The Case for Uranium

Why it looks bullish and why we should embrace it? - Article #55

In this 14-minute article, The X Project will answer these questions:

• I. Why this article now?

• II. Where is this information coming from?

• III. What is the demand situation for uranium?

• IV. What about the supply of uranium?

• V. What are the pricing dynamics?

• VI. What is the geopolitical situation related to uranium?

• VII. What are recent environmental and policy shifts?

• VIII. What are the major economic challenges?

• IX. What does The X Project Guy have to say?

• X. Why should you care?

Reminder for readers and listeners: nothing The X Project writes or says should be considered investment advice or recommendations to buy or sell securities or investment products. Everything written and said is for informational purposes only, and you should do your own research and due diligence. It would be best to discuss with an investment advisor before making any investments or changes to your investments based on any information provided by The X Project.

I. Why this article now?

The X Project first mentioned uranium in article #21, “Energy Transition Crisis—A summary of the 8-part docuseries by Erik Townsend,” in which a case was made for a nuclear renaissance. More recently, in article #46, “Generational Opportunities:  A Summary of "The Norwegian Illusion," GoRozen's Latest Market Commentary,” Section VI was devoted to uranium. This article will expand on that section and dive deeper into the case for uranium.

But why now? There was some big, mainstream media headline news this week about the U.S. Senate passing legislation that bans the imports of uranium from Russia. For example, see this article from Reuters:

The X Project does not think this ban will have any major consequence on the uranium market, just as the other bans and price caps on other Russian imports and exports proved ineffective. However, since the news made us think about uranium, it is a good reason to look closely at the market.

II. Where is this information coming from?

Justin Huhn is the highly respected and influential publisher of Uranium Insider, and he offers a free report, the title of which I borrowed for this article, “The Case for Uranium,” that you can get for free from his website. He is also a frequent guest on popular podcasts and YouTube channels, including these recent appearances:

• MacroVoices #423 Justin Huhn: Accelerated Demand Growth in Supply Driven Bull Market

  • MacroVoices Erik Townsend &  Patrick Ceresna welcome back, Uranium Insider Founder, Justin Huhn. Erik & Justin discuss the Uranium bull market, the Uranium mining sector and where it’s headed to next.

  • April 11, 2024, with 6,416 views

• Uranium Market Minute – Episode 208: Uranium is now a DEMAND Story

  • This is Justin Huhn’s Uranium Insider Channel

  • April 21, 2024, with 15,273 views

In addition to Justin’s perspective, The X Project also took into account information from the following YouTube interviews:

• Uranium Mining all the way to Nuclear Power (Mike Alkin Interview)

  • Mike Alkin is the Chief Investment Officer and Founder of Sachem Cove Partners, a specialty Uranium fund based in New York. This is an extremely high-level discussion around everything Uranium, from the mining all the way to enrichment and power generation.

  • April 19, 2024, with 12,845 views

• Uranium Market Insights + Uranium Auction + Fuel Banks - Dustin Garrow

  • Interview with Dustin Garrow, a uranium expert with more than forty years professional experience in global commercial #nuclear fuel markets including marketing and sales contracting for natural uranium concentrates (u3o8), uranium conversion services (UF6) and enrichment services.

  • April 9, 2024, with 7,507 views

• Uranium - Utilities, Driving Demand & Future Supply

  • The uranium market is experiencing a fascinating period of transition, presenting both challenges and opportunities for investors. In a recent discussion, industry experts Dustin Garrow and Matt delved into the key takeaways from the World Nuclear Fuel Cycle conference in Almaty, Kazakhstan, and explored the current state of the uranium market.

  • April 26, 2024, with 11,826 views

III. What is the demand situation for uranium?

Globally, there's a notable increase in nuclear reactor projects. China and India are particularly aggressive, with multiple reactors under construction. The global nuclear fleet of 436 operating reactors is expected to grow significantly in the next few decades, with 62 under construction, 118 ordered or planned, and 323 additional plants proposed.

The development of Small Modular Reactors (SMRs) is gaining traction due to their scalability, safety, and efficiency. Countries like the United States and the UK are investing heavily in this technology, and many industry projections do not consider the impact that SMRs could have on demand.

