Uranium Week: Preparing For The Nuclear Age

Weekly Reports | Jun 04 2024

This story features PALADIN ENERGY LIMITED. For more info SHARE ANALYSIS: PDN

The Biden administration is serious about nuclear, and so is, increasingly, the rest of the world.

-Biden administration is getting serious on nuclear
-And so is the US army
-Global investments in advanced reactors (SMRs and microreactors) ramping up
-Paladin Energy organised Langer Heinrich site visit

By Danielle Ecuyer

Nuclear power generation a top priority for the Biden Administration

The Biden Administration’s H.R.1042 Bill or the “Prohibiting Russian Uranium Imports Act” finalised how the Department of Energy (DoE) would review applications for waivers last week. (For more details see previous reports in the links at the end of today's weekly update).

At a May 29 summit, the White House announced the Act’s broad reaching plans to develop the USA’s nuclear fuel cycle to produce high-assay, low-enriched uranium which is required to fuel advanced reactor designs.

The bill has also signed into law the gradual release of US$2.72bn in funds from the Department of Energy to “revitalise” the US domestic conversion and low-enriched uranium supply chain, including the support of large-scale nuclear power projects and the deployment of small modular reactors (SMR’s), industry consultant TradeTech reports.

The Administration has included nuclear in a portfolio of carbon-free technologies to help meet the goal of mitigating carbon emissions by 2025.

A working group has been set up to deal with the thorny issue of high costs and long lead times for commercial nuclear reactors, which includes the Department of Energy, the White House energy innovation team, and the White Office Head of Domestic Climate Policy.

Notably, the US Army announced it is seeking information for the deployment of advanced reactors, including SMRs and microreactors, that can provide defense assets with resilient energy amid cyberattacks, physical threats, extreme weather, biothreats and other emerging challenges which can impact or threaten the reliability or viability of commercial energy networks.

The White House also announced agreements with major companies Duke Energy, Amazon, Google, Microsoft, and Nucor for the development of new rate structures or “tariffs” in the utility sector to lower the long-term costs of clean energy, like nuclear.

The Accelerating Clean energy (ACE) tariffs would enable the large hyperscalers – (Amazon, Google and Microsoft), as well as Nucor, to offer innovative financing structures alongside investmentments in clean energy assets.

TradeTech also pointed to the newest US reactor, Vogtle Unit 4, which started commercial services on April 29 with capacity to produce energy for 60-80 years via Units 3 and 4, the USA’s first Westinghouse AP1000 reactors to supply an estimated half a million homes and businesses.

What happened to U3O8 spot prices in the month of May?

The month of May has been uncharacteristically volatile for spot U3O8 prices according to industry consultant TradeTech.

TradeTech’s Long-Term U3O8 price indicator remains at US$80 for May 31 and unchanged on the previous month.

The Mid-Term indicator is priced at US$93.80/lb and down US$1.50 on April’s value.

The uranium market experienced almost daily price fluctuations over May, contrasting to the norm, where prices can remain stable or unchanged for extended periods according to TradeTech.

The spot price reached a high of US$93.85 on May 7 and on May 8 it declined to US$90 with US$89 reported on May 30 before rebounding to US$90/lb as at May 31.

Utilities stepped back from the U3O8 spot market as they turned their focus to the preparation of waiver applications as well as lining up the enrichment portfolios to guard against a possible waiver refusal.

Traders and financial entities were the main market participants over May with many traveling in the first weekend of June to the World Nuclear Fuel Market Annual Meeting to glean feedback on the new act.

WoodMac on the outlook for nuclear energy

Morgan Stanley hosted a webcast with Wood Mackenzie ("WoodMac") on the global nuclear industry.

The consultant highlighted a need for more investment in nuclear generation with reactors coming to the end of their 40–50 year life span and highlighted the support for the sector is growing.

WoodMac forecasts gas to remain attractive for the next 5-10 years but the nuclear/gas trade off to diminish as gas experiences growing demand from other sectors than energy generation.

WoodMac does not see fusion as commercially viable as base case, but expects ongoing investment in SMRs with the pipeline having increased by 8.9GW since 2021. GE-Hitachi currently has the largest SMR pipeline of 2.79GW in train.

Several different types of SMRs are being developed, with the majority being traditional light water reactors (a smaller version of Gen3 reactors which have been operating for a while), as well as a new type that uses highly enriched uranium.

The greatest barrier for nuclear development is cost with WoodMac envisaging a 5-year window for the nuclear industry to solve its development problems.

SMRs currently cost US$180/MWH but could feasibly scale to US$150/MWh over the next 5-6 years. The use of cement pads is one of the larger and growing cost imposts for SMRs which needs to be addressed.

Paladin Energy in focus

ASX-listed Paladin Energy ((PDN)) recently hosted a Langer Heinrich site visit in Namibia. Analysts from Canaccord Genuity, Bell Potter and Macquarie discussed their findings in research reports once back on Australian soil.

Canaccord reports the mine re-start is ahead of expectations and the broker upgraded FY24 production by 30% to 0.66Mlb while flagging upside potential to FY25 forecasts, with current production estimated at 4.64Mlb.

The analyst retained a Buy rating on the shares and upgraded its target price to $16 from $15.53.

Bell Potter admitted to being “surprised” by the quality of the Langer Heinrich site and regional infrastructure, as well as the workforce skills.

However, this analyst flagged concerns over cost escalation. Bell Potter's price target was revised to $15.70 from $16.50 and the rating adjusted to Hold from Buy due to the 140% price appreciation of the stock price over the past year.

Macquarie retains an Outperform rating and a $15 target price. This analyst stressed the plant and operation appeared in “great condition” and the commissioning was in hand with the ramp-up underway.

Concerns around power and water supplies/security were also alleviated and Paladin management announced FY25 guidance would be provided in July this year. 

Macquarie is currently forecasting 3.57mlb production, 2.34mlb shipments at all-in-sustaining costs of US$34.20/lb.

More reading:






Uranium companies listed on the ASX:

1AE 31/05/2024 0.0800 12.50% $0.19 $0.05
AGE 31/05/2024 0.0600 0.00% $0.08 $0.03 $0.100 66.7%
BKY 31/05/2024 0.4000 6.49% $0.80 $0.26
BMN 31/05/2024 4.5500 2.27% $4.87 $1.41 $7.400 62.6%
BOE 31/05/2024 4.7500 -12.55% $6.12 $2.83 48.6 $5.425 14.2%
DYL 31/05/2024 1.6900 0.30% $1.83 $0.65 $1.770 4.7%
EL8 31/05/2024 0.5300 – 1.89% $0.68 $0.29
ERA 31/05/2024 0.0500 – 8.16% $0.08 $0.03
LOT 31/05/2024 0.4800 3.33% $0.49 $0.17 $0.660 37.5%
NXG 31/05/2024 11.7700 3.51% $13.66 $6.44 $17.500 48.7%
PDN 31/05/2024 16.1900 1.21% $17.98 $6.43 -348.0 $16.310 0.7%
PEN 31/05/2024 0.1100 9.09% $0.20 $0.08 $0.260 136.4%
SLX 31/05/2024 6.1900 0.83% $6.74 $2.92 $7.600 22.8%

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