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Guest Post: Iran’s Nuclear Ambitions Highlight Kazakhstan’s Uranium Potential

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Submitted by John Daly of www.oilprice.com

Iran’s Nuclear Ambitions Highlight Kazakhstan’s Uranium Potential

One bonus of the global recession is that it wiped a lot of incompetent hedge fund managers and energy speculators from the canyons of Wall Street. As the Gordon Gecko sycophants regroup and look for the next Big Thing, maximizing profit while minimizing risk, the landscape looks very different than it did a year ago. In such a climate, it is uranium, not oil and natural gas that would seem to have the brightest future for one simple, overriding capitalist principle – supply and demand.

Whatever agreements are reached at December’s global climate warming summit in Copenhagen, they can only boost uranium’s appeal, as the carbon footprint of a nuclear power station consists primarily of the carbon cost of mining uranium fuel, not a nuclear power plant (NPP)’s operation. According a University of Wisconsin study, NPPs only emit about 17 tons of carbon dioxide per megawatt, little more than wind and geothermal power, the lowest sources. In contrast, coal has the highest carbon emissions at about 1,000 tons per megawatt. Accordingly, expect to see many nuclear power cheerleaders emerge in Copenhagen.

Consider – two years ago, London’s World Nuclear Association in May reported that worldwide, 256 reactors were either in the planning stage or under construction. Even Ukraine, site of the infamous 1986 Chernobyl disaster, has announced plans to build 22 new nuclear power stations, while the United States, site of the 1979 Three Mile Island partial meltdown accident, has 23 reactors being proposed. These new reactors would be in addition to the 439 nuclear power reactors worldwide in 31 countries generating 372,000 megawatts reported by the International Atomic Energy Agency, an increase of 58 percent, all needing fuel.

According to the Wall Street Journal on November 29, “Iran announced a massive expansion of its nuclear program.  President Mahmoud Ahmadinejad unveiled in a cabinet meeting plans to build 10 more nuclear facilities for enriching uranium.”

The nuclear issue even impacted last year’s U.S. presidential election, as Republican nominee John McCain committed his administration, if elected, to begin planning for the eventual construction of 45 new nuclear power plants in the United States by 2030, twice the number currently on the drawing boards.

Europe is also interested in expanding its nuclear power industry, which represents 45 percent of the world's currently operating nuclear facilities and 33 percent of new reactor construction. European nations currently operate 197 nuclear power plants generating 169,842 megawatts, and 12 European countries are planning or considering proposals for up to 67 additional reactors.

The story is the same in Asia. South Korea relies on nuclear energy to produce 45 percent of the country’s electricity and Japan is not far behind, relying on nuclear power for 30 percent of its energy needs.

Asia’s economic powerhouses China and India are interested in nuclear energy as well. India is increasingly interested in nuclear electrical power generation despite the fact that nuclear currently accounts for a paltry 3 percent to 4 percent of the country’s power needs; India has 19 planned and proposed nuclear power reactors.

Like India, China is a relative newcomer to nuclear power generation, deriving only 2.3 percent of its electricity from nuclear power, compared with the United States' nearly 20 percent. Of China's 11 current NPPs; the oldest, Qingshan-1, only came online in 1991. China's Commission of Science Technology and Industry for National Defense in its 11th Five-Year Plan for the Nuclear Industry said China will prospect for and develop indigenous uranium deposits in order to expand the nation’s ability to produce 40 gigawatts of nuclear power electrical generating capacity by 2020.

Further accelerating China’s move towards nuclear power, on 26 November Prime Minister Wen Jiabao announced his country’s plan to cut carbon-emissions intensity 40 to 45 percent by 2020 compared to 2005 levels. Carbon intensity is the emissions produced per unit of economic output, and in order to meet the target, China is apparently committing itself to implementing ambitious energy-efficiency and fuel-switching policies. Since most renewable and alternate non-fossil energy is in the power sector, this would mean a much higher percentage of China’s total electricity generation to meet these goals will need to come from non-fossil fuel sources, including renewables and nuclear energy.

