RE:RE:MotleyFool Article Uranium has been mired in a protracted slump since 2011 and despite claims by some pundits that a rally is looming, its price continues to fall, leaving it down by 12% over the last year. This has had a deleterious impact on uranium miners, with many — including the world’s largest publicly traded uranium miner Cameco Corp. (TSX:CCO)(NYSE:CCJ) shuttering mines and slashing production to reduce costs.
According to analysts, this, along with a dearth of investment in exploration and development as well as growing demand caused by new reactors coming online in coming years will drive uranium prices higher.
Nonetheless, there are signs that the prolonged slump is far from over.
Now what?
According to the World Nuclear Association, there are 57 reactors under construction globally, which, when combined with the 440 existing reactors should trigger an uptick in demand for uranium as they come online.
However, the situation is not as simple as the headline numbers would have investors believe.
In the wake of the 2011 Fukushima nuclear disaster, many nations are moving to wind down their dependence on nuclear power, especially now that some renewable sources of energy are cheaper to operate. Data collated by investment manager Lazard shows that solar and wind power produce electricity more cheaply – OH REALLY? WHERE IS THE SUPPORTING DATA? ARE SUBSIDIES INCLUDED IN THE ESTIMATES? NUCLEAR PROVIDES ELECTRICITY 24/7/365, WIND AND SOLAR DON’T – HOW IS THAT VALUED IN THE CALCULATIONS? GENERALLY SPEAKING A NUKE CAN BE PLACED PRETTY MUCH ANYWHERE, BUT TURBINES AND PANELS CAN’T – IS THAT WORTH ANYTHING, HOW IS THAT VALUED? than nuclear, as do natural gas-fired power plants.
Those sources of electricity do not have the same potential to cause massive environmental damage in the event of a catastrophic nuclear failure. SO CO2 EMISSIONS FROM NG, A HYDRO CARBON, DON’T CONTRIBUTE TO THE NEGATIVE HEALTH EFFECTS EXPERIENCED BY PEOPLE? BURNING OF FOSSIL FUELS CREATES POLLUTION THAT HAS KILLED AND CONTINUES TO KILL WAY MORE PEOPLE THAT NUCLEAR GENERATION EVER HAS. ESPECIALLY THOSE PEOPLE THAT ARE ELDERLY AND BREATHING COMPROMISED. EVENTUALLY A SHIP OR A TERMINAL HANDLING NATURAL GAS WILL BLOW UP. HOW MANY DEATHS WILL WE SEE FROM THAT.
In mid-2018, the growing unpopularity of nuclear power saw South Korean President Moon Jae-in announce that the nation would not build new nuclear plants nor extend the lifespan of existing reactors. AND WHEN A PRO-NUKE GOVERNMENT IS ELECTED, JUST LIKE AN ANTI-NUKE GOVERNMENT WAS ELECTED NOW??? ALSO DOESN’T MENTION THE FACT THAT CONSTRUCTION ON TWO REACTORS WAS RESTARTED - https://world-nuclear-news.org/NP-South-Korean-president-accepts-public-decision-2310175.html France has also flagged that it intends to reduce its reliance upon nuclear power, reducing the proportion of its electricity generated by nuclear plants from 75% t0 50% by 2025. AGAIN THIS STATEMENT IS NOT ACCURATE - https://world-nuclear-news.org/NP-France-to-review-nuclear-reduction-target-07111702.html
Since 2016, there has also been a sharp decline in the amount of money invested in building new nuclear reactors. During that year, only three gigawatts of nuclear capacity commenced construction, which was 60% lower than the average from the previous decade. THERE ARE MORE THAN 30 PLANTS COMING ONLINE BY 2020, THE SAUDIS, RIGHT NOW, ARE NEGOTIATING TO SPEND MONEY ON 16 REACTORS, THE CHINESE ARE GOING TO SPEND MONEY ON 6 -8 NEW REACTORS, THE TURKS ARE BUILDING 4, RIGHT NOW, THE INDIANS, I’VE LOST COUNT, JUST GO TO THE WNN SITE TO CONFIRM WHAT I ASSERT. YOU WILL FIND MORE THAN WHAT I’VE LISTED.
