Uranium Overview

Uranium: Global Energy Source

Global demand for electricity is set to grow 76% by 2030 and nuclear energy will play an integral role in meeting this demand. The WNA reports that there are 439 nuclear reactors operable in 30 countries as of January 1, 2016. These reactors can generate 382.5 gigawatts of electricity and supply over 11% of the world's electrical requirements. As of January 1, 2016, 66 nuclear reactors are under construction in 14 countries with the principal drivers of this expansion being China (24 reactors under construction), Russia (8), India (6), the United States (5), South Korea (4) and UAE (4). Based on the most recent statistics from the WNA, there are a total of 224 reactors that are either under construction, or planned around the world, and an additional 330 reactors that are proposed, with the potential to be operating by 2030.
 

Electricity Consumption
World Electricity Consumption
(Click to Enlarge)

Uranium: Supply and Demand

According to UxC, in its "Uranium Market Outlook - Q4 2015" (the "Q4 Outlook"), global nuclear power capacities are projected to increase by 44%, from 376.6 gigawatts in 2015 to 540.6 gigawatts in 2030. Of the net growth in nuclear generation capacities, China accounts for 64% while India, Korea and Russia collectively make up a further 24%. The Q4 Outlook also estimates that uranium demand could grow by over 48% to as high as 266.8 million pounds U3O8 by 2030 from an estimated 179.3 million pounds of U3O8 in 2015.  

According to the Q4 Outlook, uranium production increased slightly year over year from 145.3 million pounds U3O8 in 2014 to an estimated 151.3 million pounds U3O8 in 2015. Factoring out the additional production associated with the ramp up of activities at the Cigar Lake mine, global production declined by roughly 5.3 million pounds U3O8, representing a decline of 3.6% from 2014. Production from Africa, and the United States declined in 2015, while production from Australia, Russia and Kazakhstan remained relatively consistent. Cigar Lake increased production from Canada. Canada remains the second largest producing nation with nearly 22% of the world's production from 2015 coming from within Canada. Kazakhstan continues to be the world's largest producer of uranium, representing nearly 40% of production in 2015. 

UxC has estimated in its Q4 Outlook that existing mine production, plus new planned and potential mine production, will increase primary uranium supply from an estimated 151.3 million pounds U3O8 in 2015 to 168.7 million pounds U3O8 by 2025. This represents an increase of approximately 11.5%, as compared to the dramatic increases in uranium demand noted above. For projects to move forward to meet the production forecasts, uranium prices will need to increase appreciably to support their higher cost production profiles and the significant capital expenditures that will be required.  

Uranium: Prices

Nuclear utilities purchase uranium primarily through long-term contracts. These contracts usually provide for deliveries to begin two to four years after they are signed and provide for delivery from four to ten years thereafter. In awarding medium and long-term contracts, electric utilities consider the producer's uranium reserves, record of performance and production cost profile, in addition to the commercial terms offered. Prices are established by a number of methods, including base prices adjusted by inflation indices, reference prices (generally spot price indicators, but also long-term reference prices) and annual price negotiations. Contracts may also contain annual volume flexibility, floor prices, ceiling prices and other negotiated provisions. Under these contracts, the actual price mechanisms are usually confidential.

The long-term demand that actually enters the market is affected in a large part by utilities' uncovered requirements. UxC estimates that uncovered demand is only 7.4 million pounds U3O8 or 4% of projected demand in 2016. Uncovered demand, however, is projected by UxC to increase significantly over the period of 2016 to 2019, such that up to 75.1 million pounds remains uncovered for 2020, representing roughly 39% of projected demand in that year. Uncovered demand rises rapidly for years after 2020 to over 175 million pounds per year (or 78% of projected total demand) for 2025. At 175 million pounds, the uncovered demand in 2025 is estimated to be nearly as much as total demand estimated for 2015 and approximately 6 million pounds U3O8 greater than the total production expected from new and existing mine production in 2025 - some of which is already committed to the covered portion of the demand projected in 2025. In order to address the rising portion of demand that is uncovered, utilities will have to return to the market and enter into long-term contracts. From 2006 to 2010, on average, 39 million pounds U3O8 equivalent were purchased on the spot market per year and roughly 200 million pounds U3O8 equivalent were contracted in the long term market each year. By comparison, from 2011 to 2015, on average, 47 million pounds U3O8 equivalent have been purchased on the spot market per year, while less than 100 million pounds U3O8 equivalent were contracted in the long term market each year. In 2014 and 2015, long term contracting volumes were roughly 77 million pounds U3O8 per year. With low contract volumes in recent years and increasing uncovered requirements, we expect that long term contracting activity will have to increase in the near future as utilities look to secure supply and move U3O8 through the nuclear fuel cycle in order to fuel the world's growing fleet of nuclear reactors. 
 

 

Uranium: Value of Grades

Metal

Grade

lbs/t

$/unit

Value/t

U3O8

1%

22

$45 / lb

$990

Gold

22.6 g/t

-

$1360 /oz

$990

Silver

1386 g/t

-

$22.23 / oz

$991

Copper

13.6%

300

$3.30 / lb

$989

Nickel

6.71%

148

$6.69 / lb

$990

1% U3O8 (Uranium) =

22.6 g/t Gold

 

1386 g/t Silver

 

13.6% Copper

 

6.71% Nickel

 

Uranium: Exploration in the Athabasca Basin, Northern Saskatchewan

The uranium (U3O8) deposits of Saskatchewan, Canada are the richest in the world. The Athabasca Basin is an ancient sedimentary basin which hosts the world's most significant uranium mines and produces almost 20% per cent of the current world uranium production in a safe and favourable jurisdiction. Athabasca uranium deposits also have grades substantially higher than the world average grade of under 0.2% U3O8.

Average Grade
Average Grade per Region
Click to Enlarge

2012-2016 Southwest Athabasca Basin Uranium Discoveries

  • The Arrow discovery made by NexGen Energy (TSX-V: NXE); now the high grade Arrow deposit
  • Patterson Lake South discovery made by Fission Uranium (TSX: FCU); now the high grade Triple R deposit
  • Cameco / Areva / Purepoint Uranium's Hook Lake Spitfire Zone high grade discovery
  • Three seperate major discoveries in a short period of time in this emerging uranium district illustrate high grade nature of mineralization and potential for additional discoveries

2005-2016 Eastern Flank Athabasca Basin Uranium Discoveries

  • Wheeler River's Phoenix and Gryphon Deposits being explored and developed by Denison Mines (TSX: DML); Phoenix deposit contains indicated resources of 70.2M lbs U3O8 at a grade of 19.1% U3O8 and the Gryphon deposit 3 kilometres northwest of Phoenix contains inferred resources of 43M lbs U3O8 at a grade of 2.3% U3O8
  • Hathor Exploration which was acquired by Rio Tinto in 2011 explored Roughrider deposit which contains indicated resource of 17.2M lbs U3O8 at a grade of 1.98% U3O8 and inferred resource of 40.7M lbs U3O8 at a grade of 11.2% U3O8
  • J-Zone discovery by Fission Uranium and KEPCO; indicated 306,831 tonnes at 1.52% U3O8 (10.2 million lbs) and inferred 138,404 tonnes at 0.90% U3O8 (2.7 million lbs)
  • The majority of the large, high grade uranium deposits and mines are found on the east side of the Basin with the potential for additional discoveries to be made

 

Additional Uranium Information

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