To be on the safe side, China is also developing a national uranium reserve, to commence in 2010.

Despite Beijing’s ambitious attempts to expand uranium production in Xinjiang and elsewhere however, local sources will be insufficient to meet domestic needs despite country-wide prospecting. Analysts predict that within less than a decade China's planned nuclear power reactors will consume 44 million pounds of uranium annually, as more than 16 provinces, regions and municipalities have announced intentions to build nuclear power plants within the next eight years -- a total of 77 planned and proposed new reactors.

The revival of interest in nuclear power in the wake of record high oil prices and despite environmentalists’ opposition will prove a boon for uranium-producing nations. Current global production of uranium is approximately 40,000 tons annually. The math of the analysts quoted above on China’s needs means that without increased production, China alone would consume 55 percent of current world output within a decade.

Canada currently leads world production, with 25 percent of the world's output, followed by Australia. Kazakhstan is currently the world's third-biggest uranium miner. The three countries currently account for more than half of global uranium production. Other uranium mining nations include the United States, the Russian Federation, Portugal, Namibia and Niger, but those seeking reliable supplies must needs look to the “Big Three.”

Kazakhstan contains the world's second-largest uranium reserves, estimated at 1.5 million tons. In 2006 it produced 5,279 tons of uranium, 21 percent more than in 2005.

But Kazakhstan has ambitious plans to massively boost its output of the silvery metal, as evidenced by this year’s production. Kazatomprom, the country's national nuclear corporation, said in a press release last month that the country boosted uranium output an eye-watering 61 percent year-on-year in January-September to 9,535 tons, 3 percent above the government’s target for the period. Part of the reason for Kazakhtatomprom’s success was opening five new mines last year. According to Kazatomprom’s statistics, global uranium output in 2009 is projected to be 11,000 tons in Canada, 9,430 tons in Australia and 12,800 tons in Kazakhstan.

Kazakhstan is not only increasing its mine production, but moving to develop fuel fabrication facilities in an effort to move from mining to the higher value-added production of nuclear fuel fabrication.

Kazakhstan’s nuclear fuel issue will be of keen interest in Moscow, as it is currently a world leader in the technology. Despite its technological mastery, unlike its dominant position in the world’s oil and natural gas market, Russia’s footprint in the global uranium market remains relatively small. Russian state holding company Atomprom is the world’s seventh-largest holder of uranium ore reserves, the third-largest producer of nuclear fuel but only the world’s fifth-largest miner of uranium. Current Russian production is only 3,000 metric tons of uranium ore out of an annual requirement of 18,000 metric tons.

Russia's oldest operational nuclear power facility, Novovoronezh-3, came online in 1971. The Russian Federation now operates 10 nuclear power plants with a total of 31 reaktor bol'shoi moshchnosti kanalnii reactor units, which supply approximately 16 percent of Russia's energy needs. Except for the Bilbino Nuclear Power Plant in eastern Siberia, the other nine complexes are all located in European Russia. Putin’s administration is committed to expanding Russia’s nuclear energy use, noting in his 2007 annual address, “Over the entire Soviet period, 30 nuclear power plant units were built, but we plan to build 26 such units over the next 12 years, and to do so using the most advanced technology available.”

As with its oil industry, Kazakhstan has actively courted foreign investment for its mining operations. Kazakhstan has signed multiple contracts, including technology transfer agreements, with companies from Canada, Japan, France, and China. The world’s leading producer of uranium oxide, Canada’s Cameco, has a 60-percent share in Kazakhstan’s Inkai uranium mining operation, while the state atomic energy agency, Kazatomprom, the world’s fourth-largest producer, also has a stake in Inkai. Nor is the investment one way; Kazatomprom, flush with cash, has proposed purchasing a 10-percent stake in the U.S. company Westinghouse Electric.