The rise of AI technologies demands more power, much of which needs to be consistent and reliable. Check out these recent news articles if you have time:

• Microsoft, Brookfield to partner on renewable energy projects

• Data Centers Now Need a Reactor’s Worth of Power, Dominion Says

• The power grid has an AI problem

• Amazon Pays $650 Million for Nuclear-Powered Data Center in Pennsylvania

• Amid explosive demand, America is running out of power

Due to its baseload nature, nuclear energy is becoming an increasingly attractive option for powering large data centers.

IV. What about the supply of uranium?

Due to underinvestment in the supply chain of uranium fuel for nuclear reactors ever since the Fukushima accident, analysts are projecting a 30-50+ million pound annual deficit for the foreseeable future, which is 20-33%+ of supply.

Due to regulatory, environmental, and logistical challenges, new uranium mines take 5 to 10 years to develop, if not longer. Despite high uranium prices, suppliers' response has been sluggish, with very few new significant projects announced.

V. What are the pricing dynamics?

The uranium spot market is relatively thin and prone to significant price fluctuations based on relatively small changes in supply and demand. For instance, prices have fluctuated from around $18 per pound in 2016 to $100 per pound recently.

Long-term contracts provide more stability in pricing but reflect a gradual increase in uranium prices, indicating a trend towards higher baseline prices due to tightening long-term supply outlooks.

VI. What is the geopolitical situation related to uranium?

Kazakhstan and Russia dominate the global uranium market, controlling significant portions of the world’s uranium enrichment capacity. Any political or economic instability in these regions can disrupt global supply.

Countries dependent on nuclear power increasingly attempt to diversify their uranium sources to avoid geopolitical risks. This includes investments in alternative mining locations and technologies such as uranium extraction from seawater.

This is the point of this week’s legislation. Quoting from the Reuters article cited above:

“The U.S. has been preparing since 2022 for the possibility that Russian President Vladimir Putin would stop selling it nuclear power fuel, and a pending ban on Russian imports will help boost domestic capacity to process uranium fuel, the outgoing top nuclear energy official told Reuters.

But Kathryn Huff, the DOE's assistant secretary for nuclear, who steps down on Friday, told Reuters the U.S. is prepared for any scenario.

"The reality is this: over the last few years there has been a very real and present possibility that Russia could stop abruptly sending enriched uranium to the United States."

Countries including Canada, France and Japan will help the U.S. deal with an "allied alternative" to Russian uranium, Huff said.

And the imports ban would unlock $2.7 billion from previous legislation for building out the domestic uranium industry.

"A paired structure in which we invest in new conversion and enrichment capacity and then protect those investments with some import restrictions is what's required," to cut dependence on Russia, said Huff, who will return to university teaching and nuclear research.”

VII. What are recent environmental and policy shifts?

Many countries have set ambitious goals to achieve net-zero carbon emissions, including plans to expand nuclear power as a key component of their energy mix. Nuclear energy's low greenhouse gas emissions compared to fossil fuels are improving its perception. New policies and subsidies are being developed to support the nuclear industry in various countries.

A big shift occurred in December 2023 at COP28:

“During the World Climate Action Summit of the 28^th Conference of the Parties to the U.N. Framework Convention on Climate Change today, more than 20 countries from four continents launched the Declaration to Triple Nuclear Energy.  The Declaration recognizes the key role of nuclear energy in achieving global net-zero greenhouse gas emissions by 2050 and keeping the 1.5-degree goal within reach.  Core elements of the declaration include working together to advance a goal of tripling nuclear energy capacity globally by 2050 and inviting shareholders of international financial institutions to encourage the inclusion of nuclear energy in energy lending policies. Endorsing countries include the United States, Armenia, Bulgaria, Canada, Croatia, Czech Republic, Finland, France, Ghana, Hungary, Jamaica, Japan, Republic of Korea, Moldova, Mongolia, Morocco, Netherlands, Poland, Romania, Slovakia, Slovenia, Sweden, Ukraine, United Arab Emirates, and United Kingdom.”

The next section will examine the major economic challenges in uranium mining. In Section IX, I will tell you what I think. Then, in Section X, why should you care and, more importantly, what more can you do about it. However, I have just hit a new paid subscriber threshold, so you must now be a paid subscriber to view the last three sections. The X Project’s articles always have ten sections. Soon, after a few more articles, the paywall will move up again within the article so that only paid subscribers will see the last four sections, or rather, free subscribers will only see the first six sections. I will be moving the paywall up every few weeks, so ultimately, free subscribers will only see the first four or five sections of each article. Please consider a paid subscription.

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VIII. What are the major economic challenges of uranium mining?