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China to supercharge uranium race with 150 new nuclear reactors

It is the news that the uranium players have been waiting for: a potential new, huge surge in demand that will reward mining companies ready to go into production.

China has reported overnight to be planning 150 new nuclear reactors over the next 15 years — more than have been built around the world since 1980 — a signal that uranium production needs to be stepped up, fast and soon.

In a lucky coincidence, Paladin Energy (ASX: PDN) announced Wednesday that it is making progress on restarting its Langer Heinrich uranium mine in Namibia. 

And earlier this week, advanced uranium explorer Boss Energy (ASX: BOE) said it will begin a new drilling program at its flagship Honeymoon uranium project in South Australia with the aim of building mining inventory to extend production life and achieve higher rates.

Boss has so far built its uranium resource to 71.67 million pounds.

Meanwhile, the Nuclear Regulatory Council of Turkey has approved construction of a fourth reactor at the Akkuyu nuclear power plant in Mersin Province, southeast Turkey. The unit will be built by Akkuyu Nuclear, a subsidiary of Russian nuclear engineer Rosatom, and will be the final phase of the $20 billion project. 

Already signs of short-term uranium shortage

Kazatomprom, the state-owned uranium miner in Kazakhstan, has reduced its expected production figures for 2021, due to COVID-related and supply chain delays in exploration and development.

Last week Canada’s Cameco cut its forecast for production for the year, also citing supply chain issues.

This confluence of events should halt the recent slide in the uranium spot price, last reported at US$43.20 per pound.

China’s move also comes at a time when that country has been experiencing power shortages and blackouts, leading to Beijing’s unprecedented decision to subsidise coal prices and revealing its heavy dependence on imports.

Moreover, the hedge funds have now moved into uranium, mopping up existing inventory. Canada-based Sprott Physical Uranium Trust had, at last report, acquired 32.6Mlb of yellowcake. Kazatomprom has also announced a uranium fund company that will store physical supply and trade uranium on the company’s financial markets.

The cost of China’s new nuclear ambition has been estimated at US$440 billion (A$589 billion) and will, if executed, mean that country leaping ahead of the US as the world’s largest nuclear energy generator.

It has been announced previously by the China General Nuclear Power Corporation that it was looking, by 2035, to greatly expand nuclear capacity.

China motivated by power crises

Beijing is already passing off the move as part of its effort to reduced carbon emissions, but the power crisis it is now facing due to coal shortages (and costs) and oil prices is no doubt central to the decision, too.

China has, at present, 2,990 coal fired power stations and it will require a huge lift in nuclear capacity to allow Beijing to retire a meaningful number of those thermal generating plants to meet its emission reduction commitments.

Also, it was reported in 2019 that China was looking to build a business based on constructing nuclear reactors abroad, a business already a major earner for Russia.

The country has also been working to refine its modular reactor technology, a technology seen by many proponents of nuclear energy as the future of the industry.

Australian uranium stocks jump on China news

After the first hour of trading, it was clear that investors were wading into local stocks after the China news broke.

Lotus Resources (ASX: LOT) which — like Paladin — has an existing mothballed mine, this one in Malawi, that can be reactivated saw its shares up 13.56%. Paladin rose 10.3% at the open. Another Namibia player Deep Yellow (ASX: DYL), which has an advanced suite of projects, was up 9.2%.

Explorers Elevate Energy (ASX: EL8) was up 8.1%, 92 Energy (ASX: 92E) 8.9%, Alligator Energy (ASX: AGE) 8.7%, Vimy Resources (ASX: VMY) 8.7%, and Wiluna hopeful Toro Energy (ASX: TOE) rose 10.3% in the first hour of trade.

Paladin, in its restart plan update, said the Langer Heinrich mine in Namibia could be operational again at a cost of US$81 million based on a 17-year mine plan and an ore reserve of 84.8Mt at 448 parts per million uranium oxide. 

It would take 18 months to get the mine back into production, the company added.

Source: Small Caps