Japan Election An Early Holiday Gift For Uranium Market

Published on Friday December 28 2012 (AEST)

As many industry analysts predicted, uranium stocks rallied strongly following the Liberal Democratic Party's (LDP) landslide victory in Japan's election over the weekend. 

Since the Fukushima disaster, Japan has become the bellwether for the sector. The LDP's pro-business and pro-nuclear platform means that its win over the incumbent Democratic Party of Japan (DPJ) --- whose members promised in September to phase out the nation's nuclear power program by 2040 --- will help rebuild positive sentiment in the flagging uranium market. 

"We think this could be the turning point in the sector many have been waiting for and reiterate our affinity for select uranium names in 2013," said Chris Berry of Discovery Investing and House Mountain Partners in his latest edition of Morning Notes. The LDP garnered a two-thirds majority in Japan's lower house of parliament after campaigning on the "need to restart the reactors to cut the cost of importing natural gas and coal to fire conventional power stations," reported Bloomberg's Christopher Donville. News of the election's outcome led to significant jumps in some companies' share prices, including Uranium One (TSX:UUU), Energy Resources of Australia (ASX:ERA), Bannerman Resources (ASX:BMN,TSX:BAN), Paladin Energy (ASX:PDN,TSX:PDN) and Cameco (TSX:CCO,NYSE:CCJ). Pre-Fukushima, nuclear power accounted for nearly 30 percent of Japan's energy supply; now, however, only two of its 50 nuclear reactors are operational. 

Alternatives like natural gas, oil and coal resources are limited on the island nation, and the high cost of importing energy has placed a significant burden on the country, which is trying desperately to rebuild its economy. To alleviate the problem, the LDP believes Japan must restart the remaining idled reactors quickly and has proposed a three-year review to determine which are safe enough to come back online. "The cost of higher energy imports is increasing the cost of living; Japan's balance of payments is weakening; and the government's ability to stimulate economic activity is being hampered. Renewable energy and imports of oil/liquefied natural gas are too expensive for the economy to maintain," said Robert Gill, portfolio manager with Morrison Williams Investment Management, as reported by The Globe and Mail. However, investors should remain cautious, advises Berry in Morning Notes. "To be clear, if and when a re-start of the Japanese reactors commences, it may take longer than many anticipate as each nuclear plant must be inspected and cleared to resume operations. 

Reportedly, the Japanese Nuclear Regulation Authority is actively inspecting six plants to determine if they were built on active fault lines." To facilitate a faster restart process, industry insiders have said the LDP will need to push through changes to the current regulations set down by the DPJ, which require that any nuclear reactor restart have the approval of the prime minister, energy minister, two additional cabinet members and Japan's new nuclear regulation agency. Analysts expect a wave of nuclear restarts in Japan between 2013 and 2015. That will increase U3O8 demand at the same time as the market is forecast to experience a significant drop in available supply. 

Near the end of 2013, the US-Russian Highly Enriched Uranium (HEU) Agreement --- officially dubbed the Megatons to Megawatts Program --- will be coming to an end. The HEU agreement has accounted for nearly 15 percent of global uranium supply, and its termination in the new year heralds a looming uranium supply shortage that market watchers believe will be the catalyst for a return to the glory days for uranium stocks, especially if the industry keeps experiencing supply setbacks. 

The most recent report of production setbacks comes from Australia, where the federal Environment Minister has delayed an approval decision on Toro Energy's (ASX:TOE) Wiluna uranium project --- slated to become the state of Western Australia's first uranium mine. Couple the end of the HEU agreement, the new beginning for Japan's nuclear industry and the enormous growth in China's nuclear program --- 60 new reactors over the next decade --- with the avalanche of expansion and production deferrals this past year --- including Olympic Dam, Langer Heinrich, Cigar Lake --- and the uranium market just may be on the verge of a roaring comeback.

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Uranium - Basic Economics 101

Published on Monday December 17 2012 (AEST)

Some facts about Uranium requirements going forward.  

BP, BHP We read and hear a lot of misinformation in the mainstream media about nuclear energy and its use world wide. Many countries expect to be forced to use more nuclear power in their systems, that no matter what you may read or hear. 

It is basic economics, and inevitable. 

Japan is now pursuing new sources of Uranium, and it is Uranium that is the fuel for nuclear plants. Analyst in the sector are saying Uranium supplies are looking tight in the face of potentially large new demand. They are forecasting strong growth in nuclear power centers on China, India, and Russia. The populations of these nations are huge, and are among the lowest consumers of electric power in the world. According to British Petroleum’s “Energy Outlook 2030″ NYSE:BP study, the countries will increase their use of nuclear power 7.8% per year through Y 2030. 

That means the nuclear power demand from those countries will more than double by Y 2020 and will grow 4 times that by Y 2030. Putting that into a global perspective; the world has 436 active nuclear reactors today with a total capacity of 374 gigawatts (GW). Another 62 reactors are under construction and will add 63 GW of capacity. 

Each gigawatt of increased capacity requires about 200 metric tons of Uranium per year. And the 1st fueling for new reactors require between 400 to 600 metric tons of Uranium, according to the World Nuclear Organization. So, the 62 new plants will need a minimum of 25,000 metric tons of Uranium in their 1st yr of production and 12,400 metric tons per year after and ongoing. According to the World Nuclear Organization, total demand for uranium will hit 67,990 metric tons in Y 2012. 

