireland and Luxembourg. And of course there is Australia.

About Australia, FNArena.com Editor Rudi Filapek-Vandyck writes:

"Apart from being the staunchest ally of the Bush administration in troubled times, Australia’s prime minister John Howard is well known for his pro-uranium policy views. However, recent polls suggest the Australian electorate has yet to be convinced the future is yellow and nuclear and the issue is therefore treated with silk gloves by the Howard government. What stands out most from the polls is that Australians like their beaches and if there was a need to build a few water-guzzling nuclear reactors to save the earth from suffocating because of too much coal burning around the globe, they’d very much appreciate it if these reactors were build on someone else’s beach. The Australian government is facing an election towards the end of this year. Any plans on the nuclear matter are likely to remain in the bottom drawer until then, even when it is widely expected that the main opposition party, the Australian Labor Party (ALP) will use next month ’s members meeting to get rid of its fierce anti-nuclear stance.”

Leading the world’s nuclear energy renaissance is an unlikely candidate: Russia. Since last year’s G8 summit, Russia has set forth ambitious nuclear goals. Presently deriving about 16 percent of its electricity, the country plans to increase nuclear’s share by more than 40 percent to 23 percent nuclear-generated. Russia proposes to build as many as three nuclear reactors per year to achieve this target.

Russia’s nuclear expansionary plans cross borders and continents. After the Namibian Minister of Energy and Mines closed the doors on future uranium exploration licenses in the country, Russia’s Natural Resources Minister announced one of the state-owned companies, Renova, had ‘won’ a tender to develop two uranium deposits in Namibia. Three Russian companies are in a joint venture to mine Namibia’s uranium. Those negotiations seem to also include assisting the country in overcoming an electricity shortage of 300 megawatts over the next three years with nuclear energy.

Other countries in Africa where Russia plans to move forward with uranium exploration or uranium-related efforts, such as enrichment, include South Africa and the Democratic Republic of Congo. In 2006, Africa’s mines produced nearly 17 percent of the world’s uranium. As a result of two new uranium mines opening in Africa this year – Langer Heinrich and Dominion, the continent’s uranium production could reach nearly 20 percent by 2008, possibly challenging Australia as the second highest producing uranium continent. One civilian nuclear reactor operates in Africa, which is something Russia’s Rosatom head Sergei Kiriyenko plans to change.

Russia’s nuclear plant manufacturer, AtomStroyExport (ASE), recently met with officials in Morocco about building reactors at the country’s Sidi Boulbra nuclear plant site. AREVA’s most ambitious competitor, ASE is now building nuclear power plants at Tianwan in China, Kudankulam in India, Bushehr in Iran and Belene in Bulgaria. Russia’s deputy foreign minister recent meeting in Chile may also bring the nuclear renaissance to South America.

On Thursday, Rosatom announced it would cooperate with Italy’s largest utility, Enel. The Italian utility is the majority owner of Slovakia’s national utility and plans to build two additional reactors in that country. The agreement reportedly may involve power plant construction in Eastern Europe. The former Soviet states are ripe for new reactors. After having closed its Chernobyl-design nuclear reactors, Lithuania hopes to build one or two new reactors. Romania is planning one or two new reactors for its nuclear fleet. The Czech Republic may add two more.

We believe it would be difficult for European leaders to ignore the Ukraine’s equally ambitious domestic nuclear plans. Having been the host country for the Chernobyl nuclear plant disaster, one would have thought the country would have dumped any future plans for nuclear energy and forbidden it. Instead, the Ukraine derives nearly one-half of its electricity from nuclear energy. The country has discussed adding up to eleven new nuclear reactors by 2030. Ironically, across the Atlantic in the state of Pennsylvania, where the ‘other’ nuclear episode – Three Mile Island –  took place, the state derives the second highest percentage of nuclear-generated electricity; behind Illinois – more than thirty percent. The second reactor at Three Mile Island has continued to function for the past 28 consecutive years without incident.

