Pebble bed modular reactors
I first learned about pebble bed modular reactors (PBMR) in this article in Wired magazine. Simply put, the PBMR is designed to skirt some of the biggest headaches of nuclear power: pausing to refuel (which takes on average, about 40 days), complex piping and melt down. Small pebble bed reactors ran in Germany in the 1970s, and China has recently started one (described in the Wired article). A larger version is now being designed by South Africa's state utility, with investments from British Nuclear Fuels, owner of the reactor maker Westinghouse, and Exelon Corp., the largest U.S. operator of power reactors according to this source.
PBMR is not without its detractors: e.g. http://www.tmia.com/industry/pebbles.html, and I simply don’t know enough to assess the merits of the argument involved. However, the important fact is that construction plans like the one in South Africa are moving forward. In the larger picture, nuclear energy is definitely on the upswing. In the US, President Bush has highlighted nuclear energy as part of his energy policy in several major speeches, as recently as during President Hu’s visit. Perhaps a little surprising, nuclear is increasingly being recognized by some environmentalists as a “green-house gas free” source of energy. Nonetheless, I’m not holding my breath for any new nuclear reactors in the US. Waste disposal remains a thorny issue. The Yucca Mountain depository project has mired in political opposition. Now that Harry Reid (D-NV) is the minority leader in the Senate, anything but smooth sailing can be expected. Overall, the opposition to nuclear energy is a particularly potent manifestation of NIMBYism, based on the (some will say irrational) fear of nuclear radiation.
Uranium supply and demand
Like so many other commodities, the main incremental demand now comes from China and India. In particular, China is planning to construct as many as 30 new nuclear power plants in the next 15 years (source), while India will have 7 new nuclear power plants coming on line by 2008 (source). More information on the nuclear industry in various countries can be found here.
The following figure depicts the medium projected uranium supply/demand upto year 2050 from the IAEA. The blue column corresponds to “market based production” which is seen to be steadily increasing. The actual supply/demand picture in the near future is not clear, but the IAEA is predicting a deficit starting around 2025 even in the medium demand case if only "reasonably assured reserves" are taken into consideration. I expect the price of uranium to appreciate significantly such than lower grade ore bodies become economical well before that point is reached.
Canada, Australia, and Kazakhstan are the top uranium producing countries. The mines in Canada are concentrated in Athabasca basin in the province of Saskatchewan. The table below summarizes the most productive mines in that region.
Source for the above figure and table: www-pub.iaea.org/MTCD/publications/PDF/Pub1104_scr.pdf (Large PDF file to open in a new window)
Uranium occurs naturally as an oxide, U3O8, which is also known as yellow cake (made famous by those famous 16 words in Bush’s state of the union address). Well, yellow cake has been selling like hot cakes:
Source: The Ux Consulting Company
With price action and supply/demand dynamics like that every investor should take a look at this sector.
Other sources of information
The purpose of this big picture overview is to raise my readers’ awareness of the investment opportunities in the uranium sector. It is not my intention to talk about specific companies. I do have to disclose that I own stocks in International Uranium (IUC.TO/IUCPF) and BHP Billiton (BHP) which has a considerable uranium mining operation through its acquisition of WMC Resources. I plan to increase my position in this sector.
A starting point for your research maybe this long list of uranium mining and exploration companies. Many junior Canadian uranium miners/explorers are listed in Canada and available in the US as pink sheets. I will talk about how to purchase them if there is enough interest.
Among independent analysts and newsletter writers, James Dines has been credited with being one of the earliest in identifying the latest opportunity in uranium. The Big Picture Speculator (not to be confused with bigpicture.typepad.com) is another newsletter concentrating on commodities include uranium mining and exploration companies. Sprott Asset Management in Canada is a good source of information. 321energy and Kitcometals regularly have articles on uranium.