Fission Uranium Corp T.FCU

Alternate Symbol(s): FCUUF

Energy

Fission Uranium Corp. is a Canada-based uranium company and the owner/developer of the high-grade, near-surface Triple R uranium deposit. The Company is the 100% owner of the Patterson Lake South uranium property. Its Patterson Lake South (PLS) project, which hosts the Triple R deposit, a large, high-grade and near-surface uranium deposit that occurs within a 3.18 kilometers (km) mineralized trend along the Patterson Lake Conductive Corridor. The property comprises over 17 contiguous claims totaling 31,039 hectares and is located geographically in the south-west margin of Saskatchewan’s Athabasca Basin. Additionally, the Company has the West Cluff property comprising three claims totaling approximately 11,148-hectares and the La Rocque property comprising two claims totaling over 959 hectares in the western Athabasca Basin region of northern Saskatchewan. The La Rocque property is prospective for high-grade uranium and is located five km south of Cameco’s La Rocque Uranium Zone.

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Fission Uranium Corp

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Post by dselon Oct 06, 2016 1:10am

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Post# 25315465

The Uranium Supply Story - Part 2 of 4

https://ceo.ca/@leni/the-uranium-supply-story-part-2-of-4

The Uranium Supply Story - Part 2 of 4

The uranium supply story is very interesting because of the relative abundance of uranium in the world. Of course, the word 'abundance' needs to be used with caution because not all of the uranium in the earth’s crust or the oceans can be removed cost-effectively.

The uranium spot price is affected by the electrical demands of the world population, as well as world events. Black swan events, such as war or natural disasters, can either drive uranium prices up or crash them. The first section of this report on uranium supply is dedicated to the factors affecting uranium, or more importantly, its exploration.

Fukushima

Black swan events make such a big impact because they're unexpected. In some cases, these black swan events are even anticipated by the people whose job it is to think up the worst case scenarios and to design systems and infrastructure that are capable of withstanding calamities of all shapes and sizes. A great, but tragic example of this is the World Trade Center. The building was designed to withstand the impact of an airplane, and on September 11 2001, this was tested. The consequences were horrific, not only to the people who were directly affected by the event, but for the entire world, as our everyday lives would be forever changed.

On March 11 2011, a somewhat similar black swan event occurred in Japan. An earthquake with a 9.0 magnitude on the Richter scale hit 130 km off the east coast. The designers of the Japanese nuclear reactors had anticipated this possibility and built the plants on bed rock so that they could withstand an earthquake of this magnitude - and they did. They also considered tsunamis, using an event that occurred in Chile in 1960 (Tsunami measured 3.1m) as their example, and so the Fukushima Daiichi reactors were built 10m above sea level to keep them out of the reach of a similar sized wave. The seawater cooling pumps, however, were located only 4m above sea level.

Unfortunately, the tsunami that resulted from the 9.0 quake was 15m high, a truly massive wave. It knocked out power in the surrounding area and disabled 12 of the 13 backup generators, along with flooding the seawater cooling pumps, which sat well below the height of the wave. Without the cooling pumps circulating water through the reactor, Fukushima was headed for a meltdown. The first tsunami hit at 3:42pm, and by 7:03pm, a nuclear emergency was declared. The first evacuation forced people within a 2km radius of the plant to be evacuated. By 5:44am, however, this was extended to 10km.

In all, the Fukushima reactor meltdown didn't cause any deaths, but left 100,000 people homeless. The Tsunami death toll, however, was around 19,000, along with the destruction of infrastructure and thousands of homes in an area that stretched 560 square kilometres.

What Did the Events at Fukushima Mean for Uranium?

The uranium price and uranium company share prices plummeted, sending the entire sector down further from its high in 2007, solidifying the bear market. Was this meltdown the precursor for nuclear power elimination around the world?

To many, this was the perception. The incident did force Japan to start searching for alternatives to nuclear power, such as liquefied natural gas (LNG) and renewable power sources, namely solar and wind. This transition, however, isn’t and hasn’t been easy, as the Japanese people have had to reduce their power consumption to compensate for the reduced available power. Is LNG and renewable power the future for Japanese power requirements? That has yet to be determined, but in my opinion, the world is at least a few years away from having renewable energy as a primary source, especially for those countries with latitudes well north of the equator. This reality may be finally hitting the Japanese government as they have started stress-testing their nuclear plants for start up. This will have a major impact on the demand for uranium in the world.

