Uranium Report 2011


Critical Mass - a point or situation at which change occurs - support for the measure has reached critical mass.


By Richard (Rick) Mills
Ahead of the herd


As a general rule, the most successful man in life is the man who has the best information


Our future energy course is being charted today because of the ramifications of peak oil, because cars pollute too much, because of climate change and because we wish to end our dependence on foreign supplied energy.

 

Many countries have energy independence and global warming as two of the key policy issues of their current administrations. For instance US President Obama made a pledge to eliminate oil imports from the Middle East and Venezuela within a decade and to slash his country’s carbon dioxide emissions by more than 30 per cent by the year 2020.

If any country were to try and implement such a program they would have to do two things:

  • Wean their country off using fossil fuels (coal, oil and natural gas) to produce energy
  • Develop alternative clean energy sources within their country to avoid energy imports

The Fuel of the Future

 

The electricity needed for any country to successfully replace fossil fuels, both for transportation and everyday use, will have to come from nuclear generation.

 

There is simply no other logical alternative:

  • Coal and natural gas plants emit carbon dioxide emissions and natural gas needs an incredible amount of investment in pipelines and supporting infrastructure
  • Operating a 1,000-MW coal plant, for one year, produces 30,000 truckloads of ash that contains large amounts of carcinogens and toxins. Every second, up the smokestack, goes 600 pounds of carbon dioxide and ten pounds of sulfur dioxide
  • Extensive use of hydrogen is not practical due to its volatile nature and lack of infrastructure
  • Solar, wind and geothermal are all niche suppliers and are untried on a large scale. Geothermal seems to be limited to a few parts of any country and all three alternative means of generating electricity need massive investment in power transmission lines to get the power to where it’s needed. All three of these technologies are extremely important and each will successfully contribute, in a small way, to energy independence. But none are, today, capable of supplying base load power
  • A 1,000-MW solar plant would cover 129 to 259 square kilometers and use a thousand times the material needed to construct a nuclear plant of the same capacity.
  • To equal the output of South Korea’s Yongwangs six one-thousand-megawatt nuclear reactors, wind generators would require an 245 kilometers wide extending from San Francisco to Los Angeles. Solar would require roughly 52 square kilometers of collector area.
  • High emissions, a negative energy return and severe environmental costs are associated with ethanol and make its use impractical
  • Hydro - going to clean eco-friendly energy isn’t accomplished by damming what free-flowing rivers are left

 “The potential scope for renewables contributing to the electricity supply is very much less because the sources, particularly solar and wind, are diffuse, intermittent and unreliable.”  World Nuclear Association

 

As the world’s population and standard of living continues to climb, demand for more - and cleaner energy - grows alongside the pressures we continue to put on our environment.

 

As a zero-carbon energy source, nuclear power must be part of our energy mix as we work toward energy independence and meeting the challenge of global warming.”
— Nobel physicist Steven Chu, U.S. Secretary of Energy - May 6, 2009


"The principal motivation to reconsider the nuclear option is that nuclear power, as an alternative to fossil fuel resources, does not impair air quality and does not release greenhouse gases into the atmosphere." John Deutch, professor MIT


Today, there is an almost global wide move to develop higher levels of nuclear energy production. This is because nuclear energy works, it’s safe and recognition is slowly dawning it’s going to be impossible to meet the global, growing demand for energy and cut carbon dioxide emissions without nuclear energy.


Reasons to Use Nuclear Energy:

  • One pound of yellowcake (U3O8 - the final product of the uranium milling process) has the energy equivalence of 35 barrels of oil. One 7 gram uranium fuel pellet has an energy to electricity equivalent of 17,000 cubic feet of natural gas, 564 liters of oil or 1,780 pounds of coal
  • Nuclear power's life-cycle emissions range from 2 to 59 gram-equivalents of carbon dioxide per kilowatt-hour. Only hydropower's range ranked lower at 2 to 48 grams of carbon dioxide-equivalents per kilowatt-hour. Wind came in at 7 to 124 grams and solar photovoltaic at 13 to 731 grams. Emissions from natural gas fired plants ranged from 389 to 511 grams. Coal produces 790 to 1,182 grams of carbon dioxide equivalents per kilowatt hour. International Energy Agency
  • Nuclear energy is the only proven technology that can deliver baseload electricity on a large scale, 24 hours a day, 7 days a week, regardless-of-the-weather, without producing carbon dioxide emissions. Nuclear power plants emit no carbon pollution—no carbon monoxide, no sulfur oxides and no nitrogen oxides to the atmosphere.
  • Natural gas accounts for 80% of the cost to produce power from an NG power plant. Uranium accounts for 5%–10% of the price of nuclear energy
  • Power production cost results when comparing nuclear/gas, nuclear/coal or nuclear/hydro – only coal is cheaper
  • Nuclear energy is reliable. Nuclear power plants do not depend on weather conditions to produce electricity nor do they need costly electricity storage options
  • One ton of uranium produces more energy than several million tons of coal and oil. Fuel transportation costs are less and there is less impact on our environment from mining or fracking shale gas
  • Nuclear power plants require very little space and can be situated close to where their power output is needed

 “Through the release of atomic energy, our generation has brought into the world the most revolutionary force since prehistoric man's discovery of fire.”  Albert Einstein


Supply and Demand


Today, there are some 441 nuclear power reactors operating in 30 countries. These 441 reactors, with combined capacity of over 376 Gigawatts (One GWe equals one billion watts or one thousand megawatts), require 69,000 tonnes of uranium oxide (U3O8).

