Uranium, the nuclear fuel

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The global demand for electricity is expected to increase by 76% by 2030, and while everyone knows about the electric vehicle “revolution”, what is not often talked about is how will all that extra power be generated. Much of it will have to come from nuclear.

This is because our options are actually fairly limited when it comes to clean power, and by clean we mean no planet-warming greenhouse gas emissions.

Despite some anti-nuclear sentiment following the 2011 Japanese earthquake and tsunami that caused the permanent closure of the Fukushima Daiichi nuclear power plant, nuclear energy is considered low-carbon and deployable on a large scale, able to supply the world with clean, reliable and affordable electricity regardless of climate or weather conditions.

In fact, nuclear is the largest source of low-carbon electricity in the world behind hydroelectric power.

The US Department of Energy names three reasons why nuclear energy is clean and sustainable: 1/ it protects air quality by being zero emissions; 2/ nuclear energy comes with a small land footprint; and 3/ it produces minimal waste.

Most people understand that nuclear power is generated through fission, which is the process of splitting uranium atoms to produce energy. The heat released by fission creates steam that spins a turbine to produce energy, without the harmful byproducts emitted by fossil fuels, like carbon dioxide, carbon monoxide, methane, sulfur dioxide, nitrogen oxides and fine particulate matter. These pollutants contribute to acid rain, smog, lung cancer and cardiovascular disease.

According to the Nuclear Energy Institute, the United States avoided more than 471 million tons of carbon dioxide emissions in 2020, which is the equivalent of removing 100 million cars from the road. Globally, the use of nuclear energy avoids emissions roughly the same as parking one third of the planet’s cars.

The NEI also says that wind farms require 360 times more land to produce the same amount of electricity as nuclear, with solar power requiring 75 times more space. In comparison, a typical 1,000-megawatt nuclear facility needs just over one square mile to operate.

Put another way, to produce the same amount of power as a nuclear reactor, you would need more than 3 million solar panels, or over 430 wind turbines.

A typical 1,000 megawatt (MWe) reactor can provide enough electricity for a city of a million people.

Source: World Nuclear Association

While the nuclear reaction does create radioactive waste that must be properly disposed of, the amount of spent fuel is minimal. According to the DoE, all the used nuclear fuel produced by the US nuclear energy industry over the last 60 years could fit on a football field, buried to within a depth of 30 feet.

This is because uranium is so energy-dense. One uranium pellet equates to 17,000 cubic feet of natural gas, 120 gallons of oil and a ton of coal.

Source: U.S. Department of Energy

Despite nuclear’s many advantages, many prefer to think of renewables like wind and solar power as the holy grail of clean energy. Some mistakenly view nuclear power as a relic of the 20th century.

However, notwithstanding the incident at Fukushima, and a few radiation escapes that can be counted on one hand since nuclear power plants started in the 1950s, nuclear remains the cheapest, safest, and most energy-efficient source of power generation.

According to the World Nuclear Association, the nuclear industry has set a target of building an additional 1,000 GWe (one billion watts of electric capacity) of nuclear reactors globally so that nuclear power can provide 25% of electricity by 2050. Experts have concluded that to achieve the level of decarbonization needed to keep the rise in global temperatures to within 1.5°C will be much harder without an increased role for nuclear.

Uranium availability

Uranium is a relatively common element in the Earth’s crust, being a constituent of most rocks and even of seawater. Concentrations are approximately the same as tin or zinc.

Uranium can either be mined in open pits or underground depending on the deposit’s depth. The ore is then crushed and treated with acid to dissolve the uranium, which is recovered from the solution. The end product is uranium oxide concentrate, known as U3O8.

More than half of uranium comes from Canada, Australia and Kazakhstan, a former Soviet republic. according to the World Nuclear Association.  

Uranium sources by country, 2019. Source: World Nuclear Association

Uranium has been successfully mined since the 1940s. The table below shows which countries have historically produced uranium between 1945 and 2021. Up to 2019, more uranium had been mined in Canada than anywhere else, about 20% of the world total, however in 2020 Canada was overtaken by Kazakhstan/Uzbekistan.

Historical uranium production, 1945-2021. Source: World Nuclear Association

Uranium mining & exploration in Canada

According to the WNA, Canadian uranium exploration started in 1942 for military purposes. (A brief aside: Uranium and plutonium were both used to make nuclear bombs before they became important for electricity. However, the type of uranium and plutonium is different than that used in a nuclear power plant. Bomb-grade uranium is highly enriched with more than 90% of the uranium isotope U-235, versus up to 5% U-235 in reactor-grade uranium.)

After World War Two, uranium exploration gathered pace when the wartime ban on prospecting was lifted. Deposits around Bancroft, Ontario were discovered in the early 1950s, uranium was found in Ontario’s Elliot Lake region in 1953, and the northern Saskatchewan uranium province was also discovered in the 1950s.

By 1956 thousands of radioactive occurrences had been discovered, and by 1959, 23 mines with 19 treatment plants were in operation.

Exploration in the 1970s resulted in major discoveries in the Athabasca Basin of northern Saskatchewan. Until 2000, mines at Rabbit Lake, Cluff Lake and Key Lake accounted for most of Canada’s uranium production, however these deposits have been mined out. In 1998 Cameco Corporation discovered the massive McArthur River deposit. For the past two decades, most of Canada’s production has come from the McArthur River and Cigar Lake mines, however Cameco shuttered McArthur River in 2018 and temporarily closed Cigar Lake — the world’s highest-grade uranium mine — in response to the pandemic. In 2022 the company restarted its McArthur River/Key Lake operation.