After Fukushima, other countries, most notably the Germans, unveiled plans to aggressively reduce or eliminate nuclear power, with 2022 being the date for a complete phase out. Time will tell if this is going to be possible.

There are a tonne of factors that affect uranium; world events like the Fukushima disaster or war drive the price up and down. In the next section, I would like to review a couple of the uranium exploration cycles that have occurred in last 70 years.

Major Exploration Cycles of Uranium

The first major uranium exploration cycle occurred after the end of World War 2 (1945 to 1958). WW2 set the stage for the Cold War, pitting the world’s two main nuclear powers, the United States and Soviet Union, against each other.The implications of a growing communist agenda was outlined by the ambassador to the Soviet Union at the time, George Keenan. In 1946, he wrote his famous Long-Telegram, in which he discussed a number of different topics involving the Soviet Union. In particular, he states,

“In summary, we have here a political force committed fanatically to the belief that with U.S. there can be no permanent modus vivendi that it is desirable and necessary that the internal harmony of our society be disrupted, our traditional way of life be destroyed, the international authority of our state be broken, if Soviet power is to be secure.” ~Keenan

Using this intelligence, American presidents, Harry S. Truman and Dwight Eisenhower, started and propagated the Cold War. Their main objective was to contain communism and to prevent the Soviet Union from advancing this political theory throughout the world, using economic and political interventions, and by creating an arsenal of nuclear weapons in case plan A didn’t work.

Uranium’s start in the mining business was predicated on political agendas, and still today, it's greatly affected by political events around the world.

Fast forward to the early 2000s when the most funded uranium exploration cycle in history occurred, and as the World Nuclear Association states,

From 2003 to the end of 2009, about US$ 5.75 billion was spent on uranium exploration and deposit delineation in over 600 projects. In this period, over 400 new junior companies were formed or changed their orientation to raise over US$ 2 billion for uranium exploration.~World Nuclear Association

To note, for those who haven’t seen this before, as referenced in the World Nuclear Association quotation, there's always a portion of issuers on the various exchanges that will change their commodity orientation according to what's most popular or easiest to fund. In some cases, the commodity orientation switch makes sense, but more often than not, this is a huge red flag and a warning to stay away!

In particular, it's estimated that between 2005 and 2006, the world’s known uranium resources increased by 15%. This is an incredible increase in known resources for any commodity, and most certainly, is partially to blame for the approaching end to this major uranium exploration cycle.

World Primary Supplies of Uranium

How much mineable uranium exists? That's a great question, and the answer is that it all depends on the spot price of uranium. The higher the spot price, the more uranium there is available to mine. The following uranium resources figures are based on values found in the Uranium 2014: Resources, Production and Demand, which is published jointly by the International Atomic Energy Agency (IAEA) and OECD Nuclear Energy Agency (NEA). This report is commonly referred to as 'the Red Book.' 'The Red Book' doesn't appear to be published every year.

The uranium resources laid out in the table below are defined as Identified Resources, which are the combination of Reasonably Assured Resources (RAR) and Inferred Resources (IR). RARs are defined as uranium that occurs in a known mineral deposit of a delineated size, grade, configuration and could be mined at a certain cost of production. The following table lists the top ten countries according to their uranium resources. Interestingly, the top ten countries account for 90% of the total world uranium supply under the USD 260/kg cost category.

Australia doesn't release their low cost uranium resource numbers, but I'm sure they are part of this group of countries - Canada, Kazakhstan and Brazil - which really stands out as far as low cost uranium is concerned. The cost range table gives us a good glimpse of where we stand with our current approximately 25 USD$/lbs uranium. We will have to see how these low cost uranium supplies stack up against demand in Part 3 of this report - so stay tuned.

Before looking at current mining production, let's take one quick look at the change in resource numbers from 2011 to 2013. As you can see, while the upper cost categories grew, the lower end stagnated and even regressed. This is definitely the trend we see with most commodities these days; the higher grades are getting harder and harder to find.

Remembering back to Part 1 of this series, the nuclear fuel cycle has many steps before the commodity can become useful. Therefore, resources in the ground are great, but we need to know how much of it is being produced right now to be able to gauge where we stand, when it comes to supply being above or below demand.

Current Mine Production

Having a uranium resource in the ground is one thing, but in terms of available supply, I believe we need to look at what is actually coming out of the ground right now - producing mines. After looking at mine supply, we'll touch on secondary sources of nuclear power, such as MOX. As you can see from the bottom line of the table, mined uranium makes up 90% of current demand. Can this supply factor change? Maybe...