The 62 plants under construction will raise that 18%. Food for thought, there are another 484 reactors on order, planned, or proposed.  

China alone accounts for 171 of those planned reactors, 

India for 57. 

Russia for 44. 

These potential reactors represent 542 GW of electric power. When those reactors are built, they will more than double the world’s existing nuclear facilities. On the Uranium supply side the supply is likely not to easily meet demand, what with the economic uncertainty, the huge capital costs, and negative public sentiment toward nuclear power. The highest-profile supply problem was BHP Billiton’s NYSE:BHP decision to delay its Olympic Dam mine expansion, taking 14,545 metric tons of Uranium per year out of the supply chain. Plus, the Kazakhstan government shelved about 4,500 metric tons of new projects recently.  

Some other notable delayed/shelved projects

1/  Areva’s Trekkopje, 
3,600 metric tons per year put on hold.

2/  Areva’s Imouaren, 
5,000 metric tons per year put on hold.

3/  Cameco’s Double U, 
reduced by 1,800 metric tons per year.

That is about 29,550 metric tons of Uranium per year of expected supply has been curtailed. This could create a substantial supply squeeze over the next few years. 

This is now basic economics 101, when supplies are low and demand is high, prices will rise. And that most often means gains can be had when Uranium prices enter a its next Boom. 

Stay tuned…...................................

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Uranium Set To Get A Boost From Japanese Election Outcome

Published on Sunday December 16 2012 (AEST)  

With opinion polls forecasting a victory for the pro-business Liberal Democratic Party the outcome of Japan's election this weekend is expected to revive the fortunes of uranium producers and explorers, hard hit since the 2011 Fukushima disaster. 

The Australian reports that the Liberal Democratic Party, traditionally considered the pro-business and pro-nuclear wing of Japanese politics, is expected to replace the Democratic Party of Japan in office following several years in opposition. Despite the recent Fukushima disaster which has tainted the reputation of nuclear energy in Japan the LDB has a relatively nuclear-friendly policy platform which would see a number of Japan's 48 decommissioned reactors rebooted following a three-year review process. 

If implemented the proposal would revive uranium demand from Japan and significantly bolster the fortunes of producers and explorers of the nuclear raw material, all of whom have endured hard times in the wake of the Fukushima disaster. The closure of Japan's nuclear power system took a severe toll on the global uranium sector, with uranium prices and shares in key producers falling precipitously. 

Australia's Paladin Energy has seen its share price fall from $5 just prior to the Fukushima disaster to around 89c at present, while the plunge in uranium prices due to the absence of Japanese demand has attenuated profits. 

Another factor likely to boost the fortunes of uranium in the near-term is the expiration of the highly enriched uranium agreement (HEU) next year, which currently provides around 15% of global uranium supply via the conversion of which Soviet nuclear warheads into reactor fuel.

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Delivery Of First Floating Nuclear Power Plant Set For 2016

Published on Friday December 14 2012 (AEST)  

Russian utility Rosenergoatom has signed a new contract with the Baltiysky Zavod shipyard for the completion of the first floating nuclear power plant. It is now scheduled for commissioning in 2016. Under a contract signed on 7 December in St Petersburg, Baltiysky Zavod-Shipbuilding - the successor to the Baltiysky Zavod shipyard - will now complete the vessel for delivery to Rosenergoatom on 9 September 2016. The plant – dubbed the Akademik Lomonosov – will then be put into use in Vilyuchinsk, in the Kamchatka region in Russia's far east. The keel was originally laid for the first floating plant at the Sevmash shipyard in Severodvinsk in April 2007. 

However, in 2008, Rosatom said that it was to transfer its construction to Baltiysky Zavod because Sevmash was inundated with military contracts. A contract was signed in February 2009 between Rosatom and Baltiysky Zavod for completion of the plant. At that time, the vessel was due to be completed in 2012, but work was hindered as the shipyard found itself facing bankruptcy. 

Shipyard reborn In August 2011, at the request of Rosenergoatom, the partly-built floating nuclear power plant was seized by the Court of Arbitration of Saint Petersburg as the Baltiysky Zavod shipyard faced bankruptcy proceedings. Rosenergoatom was afraid that it could lose its investment in the 9.8 billion rouble ($340 million) project if another claimant seized the shipyard's assets during those proceedings. The largest shareholder in the Baltiysky Zavod shipyard, with an 88.3% stake, was United Industrial Corporation, which is owned by Sergei Pugachev. 

This stake had been pledged to Russia's Central Bank as collateral for an unreturned loan to International Industrial Bank, another Pugachev-controlled company which was declared bankrupt in November 2010. Baltiysky Zavod went into receivership in January 2012 and Rosenergoatom was forced to cancel its contract with the shipyard. However, the shipbuilding company was acquired by state-owned United Shipbuilding Corporation in May and has since been relaunched as a new company. According to Rosenergoatom, over 90% of the work has been completed on the hull of the Akademik Lomonosov. 

The turbo-generators have already been installed, while the two 35 MW KLT-40S nuclear reactors - similar to those used in Russia's nuclear-powered ice breakers - have been assembled and delivered to the shipyard ready for installation. The first batch of fuel for the floating plant has also already been produced.