Canada to Supply Uranium to India and China

- June 28th, 2010

Major agreements on the political and industrial landscapes are paving the way for greater interest and commercial investment in Canadian uranium sources. Two conferences this week highlight the fears surrounding fossil fuel price volatility, security of supply and a global resurgence of nuclear power.

By Dave Brown – Exclusive to Uranium Investing News

agreementOn June 27, The Prime Ministers of Canada and India signed a civil nuclear cooperation agreement.  The deal provides for cooperation in civil nuclear energy including import of uranium and equipment from Canada, underscoring cooperation in the fields of nuclear waste management and radiation safety.

India expects to have 12 new reactors running by 2020, consuming an extra 1,500 tonnes of uranium per year. Other projects are expected, making India’s civilian nuclear sector worth $25-billion to $50-billion over the next 20 years.  Dr. Chaitanyamoy Ganguly, the President of the small Indian division of Cameco (TSX: CCO), the world’s largest uranium miner, said Canada could soon be exporting 2,000 tonnes of uranium to India annually. Canada has some natural competitive advantages over other countries in the Indian market because many of India’s reactors are already based on Canadian CANDU technology and because Australia has refused to sell uranium until India signs the Nuclear Non-Proliferation Treaty.  India has also signed civil nuclear cooperation agreements with the USA, Russia, France, UK, Argentina, Kazakhstan, Mongolia and Namibia.

Cameco signed an agreement on June 24 with China Nuclear Energy Industry Corporation (CNEIC), a subsidiary of China National Nuclear Corporation (CNNC), to supply China’s largest nuclear generator with uranium concentrate under a long-term agreement through 2020.  The deal would see Cameco supplying approximately 23 million pounds over the next 10 years to CNNC, which currently operates seven reactors with a total capacity of 5,100 MW.  The state-owned CNNC, in operation for nearly 50 years, expects to be one of the world’s leading nuclear power companies by 2020 with 10 reactors under construction totaling capacity of 9,100 MW.

Cameco also has also agreed to pursue long-term non binding co-operation opportunities with China Guangdong Nuclear Power Holding Co., Ltd. (CGNPC) to supply uranium fuel for its growing fleet of nuclear power plants.  This agreement will see a strategic alliance between Cameco and China’s largest clean-energy enterprise with the largest number of nuclear power plants under construction in the world.   CGNPC needs uranium to fuel its four existing reactors and indicates that it has about 20,000 MW of nuclear capacity under construction with expectations of over 50,000 MW on line by 2020.

Jerry Grandey, Cameco’s CEO, seemed very pleased with these announcements, “Our plan to double uranium production by 2018 aligns well with China’s vigorous reactor construction program.”  Chinese estimates indicate the country is expecting to increase its nuclear capacity from the current 9 GW to at least 70 GW by 2020 with a further increase to at least 120-160 GW planned by 2030.

Uranium Prices

The uranium market has continued to demonstrate limited activity over the short term with spot prices unchanged at $40.75 per pound.  The demand side has been described as discretionary and lackluster at best with two transactions reported, although they had previously been negotiated. The price spread between willing buyers and willing sellers continues to narrow with only $0.50-$0.75 now separating the two and activity at a virtual stalemate.

Conferences

This week presents industry stakeholders with 2 unique opportunities for a comprehensive outlook on the nuclear power market.  A small modular reactor conference is scheduled for June 28 and 29 in Washington, focusing specifically on the issues related to the development and licensing in the U.S.   Overlapping this conference in London will be the 5th Annual European Nuclear Power conference providing attendees with a comprehensive outlook of the European nuclear power market, highlighting opportunities and debating the challenges faced.

Fears surrounding security of supply, fossil fuel price volatility and increasingly tighter climate change goals at the international level are being manifested in a global resurgence of nuclear power.  If aging infrastructure remains neglected, it is widely predicted that demand will outstrip supply long-term. The ability to create a stable and significant clean energy has firmly placed nuclear power back on the table for policy makers and utilities alike.  For uranium investors these conferences should inspire actions and intentions which can have direct implications on uranium price targets and supply demand fundamentals.

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