Who are the largest uranium miners in the world and where are they situated?

Top Uranium Miners in More Detail

Knowing who owns and operates the uranium industry's largest companies is imperative to the uranium supply story. Let's take a quick look at the top 9 uranium producing companies, which control around 89% of the world’s production.

1. KazAtomProm or National Atomic Company of the Republic of Kazakhstan

- State-owned through a sovereign wealth fund, Samruk-Kazyna

- The #1 producer in the world, operating solely in Kazakhstan

- Main customers: China, USA, EU countries, South Korea, Japan and India

- 2016 planned production of natural uranium: 24,000 tonnes

2. Cameco

- Offices in Canada, USA, Switzerland, Kazakhstan and Australia

- Largest publicly-traded and owned uranium company in the world, listed on the TSX and NYSE

- Operates the two largest uranium mines in the world: McArthur River and Cigar Lake, both located in Saskatchewan’s Athabasca Basin

- Involved in all parts of the nuclear fuel cycle: mining/milling, conversion and a 24% interest in the experimental Global Laser Enrichment facility in the USA (with GE and Hitachi) and fuel assembly manufacturer

- 2016 planned production: 25.8 million lbs

3. Areva

- Operates across the globe, but mainly in France where 39% of total company revenues and 68% of total company employment are accounted for

- Second largest publicly-traded and owned uranium company in the world, listed on Euronext Paris

- Involved in all parts of the nuclear fuel cycle: mining/milling, conversion and enrichment and fuel assembly manufacturing

4. ARMZ – Mining Arm of ROSATOM State Atomic Energy Corp

- State owned by JSC Atomenergoprom 82.57%, JSC TVEL 16.14% and ROSATOM 1.29%

- Controls Russian Federation uranium resource assets

- Active in uranium acquisitions: In 2010, they bought 51% of Uranium One, 100% of Mantra Resources in 2011, 98.5% of JSC First Mining Company in 2012.

5. China National Nuclear Corp. (CNNC)

- State-owned and under direct management of central government

- Involved in all aspects of the nuclear fuel cycle

6. BHP Billiton

- Headquartered in Australia, but owns various resource deposits around the world

- Publicly-traded and listed on the ASX, LSE, JSE and NYSE

- Uranium production is actually a by-product of a large copper deposit, Olympic Dam, in Australia

- One of the world’s largest miners

7. Rio Tinto

- Headquartered in the United Kingdom

- Publicly-traded and listed on the LSE, ASX and NYSE

- One of the world’s largest miners

8. Navoi Mining & Metallurgical Combinatt (NMMC)

- State-owned and operated by Uzbekistan

- Focused on uranium and gold mining

9. Paladin Energy

- Headquartered in Australia with operations in Australia and two mines located in Namibia and Malawi

- Publicly-traded and listed on ASX and TSX

A quick tally of the companies leaves us with 4 out of the 9 miners being state-controlled. Plus, it should be noted that these state-owned and operated uranium mines make up approximately 43% of the yearly production. While the other companies aren’t state-controlled, having all of your operating mines in one country at least makes you, in my opinion, more susceptible to state influence. An example of this is Areva, which is a global company, but the majority of its revenue and employees are in France. The reality is that for any minable commodity, it's hard to move a mine. Next to oil, I'm not sure if there's another commodity that's this politically controlled. Political influence in the sector sets up perfectly for speculators; it's not a matter of if, but when.

Largest Producing Uranium Mines

For your information, here's a list of the 15 largest operating uranium mines around the world. Pay particular attention to how much of the total uranium production these 15 mines represent, as far as global supply is concerned.

Deposit Type and Mining Methods

Now, the method of mining alone doesn’t tell the whole story, it's a mix of the geology of the area and the mining method together that dictates how economical the deposit is going to be. As you will see, there are certain uranium mining methods that lend themselves to achieving low uranium recovery costs. Which, in effect, could lead us to the mines that, if or when the uranium price goes lower, would be the lone survivors when it comes to making profit.

NOTE: Even before we get into the demand story, let me reiterate that because so much of the commodity is state-controlled, as the World Nuclear Association says, a low uranium price doesn't mean production is cut.