While the price of uranium in the last several years has been volatile, the overall trend of the last decade has been strongly upwards. In 2001 a pound of uranium sold for between $5 and $10. Current prices in the spot uranium market have trended between $40 and $50 all year after having soared to $140 along with oil in 2007. The 2007 price resulted from the end of Russian dumping, surging apparent increases in demand plus massive liquidity via hedge funds and participation certificates, plus, combining with the difficulty of valuing uranium stocks. Despite these variables, given the projected construction and demand of NPP plants worldwide over the next decade, even a cashiered Wall Street analyst might be able to conclude that the price trend is likely to be upwards.

Rio Tinto's listed uranium subsidiary, Energy Resources of Australia CEO Rob Atkinson, recently commented in The Australian that current relatively low uranium spot market prices combined the effects of the global recession are hampering mine development in a number of countries, setting the scene for a future uranium shortage, noting, “Given production issues that are going on across the world and the (longer-term) demand from power stations, spot prices seem a bit out of kilter at the moment.” Atkinson’s comments echoed an earlier report, as the Royal Bank of Canada Capital Markets noted in a study, "Investing in Uranium Companies," that a supply gap will exist in uranium after 2013. As
NPPs are licensed to run for 40 years, with many re-licensed for another 20 years, new NPPs will not be replacing existing plants, but only adding to demand.

Kazakhstan’s nuclear policies have won it plaudits in the international community, beginning when it voluntarily relinquished its Soviet-era nuclear arsenal. Now the IAEA is considering Kazakhstan’s proposal to host a nuclear fuel bank on its territory, a gesture that might yet cut the international Gordian knot of Iran’s civilian nuclear program.

In short, Kazakhstan is fast becoming a major player on the world nuclear stage, even in the diplomatic sphere and its potential to increase its share of the world’s uranium market is a certain bet over the next few years, as it has its influence in the global oil market. Its government’s relative stability and investor friendly climate are added pluses, but for those Wall Street Masters of the Universe disinclined to deal with President Nazarbayev’s regime, there are always profits to be made in Namibia and Niger.

And, of course, China, Japan, South Korea and India are only too willing to pick up the slack.

This article was written by John C.K. Daly of OilPrice.com who focus on Fossil Fuels, Alternative Energy, Metals, Oil Prices and Geopolitics. To find out more visit their website at:
http://www.oilprice.com

 

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Mon, 11/30/2009 - 19:19 | 146896 SWRichmond
SWRichmond's picture

Uranium suppliers are a recovery play. 

FWIW, I am reconnecting with the nuclear industry after leaving it many years ago.  I have started getting recruiter calls interested in my B.S.N.E. from a major eastern U.S. university.  And there's almost nothing I'd like better than building a few new sites before I retire.  Time will tell.

Mon, 11/30/2009 - 19:59 | 146945 Anonymous
Anonymous's picture

Good luck brother.

Tell me one thing. What is the current solution for waste? Still buried in the dirt or in a cave?

Mon, 11/30/2009 - 21:40 | 147050 New_Meat
New_Meat's picture

Gwyneth Cravens "Power to Save the World" has the best non-technical discussion (dispassionate) of waste.  Of course, French are reprocessing Pu, DoE working on it with the Borg (Areva consortium) to get Pu into fuel cycle.

Waste solved technically, but bad political situation ongoing.

You really want waste?  How much Radium, U, etc. are emitted through a coal stack.

'course, we can turn off our computers ;-)

Mon, 11/30/2009 - 19:30 | 146913 Anonymous
Anonymous's picture

It looks like the Environmentalists are now backing Nuclear power as well. I wonder what they will go after next.

http://www.oilprice.com/article-environmentalists-admit-being-wrong-for-...
Nuclear Power

Mon, 11/30/2009 - 19:49 | 146929 Anonymous
Anonymous's picture

Investor friendly climate? Sure -- unless you pick the wrong side in the post Nazerbayev era.

Mon, 11/30/2009 - 21:38 | 147047 Ignore Amos
Ignore Amos's picture

Exactly, see how various Kazakh oil firms have faired.  For example, a story on Chaparral Resources:

http://thedealsleuth.wordpress.com/2008/01/22/chaparral-resources-shareholders-have-last-laugh-as-lukoil-settles-litigation/

And there are others to list too. 