 

There are 59 power reactors currently being constructed. In all there are 493 new power reactors planned or proposed with 84 new reactors scheduled to be commissioned by 2017.

 

The International Atomic Energy Agency, in its 2009 report, anticipates at least 807 GWe in new net capacity to be in place by 2030.


The Energy Information Administration (EIA) projects electricity generation from nuclear power to increase from about 2.7 trillion kilowatt hours in 2006 to 3.8 trillion kilowatt hours in 2030. U.S.

 

Each GWe of increased capacity will require about 195 tU per year of extra mine production – three times this for the first fuel load. Let's also consider the fact that no one builds a $4 to $6-billion dollar reactor just to watch it go idle. They will order one or perhaps several year’s worth of fuel supply to guarantee it doesn’t.

 

By the year 2020, China will have at least 60 nuclear reactors using 20,000 tonnes of fuel per year.

 

India and France recently signed a multibillion dollar agreement to build two Nuclear power plants in India - Areva SA, will build two pressurized reactors of 1,650 megawatts each. These are the first two in the proposed construction of a total of 20 such nuclear plants in India. India’s need for uranium is predicted to increase 10-fold by 2020.

 

The Russians are planning to build a large number of nuclear reactors so they can use nuclear power domestically and increase their exports of natural gas to Europe.

 

"We believe there is not enough uranium production, either current or planned, to satisfy reactor needs, initial core requirements and inventories for new reactors." Adam Schatzker, analyst RBC Capital Markets


In 2008, mines supplied 51,600 tonnes of uranium oxide concentrate containing 43,853 tU, which means mining supplied roughly 75% of nuclear utility power requirements.

 

Spot Market and Megatons to Megawatts

 

The 25% mine supply deficit used to be made up from stockpiled uranium held by nuclear power utilities and the Megatons to Megawatts program.

 

Utility stockpiles are pretty much depleted and nuclear power utilities are expected to be back in the market, after a long absence, to sign long term contracts for uranium supply starting in early 2011.

 

China has given top priority to nuclear energy in its 12th Five-Year Plan (2011-2015) and they have already been a very strong buyer of uranium on the open spot market. China Guangdong Nuclear Power Corporation entered into a 10-year agreement to buy uranium at a price that was well above the spot price at the time of the announcement - China is building its strategic working inventory for future nuclear requirements.


Japanese and Indian utility purchases will also increasingly impact the spot market and many countries in Europe are reconsidering their current nuclear policy and extending the life of existing nuclear reactor fleets. New capacity is also being built or considered in both Taiwan and South Korea.

 

"It appears that the character of the spot market has changed markedly over the past few months from one that was heavily oversupplied with weak demand to one that is in high demand with very little supply." Adam Schatzker, analyst, RBC Capital Markets

 

Mine production is now primarily supplemented by ex-military material - the Megatons to Megawatts program. The Highly Enriched Uranium (HEU) Purchase Agreement to convert 500 tonnes of HEU to low enriched uranium (LEU) with Russia will expire in 2013 - Russia has said they will not renew it.

 

Energy Dependence


While working for Shell Oil during the 1940's Dr. M. King Hubbert noticed the production of crude oil from individual oil fields plotted a normal bell shaped curve. Roughly half of the oil from a field has been exhausted when the bell curve peaks.

Carrying that insight further he surmised that oil production from a group of oil fields would follow a similar bell shaped pattern.


In 1956 Dr. Hubbert predicted the cumulative group of oil fields within the US would reach peak production in the 1970's, and thereafter decline – no matter how much money would be thrown at exploration and development of reserves US oil production would not rise higher after this date. Dr. Hubbert’s prediction was uncannily accurate and is not restricted to just US oil field production.


 “In most fields, oil production has now peaked...Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabia’s to maintain production, and six Saudi Arabia’s if it is to keep up with the expected increase in demand between now and 2030.” Dr. Fatih Birol chief economist at the International Energy Agency (IEA)

 

As is the current situation with oil, the USA, and most other countries, are highly reliant on foreign sources for their uranium.

 

A country’s dependence on imported energy increases its strategic vulnerability. Energy suppliers who are willing to do so (Russian supplying natural gas to Europe comes to mind) can use their energy resources as leverage - holding whole countries hostage - to pursue their own policies.

 

“Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world.” George W. Bush, 2006 State of the Union Address

 

Conclusion


Developing countries such as China and India, with 2.3 billion people between them, will, even while increasing their nuclear fleet, drastically increase their consumption of fossil fuels. Oil, natural gas and coal are all going higher in price.


Accessing a sustainable, and secure, supply of raw materials is going to become the number one priority for all countries. Increasingly we are going to see countries ensuring their own industries have first rights of access to internally produced commodities. If any country is to end its dependence on foreign supplied fossil fuels and vastly reduce its carbon footprint it will have to develop its own source(s) of uranium.


Global climate change, reducing our carbon footprints, weaning ourselves off fossil fuels and achieving energy independence are all key issues facing us and future generations and the herd is not paying attention to HOW our future power is going to be supplied.


But as more and more investors figure out how we are going to produce our future energy, companies in the uranium sector could very well deliver spectacular gains for their shareholders. Uranium should be on every investors radar screen.


Is it on yours?


Richard (Rick) Mills
rick.mills@aheadoftheherd.com
www.aheadoftheherd.com


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Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell.com, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.


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Legal Notice / Disclaimer


This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.


Richard Mills does not own shares of any company mentioned in this report.

No company mentioned in this report is an advertiser on his website aheadoftheherd.com.



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