Canada is the second largest producer of uranium in the world, accounting for 22 percent of global uranium production.
Recent high-grade drill results in Canada’s Athabasca Basin have indicated the potential for the country to expand on its existing uranium supply.
More than three-quarters of Canadian uranium output is exported to other countries, including the US.
Much of that production comes from a mineral-rich geological formation known as the Athabasca Basin. Covering about 100,000 square kilometers of the Canadian Shield in Northern Saskatchewan and Alberta, Canada’s Athabasca Basin is home to the world’s largest reserves of uranium and accounts for 15.5 percent of global annual uranium production. Ten of the 15 highest-grade uranium deposits on the planet are found here, including the Cigar Lake and McArthur River deposits, which are held by the world’s second-largest uranium producer Cameco (TSX:CCO,NYSE:CCJ). Saskatchewan’s rich reserves and friendly mining policies have earned the province the number three spot on the Fraser Institute’s list of mining-friendly jurisdictions in 2018.
The vast Athabasca Basin also offers plenty of upside for uranium exploration companies as well, according to Craig Parry, co-founder and advisor to NexGen Energy (TSX:NXE,NYSE:NXE), and CEO and President of IsoEnergy (TSXV:ISO,OTCQX:ISENF), a subsidiary of NexGen. IsoEnergy has amassed a portfolio of 17 uranium exploration properties, 16 of which are within the Saskatchewan portion of the Athabasca Basin. In 2018, the company made the first significant discovery in the region in recent years with the Hurricane high-grade uranium zone. “Kazakhstan may be the world’s largest uranium-producing country, but Canada plays host to the largest and highest-grade uranium mines in the world. The typical grade of the uranium mines in the Athabasca Basin is significantly higher than those elsewhere on the planet. In a world where grade is king, Canada wears the crown,” Parry told the Investing News Network. “From our perspective, the Saskatchewan portion of the Athabasca Basin is the best place in the world to explore, develop and operate a uranium mine.”
In February, IsoEnergy announced the company had intersected its strongest drill results to date at the Hurricane Zone. Drill hole LE20-34 intersected 8.5m of uranium mineralization that averages 33.9 percent U3O8 from 326.0 to 334.5m, including 5.0m that averages 57.1 percent U3O8 from 328.0 to 333.0m. “Those results confirm Hurricane is one of those high-grade true unconformity-related Athabasca deposits,” said Parry during an interview with INN.
Uranium supply and market dynamics
The world is using more uranium than it is currently producing, putting pressure on global supplies as production has been reduced to match falling uranium prices. According to a World Nuclear Association (WNA) report published in 2019, global uranium production dropped from 62,200 metric tons in 2016 to 53,500 metric tons in 2018. In Canada, uranium production has cut in half during the same timeframe, resulting in only 7,000 metric tons produced in 2018. Despite this global downturn in production, global uranium demand has shown no signs of slowing. According to the WNA, uranium demand is expected to rise from 67,600 metric tons in 2019 to 84,850 in 2030.
“We are using more uranium than ever before in history,” industry analyst Rick Rule said during an interview with INN at the Vancouver Resource Investment Conference. “We’re coming into a new fuel cycle in uranium. You’re going to see tighter uranium supplies just as a consequence of refueling and also beginning a new purchase cycle. Obviously, the underlying tone is extremely bullish, but we have a short term problem of Japanese inventories, which is a 38 to 40 million pound supply problem.”
Despite global inventories muddling the supply side, many in the uranium space have recognized that demand continues to outpace current production numbers. “We understand that the major producers have been running inventories to very low levels, which has kept a lid on prices. With this selling now largely out of the way, the market is in serious undersupply,” Parry said.
The slow decline of the uranium spot price has been partially to blame for the lack of global production, as major producers like Cameco have been forced to shut down flagship operations. The company’s McArthur River mine was shut down in 2018 and is expected to remain on care and maintenance until the uranium price can justify production once again. With major producers halting operations, junior miners capable of delivering high-grade uranium have an opportunity to take advantage of dwindling global production. In Canada’s Athabasca Basin, junior miners IsoEnergy have recently begun a drill program in pursuit of high-grade uranium at the company’s 100 percent owned Larocque East property. The company has received support from companies including Cormark Securities and PI Financial, both of which have been instrumental in the development of the uranium market.
Nuclear energy essential to North America’s clean energy future
Citizens in North America are pressuring government leaders to get serious about reducing carbon emissions, which reached record levels in 2018. When produced safely and responsibly, nuclear energy can be one of the most efficient low-carbon energy sources available. Unlike natural gas, coal or other fossil fuels, nuclear power does not release carbon into the atmosphere because the energy is generated via fission rather than combustion. In fact, nuclear generation has a comparable carbon footprint to renewable energy sources like solar or wind generation. Waste material is of minor volume compared to other non-renewable energy sources and is produced in a solid-state which can be more easily managed and recycled for further energy generation. Any carbon emissions associated with nuclear generation are from indirect sources such as the mining and transporting of material. Rising demand for cleaner energy generation in North America has renewed interest in nuclear energy and the continent’s uranium resources.