While many turn to Europe for guidance about nuclear energy, Russia has moved forward with its former states in reviving nuclear energy in those countries, and may emerge as a champion in Africa to replace AREVA’s long-standing dominance in that continent. Russia has been actively pursuing uranium mining interests and enrichment services in order to fuel those reactors they plan to construct. The strategy be one suggested by Sprott Asset Management’s Kevin Bambrough, several months ago, whereby Russia offers a package deal of nuclear power plant construction and the enriched uranium to fuel the reactors. By controlling the entire nuclear fuel cycle, Russia is likely to emerge as the leading force of this nuclear renaissance before the end of this decade.

Ask just about ten people in the United States what energy source is used to generate their electricity – as we did. You might be surprised if a single soul says nuclear energy. Ask those same ten individuals what uranium is used for, and you will unanimously hear back: To Make Bombs. State senator David Ulibarri found similar sentiment among his peers in the New Mexico legislature, during the recent session. He was also surprised how very few of his colleagues realized the size and value of the state’s uranium resource – about 600 million pounds, according to the senator, estimated at the recent weekly spot price at more than $54 billion

Senator Ulibarri may become even more surprised when he discovers that more mining companies in Australia see the great value in the uranium resource in the Grants Mineral District (which includes the McKinley and Cibola counties, which he represents) than his senatorial peers realized. We have been receiving numerous inquiries from publicly traded Australian companies hoping to get a foothold in New Mexico.

Quietly, a nuclear renaissance in the United States is starting to show signs of life. At the recent Nuclear Energy Institute forum in Washington, an interesting number emerged. The Nuclear Regulatory Commission (NRC) has hired 400 engineers per year over the past two years. The NRC plans to continue adding engineers for as long as necessary to meet the needs of the nuclear power industry and related activities, such as uranium mining.

In order to help advance the nuclear renaissance, some of the cost barriers were removed. Decisions on how to permit a nuclear power plant were streamlined in 1989, but never really brought to light until recently. In the past, utilities suffered through double permitting episodes – one for construction, another for operations. In a self-serving fashion, environmental groups are quick to point out the cost overruns in building a nuclear plant. Behind those cost overruns were the delaying tactics used by those groups to prevent or stall a plant from coming online.

During the next round, construction and operating licenses are granted as one: combined Construction and Operating license. If the utility builds the plant, using the approved design, they can fast track the power plant’s operations. This should help reduce the final cost of plant construction. The first step for a new U.S. reactor is the approval for an early site permit. On March 9th, the NRC approved one such permit in Illinois for Exelon which plans to add more power on its existing Clinton site. Speed of construction has also improved. For example, the Japanese modular nuclear power plant can be constructed in 42 months.

It appears a confluence of events has taken place offering nuclear energy a step up. Concerns over carbon emissions, and the impracticality of present-day renewable energy alternative technologies replacing coal or natural gas baseload electricity generation by 2020, have opened the door for nuclear energy. The amount of uranium consumption envisioned, amidst all these grand plans of nuclear reactor construction, begs for a doubling of the amount of uranium production.

Imagine if every country consumed uranium in the same proportion in which it is produced as we find with the United States. In 2006, U.S. utilities consumed nearly 14 times what was produced by a handful of in situ uranium recovery operations. How long will this imbalance last should Asia, Africa and South America bring about a nuclear renaissance on their continents?

As we wrote from late 2005 through the first half of 2006, there might not be sufficient uranium for U.S. utilities. In 2006, two of the few bright spots among major uranium producing countries were Kazakhstan and the United States. The Kazakhs are rushing to become the world’s largest uranium miners, but they are establishing contracts with Asian nuclear utilities. The country has announced a substantial joint venture with Russia.

When U.S. utilities finally awaken from their nuclear hibernation, they may be hungry for uranium, but discover the yellowcake has all been spoken for. That’s one significant liability for Americans who are clueless about how their energy is produced and who have not yet heard about the nuclear renaissance moving full steam ahead outside of their borders. As we have discovered over the past six years, it’s not only gasoline at the pumps which costs more now. The price of uranium has also gone up a bit, too.