Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
There will likely be a further recovery of uranium prices in 2023 as nuclear energy regains popularity, was the sentiment among uranium specialists who spoke on Monday at the Vancouver Resource Investment Conference (VRIC).
With several of the world’s most developed countries announcing plans to extend the life of their existing nuclear power plants and some expanding their fleets, there was an optimistic buzz at VRIC.
Amid the energy crisis accelerated by the Russian-Ukraine war, countries like Japan, France, South Korea, India, the UK, the US, and Germany recently announced new constructions and additional incentives and funding for nuclear power.
“I think the principal factor is the change of public opinion in Japan. With regards to the pace of Japanese restarts, the biggest source of new demand that you could have on the planet is from their 40 existing reactors,” said Rick Rule, CEO of Sprott US Holdings.
“They don’t have to be built, they just have to be restarted. That would raise the structural demand for uranium by between 10 and 12 million pounds a year.”
According to Goviex Uranium CEO Daniel Major, demand is set to increase while supply remains tight.
“At the end of the day, we consume about 190 million pounds a year. Currently, we dig out of the ground about 130 million pounds,” said Major.
Spot uranium started the year rising from $48.66 to over $50/lb in a two-week period.
For Rick Rule, some greenfield supply could come from Kazakhstan, but with a new incentive price close to $70 a pound.
According to the veteran investor, the outlook is also very bullish over the next ten years.
“There’s a billion people on Earth that have no access to electricity at all. There are 2 billion people on Earth who experience energy poverty, either intermittent energy or unaffordable energy,” said Rule.
“When we talk about energy in the West, we talk about stuff like Teslas,” he pointed out. “Increasing the living standards of the poorest of the poor means that we’re gonna need more energy from all sources. Solar, sure. Wind, yeah. Coal, of course. But nuclear is a wonderful source of post-construction, cheap, reliable, non-carbon generating baseload power.”
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Comments
Malcolm Stewart Rawlingson
While nuclear power may have been “persona non-grata” in western nations for several decades that is not the case in nations like China and India with their vast populations. Both are very pro-nuclear and are building dozens of nuclear reactors.. It is of course dawning on the western nations that nuclear power is the safest, cleanest and most reliable way to produce electricity. Reactors that were slated to be shut down due to political ideology are now having operating lives extended for decades more. Also lost in the mists of Uranium speculation is the fact that almost all of the new reactors are over 1000MW in size and some even as large as 1600MW. This translates into a very large future demand for Uranium. Also these reactors are using higher enrichment fuekl which nmeans more U3O8 feedstock. With a 60M lb shortfall based on CURRENT demand and the fact that there are no new Mc. Artther River or Cigar Lake mines anywhere close to production the shortfall is going to get worse. And to add icing on the cake….reactors cannot run on anything else but Uranium. Therefore a captive fully inelastic market place. There is no better scenarion in investing right now.