It should also be noted that many of the nuclear plants under construction are earmarked to replace existing reactors that are being retired because they have reached the end of their lifespan. I CALL BALONEY. THE NEW REACTORS COMING ON LINE AND THE NEW ONES UNDER CONSTRUCTION AND THE NEW ONES JUST MOVING FROM THE PLANNED CATEGORY TO UNDER CONSTRUCTION ARE IN DEVELOPING NATIONS THAT DON’T HAVE NUKE’S, SO BALONEY. THE REPLACEMENT BUILD OUT HASN’T REALLY STARTED YET – WATCH THE STATES IN THE NEXT 10-20 YEARS TO SEE THAT GET GOING AS THEIRS ARE STARTING TO AGE OUT. AGAIN ALL OF THIS IS PUBLIC KNOWLEDGE.
For these reasons, there is unlikely to be a substantial enough spike in demand to trigger a sustained uranium rally.
Supply constraints are also not as significant as some pundits believe.
While some producers such as Cameco have shuttered production, including its November 2017 decision to suspended production at its McArthur River mine by the end of January 2018, other sources of supply are coming online.
Namibia is determined to boost output from its uranium mines, viewing the radioactive metal as a means of generating economic growth and earning desperately needed export income. The African nation’s Rossing mine contains the world’s largest uranium deposit and Namibia believes it can supply 10% of the world’s uranium. THEY OPERATE ROSSING AT A COST IN THE MID $50’S PER LB.
Smaller miners such as Australia’s Peninsula Energy Ltd. (ASX:PEN) have also ramped up activity despite the sustained weakness of uranium. For the first quarter 2018, Peninsula beat its first quarter 2018 production guidance by 9% and aims to continue doing so for the remainder of the year. THIS IS A TINY PRODUCER. https://www.pel.net.au/images/peninsul---thopaimair.pdf GO TO PAGE 13 OF THIS REPORT AND LOOK AT THE CHART THAT FORECAST U DELIVERIES YOU WILL NOTE THAT THEY CURRENTLY DELIVER 225,000 LBS PER YR AND DELIVERY WILL DECLINE FOR THE NEXT TWO YEARS. IT ISN’T UNTIL AFTER 2020 THAT THIS COMPANY WILL PRODUCE OVER 400,000 LBS PER YEAR – HARDLY A MARKET MOVER COMPARED TO THE CAPACITY OF 18,000,000 AT MACARTHUR RIVER.
For these reasons, it is difficult to see a sharp decline in supply to give uranium a sustained lift.
So what?
The outlook for uranium remains poor. There is little evidence of a substantial lift in demand or major supply constraints, making it improbable that the radioactive metal will experience a sustained rally. This means there won’t be any significant improvement in Cameco’s performance. While the miner has done a great job of slashing costs, including reducing its dividend by 80%, it is unlikely to see a significant leap in profitability or cash flow. Thus, there is little upside available to investors and Cameco is unlikely to reinstate its dividend. MY PERSONAL ANALYSIS OF THE NUMBER OF REACTORS COMING ON LINE SHOWS ME THAT WE SHOULD SEE 503 REACTORS OPERATING BY 2023. WHEN FUKISHIMA HAPPENED THERE WERE 454 REACTORS OPERATING. JUST PRIOR TO THAT EVENT THE SPOT PRICE WAS SEEN TO BE $72.50 US / LB. CONTRARY TO WHAT IS STATED HERE THERE ARE NOT A LOT OF REACTORS SHUTTING DOWN PRIOR TO 2025. AND IN MOST COUNTRIES IT TAKES 10 PLUS YEARS TO GET A URANIUM MINE UP AND RUNNING. THE ONLY NEW MINES STARTING UP CURRENTLY ARE CHAINA’S HUSAB IN AFRICA AND BERKLEY’S PROJECT IN SPAIN. RANGER MINE IN AUSTRALIA IS SCHEDULED TO CLOSE BEFORE 2023. I SEE A PROBLEM - SO WHERE IS THE U GONNA COME FROM? AGAIN, ALL OF WHAT I SAY HERE IS COMON KNOWLEDGE AND REPRODUCABLE BY DOING YOUR OWN DUE DILIGENCE.
Glta – B2S2