Mon, 11/30/2009 - 22:06 | 147078 Ignore Amos
Ignore Amos's picture

And there is this from a fairly recent BBC report:

"In May Mukhtar Dzhakishev, the head of the state-owned nuclear firm "Kazatomprom", was arrested along with a number of his deputies."

http://news.bbc.co.uk/2/hi/asia-pacific/8153982.stm

Yet, for some reason I suspect nothing has really changed but the names of who to bribe.

  

Mon, 11/30/2009 - 19:54 | 146935 New_Meat
New_Meat's picture

Tyler/John, good summary.  India recently "finished" a civilian nuclear power plant (electricity) but didn't have fuel contracts in place to start-up. (gee, might have been other reasons) but this is indicative of the mid-term shortage.

Without commenting on global climate change, let alone human-caused CO2 induced global warming--the nuclear industry in the US and other countries faces environmentalist opposition regardless of the low emissions.  The waste chimera is Harry Reid's way to block any domestic development--building significant uncertainty with the ability of the plant to finally get its Operating License (and yes, ackn "current" COL process).  Witness Rowe at Exelon withdrawing his "friendly" bid for NRG.  NRG pushing forward on ABWR in TX, with long-term financing vs. shorter term cash flow issues at forefront among all participants.  Capital formation significantly challenged here.

Yes, I was attracted to ZH because of the big-picture finance points of view (thank you all) because this is a critical point in the life of a project--"Can the project deliver us positive return given all of these uncertainties?"

It is too far out in the future for the Squids (oh, how I love that moniker!) to get their bonuses; the previous pain in financial markets is burned into institutional (not local) memory.  So they stay away.  Toshiba-san has deep pockets, 50+ year time horizon, maybe leverage over GE, and the (now) second-best carry trade in the world.  So they methodically go for it.

We have a saying: "nuclear time".  Lot like Cheops' Law--Everything takes longer and costs more.

Problem is to quantify that.  This gets to demand.

Look over the U producers and fuel fabricators, might be a long-term play.  With an irreplaceable asset, sitting without fuel is not an option.  That is as close to  short-squeeze as can be had here.

Ned

Mon, 11/30/2009 - 21:23 | 147023 Anonymous
Anonymous's picture

While Uranium is good, Thorium seems to be a cost effective alternative according to India which has 25% of the world's reserves: http://en.wikipedia.org/wiki/Thorium

Mon, 11/30/2009 - 22:37 | 147108 Anonymous
Anonymous's picture

A long but worthwhile reading - http://world-nuclear.org/info/inf53.html

Tue, 12/01/2009 - 15:27 | 148084 greased up deaf guy
greased up deaf guy's picture

if you had 25% of the world's reserves, you'd be saying the same thing ;).

Mon, 11/30/2009 - 22:50 | 147123 Rollerball
Rollerball's picture

Think I'd rather be mining magnetite.

http://www.youtube.com/watch?v=w8TJlQlPi4s

Mon, 11/30/2009 - 23:20 | 147163 Anonymous
Anonymous's picture

Yeah. Check out Dzhakishev's inverview on Youtube. In it he describes how Clinton's aide yelled at him for stalling a deal with Giustra. He also says that he suspects Giustra manipulated uranium markets

http://www.youtube.com/watch?v=aGyMi1KCkc4&feature=related

Mon, 11/30/2009 - 23:26 | 147170 Anonymous
Anonymous's picture

I know there is likely better places to get technical answers but I thought I'd spark the minds of ZH regarding Uranium as an investment.

Is it practical (legal & safe) to purchase and hold physical Uranium as a store of wealth, investment opportunity, and/or future fuel source?

Looks like the U3O8 NYMEX contract is cash-settled onry. What's the procedure for accepting physical delivery, and where can I purchase some?

http://www.amazon.com/Uranium-Ore/dp/B000796XXM

Seems like Uranium has the characteristics of the ultimate investment asset. It combines the attributes of Gold (immutable, store of wealth across time & cultures, not fiat) and Oil (consumable, high-demand energy resource limited in supply). With all the reactors coming online in future years, the demand picture looks pretty clear. Treehuggers and politicians might halt NPP in America, but worldwide power-generation will become increasingly nuclear.