Uranium supply versus nuclear demand
Nuclear power has been an important contributor to the world’s energy mix and a key source of low carbon-emission electricity generation for over 60 years. According to the World Nuclear Association (WNA), nuclear reactors provided 29 percent of all low-carbon electricity generated in 2017. After hydropower, nuclear power is already the world’s second-largest source of low-carbon emission electricity.
As the world turns away from fossil fuels and looks to clean energy sources, nuclear power is increasingly being viewed as an essential part of that transformation. “Nuclear power has the potential to play an even bigger role in decarbonizing the energy sector and achieving global climate goals. We need nuclear and renewables. If we don’t bring all the clean electricity technologies we have innovated, there is no chance whatsoever to reach our climate targets,” said International Energy Agency (IEA) Executive Director Fatih Birol at a clean energy summit hosted by Canada’s federal government in 2019.
Uranium supply and the US nuclear energy revival
With 98 currently active reactors, the US is by far the largest producer of nuclear energy in the world. After a 20 year slump, nuclear energy is back on the rise in the United States. In 2016, operations began at the first new nuclear reactor to come online in the US since 1996. Producing 807 billion kilowatt-hours in 2018, the nation accounts for 30 percent of global nuclear energy generation. Two new reactors are set to come online in 2021 and 2022.
While the country leads the world in nuclear energy generation, the US is largely dependent on imported uranium to fuel its reactors. Only 10 percent of its uranium supply comes from domestic sources. Canadian companies are the largest suppliers, accounting for 24 percent of US uranium imports.
Canada considering nuclear in future energy plans
Canada itself is no stranger to nuclear energy, particularly in the provinces of Ontario and New Brunswick. Nuclear reactors in these two jurisdictions account for at least 15 percent of the nation’s electricity generation. Canada is also a global leader in nuclear reactor technology research and development, having developed the CANDU nuclear reactor, which is now used by nuclear power plants in India, Pakistan, Argentina, South Korea, Romania and China.
In Canada, the push towards sustainable energy sources has caused leading politicians like Saskatchewan Premier Scott Moe to openly consider using nuclear power plants as part of the province’s energy plan. Moe believes nuclear power is the answer to supporting his province’s energy needs in a post-carbon fuel future. “We are beginning to have conversations with other provinces, such as Ontario and New Brunswick, on small modular reactors (SMRs) as that technology is coming forward,” he told reporters in May 2019. “This is a new and innovative technology that is very different from the conversations that we’ve had around larger nuclear reactors here in the province. These are small, they’re stackable and they’re safe.”
Saskatchewan Power wants to reduce emissions from its electrical generation by 40 percent from 2005 levels over the next decade. To achieve that, the Saskatchewan government is considering replacing the province’s fleet of coal and natural gas plants with nuclear reactors as a long-term source of baseload electricity. As one of the world’s leading sources of uranium production and reserves, Saskatchewan’s uranium-rich Athabasca Basin is well-positioned to supply the materials needed to fuel any future nuclear reactors.
At the federal level, the Canadian government itself is advancing on a plan to develop and deploy new nuclear reactor technologies that offer the potential for intermediate energy options that may bridge the gap in the transition away from fossil fuels. Canada is pursuing the development of SMR designs as part of a new national nuclear strategy. Following months of consultations with power utilities, communities and other stakeholders, the Canadian government released its SMR Roadmap development plan. “It’s the next wave of innovation. It’s the future of the Canadian nuclear sector,” said Diane Cameron, director of the Nuclear Energy Division at Natural Resources Canada.
As the name suggests, SMRs are smaller than conventional nuclear power plants, but they operate in much the same way, using the same nuclear fuel. The main advantage of SMRs over conventional reactors is that their smaller scale means they can be mass-produced, which reduces the cost per unit and lead time. SMRs are capable of generating up to 300 megawatts of electricity. Being modular, they can be linked together to produce greater amounts of power as well. They can also be used as load-following units with storage systems for excess electricity that can complement energy produced from renewables such as wind and solar. Their small, modular design means SMRs can be used to generate heat and electricity for off-grid remote communities or mining projects that typically rely on diesel.
Natural Resources Canada has said some new SMR designs could come online “in the near term,” while other designs currently under development may be deployed within the next 15 years. The market for SMRs in Canada is estimated to reach C$5.3 billion between 2025 and 2040. In addition to domestic energy production, Canada is looking past its own borders to become a leader in the SMR global market, which could potentially reach C$150 billion.
Nuclear energy has a role to play in the transition to a clean energy future and the North American nuclear energy industry has a lot to gain from the push to lower global carbon emissions. Canada’s Athabasca Basin is one of the largest uranium reserves on the planet and has plenty of upside for further discoveries to fuel the continent’s nuclear energy demands.
This article was originally published on the Investing News Network in February 2020.