Secondary Supply of Uranium – Low-Enriched Uranium, MOX and Depleted Uranium

In 1993, a truly momentous step was taken between the USA and Russia, as the nuclear weapon disarmament program, Mega-Tons to Mega-Watts, was launched. As representatives of their countries, US Enrichment Corp (USEC) and Techsnabexport (TENEX) negotiated a commercial agreement that would last 20 years and total $8 billion for down blended weapons grade uranium, commonly referred to as low-enriched uranium (LEU) and plutonium, which can be combined with uranium oxide to form MOX fuel. As of 2013, 500 tonnes of Russian warhead uranium has been down blended into 14,446 tonnes of LEU (The 500 tonnes of HEU is the equivalent of 20,000 warheads).

FYI - Weapons grade uranium is enriched to over 90% U-235, while weapons grade plutonium is enriched to over 93% Pu-239.

This new supply of reactor-ready uranium has a definite affect on world demand, as the World Nuclear Association states,

“Highly-enriched uranium from weapons stockpiles has been displacing some 8850 tonnes of U3O8 production from mines each year, and met about 13% to 19% of world reactor requirements through to 2013.”

The World Nuclear Association estimates Highly-enriched uranium (HEU) in US and Russian weapons stockpiles amounts to about 1500 tonnes. It's estimated that world supply of weapons grade plutonium sits at 260 tonnes. This is an estimate, however, as information like this is super sensitive. The World Nuclear Association puts the burn rate of this resource at 8 to 10 tonnes a year. As can be expected, there's a huge number of skeptics who are concerned that this weapons grade material that's headed for down blending will find its way into the black market. This is a fear that's never going away as long as weapons grade uranium is around to be used civilly. Also, I would contend that all uranium resources would be affected by war, but there's no doubt in my mind that this market supply dries up if we are hit with the black swan of war.

“As of January 2013 there were 35 reactors, or about 8% of the world’s operating fleet, licensed to use MOX fuel, including reactors in France, Germany and India... Reprocessing and MOX fuel fabrication facilities exist or are under construction in China, France, India, Japan, the Russian Federation, the United Kingdom and the United States. However, in 2011, it was announced that the Sellafield MOX plant in the United Kingdom would be closed owing to reduced demand for services in Japan following the Fukushima Daiichi accident.” ~URANIUM 2014: RESOURCES, PRODUCTION AND DEMAND, NEA No. 7209 (Red Book) – pg.115

Not only is there a licensing requirement, but only certain nuclear reactors are even capable of using MOX fuel. As you will see in the tables, it's a select group of countries that participate in MOX fuel and the reprocessing of uranium production.

Depleted Uranium

Depleted uranium is tailings or waste from the nuclear reactor, with a typical 0.25% to 0.35% U-235 (fissile material). As seen in the Nuclear Fuel Cycle, these tailings can be re-enriched and brought back into the supply chain. As cited in the Red Book, however:

“Depleted uranium (DU) stocks represent a significant source of uranium that could displace primary production. However, the re-enrichment of depleted uranium has been limited since it is only economic in centrifuge enrichment plants with spare capacity and low operating costs.“~ URANIUM 2014: RESOURCES, PRODUCTION AND DEMAND, NEA No. 7209 (Red Book) – Summarized from pg.117

There is an estimated 1.6 million tonnes of depleted uranium in the world. There is roughly 90% waste after the fission of the uranium within the reactor. With current consumption, it is estimated that the world tailings supply increases at a rate of 60,000 tonnes per year. As stated at the beginning of the report, the only thing standing between a uranium resource and its use in reactors is the cost of removing it from the earth, or in this case, the enrichment cost.

Concluding Remarks for Supply

The world's uranium supplies can be broken down into two main categories: Primary Supplies – In the ground resources and mine production, and Secondary Supplies – Low-Enriched Uranium (Down blended HEU), MOX and Depleted Uranium.

How do you actually determine the world's current supply of uranium?

This is convoluted as it all depends on price, but even that is skewed because of the political control of a good portion of the world’s operating mines. Instead of looking at hard numbers and saying this is the supply number and this is the demand number, I believe the best course of action is to review data in scenarios, and from there, you can be the judge of where you see this uranium story going.

In part 3, we will look at the hard uranium demand data and then break that down into scenarios. From there, you will have a clear picture of where we stand in the cycle, and can invest or speculate accordingly.

One last thing, Parts 3 and 4 will only be available to subscribers, so if you aren’t already a subscriber and you want to see how this uranium thesis develops, visit the Junior Stock Review homepage andsubscribe for FREE.

Until next time,

Brian Leni P.Eng

Founder - wwww.juniorstockreview.com