Bubble? We are well off the '07 highs, even relative to other similar assets. There is no yellowcake ETF. Speculation doesn't seem outlandish, it's not on any BUY list or CNBC. Didn't Lehman have like 50 tons of the stuff they needed to liquidate?

$45 per lb. makes Uranium over 500 times cheaper then gold on a per weight basis. Earth has about 20 times more Uranium then Gold, however Uranium is consumed (kinda) whereas Gold just exchanges hands. (I know it's like comparing apples to iPods, but it's the ultimate supply constraint of precious metals.) On a per BTU basis, using the world's most inefficient reactor, I wonder how does it stack up to NG and WTI?

I think having a huge safe of yellowcake in my basement will help me sleep at night. Secure our nations future energy needs, profit, and keep it out of the hands of our enemies.

Tue, 12/01/2009 - 01:37 | 147293 Anonymous
Anonymous's picture

No it is not practical to hold U. Transporting and/or storing ore would be prohibitively expensive. The refined products are not especially radioactive because it decays by alpha emission. However, inhaling yellow cake dust will kill you. Also, the refined metal catchs fire in certain circumstances. In any case, its possession is subject to numerous laws and DOE oversight.

Anyway, if we ever get smart and start reprocessing (or switch to even more abundant Thorium) its value will collapse.

Tue, 12/01/2009 - 08:18 | 147468 jm
jm's picture

Umm... I think the article referred to investment in the mining/exploration stocks.  Think junior gold miners.

What about lithium producers as an evergy play?

 

Tue, 12/01/2009 - 15:39 | 148111 greased up deaf guy
greased up deaf guy's picture

there are plenty of canadian junior explorers in which to invest: alberta, bayswater, ditem, pancontine, virginia energy, silver spruce, titan and uracan to name a few.  also, they're a usd hedge since they are listed in canada (plus their u.s. otc equivalents).  also, think production/processing with urre or plant production with shaw.  lastly, pkn is one of the few pure nuclear etf plays.

Tue, 12/01/2009 - 02:23 | 147327 Anonymous
Anonymous's picture

For what it's worth, since we are generally talking about
"energy useage", you might take some time to listen to the guy in this interview...Amory Lovins.

He says nukes (as well as coal and gas fired large plants) aren't even close to being the answer..two reasons:

>None of these address the problem that most people bitch about...cars and the cost of oil(eg gasoline). 1 out of 10 barrels of world production goes to power the US transportation needs. So far, I don't see any nuke-powered cars running around.

>Nukes (and other large power plants) are ridiculously expensive to build. The costs also aren't coming down drastically vs. the alternative energy ideas out there.

The interview is good to watch just to hear about the Alaska pipeline and the various attempts to shut it down (early in the show).

This guy has some good ideas particularly on buildings and co-generation within buildings, etc.

Alsp--interesting view on oil company's drilling projects, offshore stuff and the Alaskan Wildlife Refuge (why nothing will happen there even if the companies are given a free reign...at least not any time soon).

http://www.charlierose.com/view/interview/9175

Tue, 12/01/2009 - 03:17 | 147371 laughing_swordfish
laughing_swordfish's picture

Better be sure your "safe" is lead-lined and your house well placarded with "radiological hazard" signs.

One positive side effect of storing uranium in your house will be a large reduction in your electric bill - the house will glow in the dark.

And commercial grade yellowcake has radiologically significant amounts of cesium,strontium, radium and thorium content and it emits radon gas too.

So make sure you and your family wear film-type dosimeters and get checked out regularly.

Cheaper than Au yes, but just a tad more difficult to live with physically.

 

 

Tue, 12/01/2009 - 03:33 | 147378 CombustibleAssets
CombustibleAssets's picture

Pebble bed reactors

Tue, 12/01/2009 - 08:14 | 147467 Anonymous
Anonymous's picture

Current interest is probably focused more on Thorium.

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