Stunning Uranium Industry Growth Ahead: Jim Paterson

By Jim Paterson

What do the naysayers say about the future of the nuclear sector and the uranium industry?

Frankly, I don’t care, as I believe it is an absolutely stunning time to be an investor in our business. But not stunning like how you feel after being punched in the nose repeatedly for almost four years, as participants in our industry have been. Rather, the valuations of the companies in the uranium sector are so deeply discounted, while the decade’s long runway to demand growth is so clearly marked in front of us, that the opportunity for future gains is stunning.

Environmentalism gets real

Firstly, let’s talk about a perception change that may be taking hold in the broader global scientific and environmental communities. Seventy-four leading conservation scientists from 14 countries just attached their names to an open letter by two Australian professors; it has been republished at ConservationBytes.com. The balanced — but pro-nuclear energy — letter asks that “the environmental community weigh up the pros and cons of different energy sources using objective evidence and pragmatic trade-offs, rather than simply relying on idealistic perceptions of what is ‘green.’” Scroll right to the bottom of the page on that web page and take note of the pedigree of the signatories — these are not industry shills.

Governments of many countries share the view expressed in the open letter discussed above. Worldwide, 436 reactors are operating, with 71 currently under construction. With each reactor expected to have over 50 years of operating life and consume over 400,000 pounds of U3O8 per year, we are dealing with some serious future demand growth. China, Russia and India provide us with some great examples of where the industry is going.

China’s five-year plan(s) = STAGGERING

Mainland China has 22 nuclear power reactors in operation, 26 under construction and more about to start construction. At 10:00 p.m. on December 15, Unit 1 of the Fangjiashan plant in China’s Zhejiang province became China’s 22nd nuclear power reactor to enter commercial operation.

In September 2013, the Chinese State Nuclear Power Technology Corporation estimated that four to six new reactor units per year would be needed up to 2015; then six to eight units per year from 2016 to 2020, and 10 units each year after 2020. Do the math based on 400,000+ pounds of new U3O8 demand annually for each new reactor. Right now, a new reactor is turned on in China every two months, but by 2020 it has been proposed that a new reactor will be plugged into the grid EVERY MONTH!

The success of Chinese plans for nuclear power are an absolute necessity due to: the electrification of cities and power manufacturing centers; plans for large-scale seawater desalination by 2015; and demands to replace coal-fired power plants with less-polluting power sources.

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The Russian bear roars

In August 2011, Russia established Rusatom Overseas to “…manage … the development of Russian nuclear business abroad, as well as working to create a worldwide network of Rosatom marketing offices.”

One of the first projects Rosatom is implementing using the build-own-operate (BOO) structure is the Akkuyu nuclear plant in Turkey. There will be many more of these BOO structures around the world as Russia finances, builds and operates nuclear plants on behalf of client state countries. These client state countries have a dire need for electricity (base load power), but lack the financial resources and expertise to build a reactor.

This month, Moscow and Tehran signed two contracts where Russia will build as many as eight nuclear power plants in Iran. A spokesman from the Atomic Energy Organization of Iran said construction of the first two plants will begin in the current Iranian year.

Finding new homes across the world

An agreement announced on December 11 between Rosatom and the Nuclear Power Corporation of India calls for the construction of 10 more reactors for nuclear power plants in India.

In July 2014, then newly elected Indian Prime Minister Modi urged India to triple its nuclear capacity by 2024. He praised “India’s self-reliance in the nuclear fuel cycle and the commercial success of the indigenous reactors.” He also emphasized the importance of maintaining the commercial viability and competitiveness of nuclear energy compared with other clean energy sources. It has been noted that this Indian reactor growth “would require substantial uranium imports.”

In addition to oil-rich kingdoms like Saudi Arabia and the UAE, which have the financial resources to build facilities themselves, the smaller “infrastructure-challenged” frontier nations also need nuclear to avoid addiction to fossil fuel consumption and gain energy sovereignty. Countries like Romania, Bulgaria and South Africa are tapping the major global players to help them build nuclear plants.

Despite the dour mood of Canadian resource investors, and the apathy of most western nations in terms of staying at the forefront of truly environmentally friendly base load power sources, the global demand for uranium and nuclear power will be substantial. Canadian uranium explorers and producers will be happy to oblige, to the direct benefit of their shareholders!

The Hindu BusinessLine reported this week that “[a]s shares of foreign uranium mining companies remain sedate as a fall-out of the continuing slide in ore prices, State-owned Uranium Corporation of India is considering picking up stakes in such companies, which would be its first overseas foray.”

In early December, the chairman of a subsidiary of China General Nuclear Power (CGN), one of the country’s two state reactor builders, announced the company’s intention to invest in mines in Canada “in the near future,” and said that it is already in discussions with Canadian officials. CGN just raised around $3.2 billion in an initial public offering in Hong Kong this month.

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Time to act 

So, back to my comments above. If you are on the fence about nuclear energy and the uranium sector, do your homework and see if you can be convinced. If you are already convinced, but still on the sidelines, I urge you to get in the game!

I wish everyone happiness, health and successful investing in 2015.

 

Opinions expressed in this article are Jim Paterson’s alone and do not reflect the opinions any organization with which he is affiliated. 

Appointed CEO of Kivalliq Energy (TSXV:KIV) in 2010, Jim was a driving force behind more than C$57 million in equity financings, one of the largest uranium exploration programs on the globe and a 200-percent increase in mineral resources at the Lac 50 deposit from 2010 to 2013. Jim has 17 years of corporate experience with several North American publicly traded companies, participating in acquisitions, joint ventures, spin outs, reverse transactions and IPOs. 

Kivalliq Energy is a client of the Investing News Network. This article is not paid for-content. 

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