There is no “solution without nuclear”, Cameco (NYSE:CCJ) says CEO Tim Gitzel, referring to the need for governments to balance their clean energy prerogatives with moving away from Russian energy supply.
“Suffice to say, we’re seeing governments and companies turning to nuclear power with an appetite that I’m not sure I’ve ever seen in my four decades in this business,” he said in late July.
“Therefore, it is easy to conclude that the outlook for demand is long lasting and very bright. But the offer is quite a different picture.”
Here are five (of many) reasons why uranium stocks are going to grow in the coming years.
As a low-carbon, base-load energy source, nuclear power will be crucial to achieving net-zero emissions.
90% of governments have committed to zero emissions. That’s easy to say, but how do they get there?
The leading player in zero-carbon technologies is nuclear, says Deep Yellow (ASX:DYL) boss John Borshoff.
“That low carbon footprint is for 24-hour-a-day production, whereas the carbon footprint for wind and solar, which is higher, by the way, is only for 6-hour-a-day production,” he says. .
“That’s why nuclear power is so miserable.
“The United States, the United Kingdom, the European Union, Japan, Korea, the Middle East, China, they all say ‘we need more nuclear power.'”
The combination of COP26, war and high energy prices has created a boom in the construction of nuclear power plants
The European war has highlighted the need for energy security, which nuclear power provides, says Brandon Munro, CEO of Bannerman Energy (ASX:BMN).
“So we are seeing a comeback of nuclear power in the key market of Europe,” he says.
“The largest single market for uranium, the US, has just received support under the Inflation Protection Act, which provides $30 billion in tax credits to support continued long-term operation of the reactor fleet. from the USA”.
But the fastest growing market is China, which sees nuclear power as a critical pillar of its decarbonization and energy security strategies, Munro says.
“China is building 10 large reactors a year for the next 15 years, which will make it the largest single market despite having very little domestic uranium production,” he says.
Asia is embracing nuclear power, thanks to the global energy crisis ☢️ ❤️
🇯🇵 Japan stops anti-nuclear policies
🇰🇷 Korea is reversing a nuclear phaseout
🇨🇳 China is accelerating its huge reactor construction
🇮🇳 India is moving to build more plants https://t.co/YTPHQFWFJa
— Stephen Stapczynski (@SStapczynski) August 27, 2022
The end users, the utilities, will soon be focused on acquiring U3O8 from short-term miners and miners.
Until recently, nuclear power plants have been largely distracted by the need to secure downstream nuclear fuel cycle and enrichment, Munro says.
Enrichment is the process of converting natural uranium into nuclear fuel.
“Russia provides more than 40% of the world’s enrichment capacity, so nuclear companies have struggled to ensure security of supply in the face of government and social sanctions on Russian supply,” says Munro.
“This has overwhelmingly distracted them from the business of buying U3O8.
“When that changes, we hope to see the start of the long-term hiring cycle.”
That brings advanced project developers like Bannerman and Deep Yellow into play.
“These are the companies capable of signing long-term contracts; the reboot players and a couple of advanced developers,” says Munro.
Money is already starting to flow into the uranium sector through mergers and acquisitions.
From an equity point of view, this sector is starting to heat up with consolidation.
The merger of Deep Yellow and Vimy is now complete. Meanwhile, we are seeing the first genuinely competitive M&A action of this cycle with UEC and Denison vying for the acquisition of UEX.
More activity is expected as the sector begins to grow.
“Mergers and acquisitions are good for investors,” says Borshoff.
“It’s a wealth-creating environment, not just in terms of the merger, but what that new platform can do to create more value. It’s a win-win.”
But most importantly: there will not be enough uranium to go around.
There is a big gap between supply, projected supply, and what will be required in the future.
Just take a look at this graphic from the World Nuclear Association:
Munro says the previous WNA upper case scenario “now looks realistic” as future demand continues to grow.
Even if all suspended mines are brought back online and all advanced projects are developed, a large area of ’unspecified supply’ remains (above in red). No one knows where that supply of uranium will come from.
There are also expectations that the secondary supply, the light blue section, will also decrease.
“Demand expectations are rising for both conventional reactors and SMRs (small modular reactors),” he says.
“Nearly every week I need to make an adjustment to projected demand as more reactor builds are announced and existing reactors are expanded rather than shut down. We are witnessing fundamental political changes in all key markets, including the US, France, UK, South Korea and Japan.”
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