Source: World Nuclear Association

Uranium market  

What factors impact uranium supply and demand?

Investors want to know about mine output, the number of nuclear reactors online, under construction or planned, and the signing of long-term contracts between uranium suppliers and utility companies.

Prices are mostly determined by above-ground mine supply and demand for nuclear energy.

On the demand side, nuclear energy is currently generated from 440 reactors, which supply about 10% of the world’s energy requirements. China is building the most new reactors, 21, followed by India with eight and Russia with three.

Last, year, the World Nuclear Association said demand for uranium is expected to grow by about a third through 2030.

On the supply side, major uranium producers are not producing at full capacity and there are few new uranium projects. The WNA says global uranium production fell from 63,207 tonnes in 2016 to 47,731 tonnes of uranium in 2020. The organization also notes that “only 74% of 2020’s reactor requirements were covered by primary uranium supply.”

The bullish case for uranium is strengthened by huge cuts to uranium production, especially from Kazakhstan, the largest producing country. The WNA report says supply deficits are likely to continue in the years ahead, driven by uranium production volumes more than 50% less between 2030 and 2040, and the fact that uranium exploration spending dropped 77% from 2014 to 2018.

Moving away from Russia

One of the catalysts for the uranium space at the moment is the freeze in Russia’s role as a leading provider of uranium to the western world.

Earlier this month, energy ministers from the Group of Seven, including the five member nations that still generate nuclear power — Canada, France, Japan, the US and the UK — formed a pact aimed at weakening Russia’s influence on nuclear energy.

“The focus was really on nuclear fuel cooperation and trying to ensure that we have resilience in the nuclear fuel supply chains,” Canada’s Natural Resources Minister John Wilkinson told Bloomberg. “Many countries in Europe have been using Russian and Belarusian uranium, and all would like to see a pathway to getting off of that.”

Wilkinson also said the G7 pact will likely bolster Canada’s own industry, noting “For Canada, there is a real opportunity in terms of supply of uranium. There’s also potential for supply of technology.”

Uranium prices

While uranium prices took a tumble following the Fukushima incident in 2011, since 2021 they have rebounded. The nuclear fuel hit an 11-year high in April, 2022 on the back of the transition from fossil fuels to cleaner forms of energy generation, and concerns about energy security brought about by the war in Ukraine.

Another factor in uranium’s favor was utility companies returning to the table to negotiate long-term supply contracts. It’s important to understand that only about 10-15% of uranium trades on the spot market; the vast majority of it is sold through long-term contracts between producers and utilities.

U3O8 spot price performance, 5-year chart. Source: Trading Economics

The decade-long low-price environment led to production curtailments and a dearth of uranium exploration.

For years, industry insiders have been saying uranium prices need to settle between USD$50 and $60 to incentivize new mines, however as inflation pushes mining costs higher, some, like Sprott Asset Management CEO John Ciampaglia, have said to develop a greenfield project uranium needs to be in the range of $75 to $100. Spot uranium currently trades around $52/lb.

As for when uranium prices might push higher, one of the factors to consider is Japanese nuclear reactors. In August 2022, Prime Minister Fumio Nishida said the nation is moving to restart idled plants and developing new reactors as parts of its green transition. The country wants nuclear power to account for 20-22% of its electricity by 2035.

Another consideration is where we are at in the nuclear fuel cycle. With Russia controlling 25% of global conversion capacity and nearly 40% of enrichment capacity, and the country at war with Ukraine, this has increased prices for these services. Experts believe that the higher cost of conversion and enrichment could bring the uranium spot price along for the ride.

While the uranium market suffered a blow to its reputation in the years following Fukushima, over the past five years ended March 31, 2023, the U3O8 spot price appreciated 140%, compared to just 20% for the BCOM (Bloomberg Commodity) Index.

As of March 31, spot uranium was up nearly 5% year to date, Sprott Asset Management said in its latest uranium report.

“We believe that uranium market fundamentals, which are the most positive in over a decade, will continue to support prices,”  said Jacob White, ETF product manager at Sprott Asset Management.

Like physical uranium, Sprott noted that uranium mining equities have had positive long-term results, having gained a cumulative 138% for the five years ending March 31, 2023.

Source: Sprott Asset Management


Uranium executives are sounding an optimistic note on the future of the uranium market, with sentiment improving as countries recognize the need to decarbonize.

“Nuclear (has started) to claw its way back into the policy toolbox,” Grant Isaac, executive vice president and CFO at Cameco, told the recent Future Facing Commodities event in Singapore. “And it’s done it at a time when energy security has really taken the forefront, and so we’ve just seen this complete change in the demand outlook.”

“If you want to decarbonize and if we want to have energy security and affordability, we need nuclear to be part of the conversation,” Monica Kras, vice president of corporate development with NexGen Energy, agreed.

Higher demand for uranium will continue to be driven by the building of more nuclear power plants, Japanese reactor re-starts, and utilities buying on long-term contracts.

On the supply side, positive developments for the uranium price include production curtailments and the lack of new discoveries.

The fact that prices are climbing into the $50-60 range also bodes well for uranium companies on the hunt for the nuclear fuel.