Why Investing in Uranium & Thorium?

Uranium-MineUranium -U 92-

Dear PGM Capital Blog readers,
In this weekend blog article we want to discuss with you why investing in Uranium can be so lucrative in the coming 4-6 years from now.

About Uranium:

  • Uranium is a silvery-white metallic chemical element in the actinide series of the periodic table, with symbol U and atomic number 92, which means that an uranium atom has 92 protons and 92 electrons.
  • Uranium is weakly radioactive because all its isotopes are unstable, known isotopes, U-233 – U-238.
  • The most common isotopes of uranium are uranium-238 (which has 146 neutrons and accounts for almost 99.3% of the uranium found in nature) and uranium-235 (which has 143 neutrons, accounting for 0.7% of the element found naturally)
  • After Plutonium, Uranium has the second highest atomic weight.
  • The main use of uranium in the civilian sector is to fuel nuclear power plants.
    • One kilogram of uranium-235 can theoretically produce about 80 tera-joules of energy (8×1013 joules), assuming complete fission; as much energy as 3000 tonnes of coal.

About Thorium:

  • Thorium is a naturally occurring radioactive chemical element with the symbol Th and atomic number 90.
  • Thorium is more abundant in nature than uranium.
  • It is fertile rather than fissile, and can only be used as a fuel in conjunction with a fissile material such as recycled plutonium.
  • Thorium fuels can breed fissile uranium-233 to be used in various kinds of nuclear reactors.
  • Molten salt reactors are well suited to thorium fuel, as normal fuel fabrication is avoided.
  • Scientists believe thorium is key to developing a new generation of cleaner, safer nuclear power.

THE SUPPLY AND DEMAND PICTURE:

Uranium:
The worldwide production of uranium in 2011 amounted to 54,610 tonnes, of which 19,451 tonnes (35.61%) was mined in Kazakhstan. Other important uranium mining countries are Canada 9,145 tonnes (16.74%), Australia 5,983 tonnes (10.95%), Niger 4,351 tonnes (7.97%) Namibia 3,258 tonnes (5.96%), and Russia 2,993 tonnes (5.48%).

Source:

Below chart shows the world Uranium production by Country in the period, 2001 – 2011

World production Uranium 2001 - 2011

As can be seen from above chart, the world supply of uranium production is higher because of increased production from Kazakhstan. Apart from Kazakhstan, production is flat or slightly declining. Kazakhstan claims that it has the ability to eventually ramp up production to 30,000 metric tonnes per year, but indicates that it is planning an output plateau of 20,000 to 25,000 metric tonnes a year.

Below chart shows a history of uranium consumption and uranium mined.

world_uranium_production_and_demand

The reason that currently supply from mines can be less than current demand is because some of the supply is from previously mined uranium. Back in the 1950s, 1960s, and 1970s, far more uranium was mined than was needed for peaceful purposes. A large part of this excess uranium was used by both the United States and the Soviet Union to make nuclear bombs. Some of it was stockpiled as well.

It is worth mentioning that due to an agreement between the USA and Russia, over the last 20 years the Russians have dismantled about 20,000 nuclear warheads, processed their high-enriched uranium cores into low-enriched fuel, and sent it to the United States.

As can be seen from below 12-year chart, uranium-oxide (also called yellowcake) prices have plummeted due to the “Great Recession” and Japan’s Fukushima disaster from its peak in 2007, of US$ 136.00 per pound, since the Great Recession 2008-2009, and Japan’s Fukushima disaster of March 2011 to a minimum of US$ 34.00 a pound by early August, this year.

Uranium 12 year price chart

As can been seen from below 6-month chart,  the price of Uranium is showing signs of recovery, since its bottom of early August this year and has closed at US$ 36.00 per pound on Friday, November 22nd, 2013.

Uranium 6-month price chart

Thorium:
Below table shows the estimated world thorium resources:

Country Tonnes
India 846,000
Turkey 744,000
Brazil 606,000
Australia 521,000
USA 434,000
Egypt 380,000
Norway 320,000
Venezuela 300,000
Canada 172,000
Russia 155,000
South Africa 148,000
China 100,000
Greenland 86,000
Finland 60,000
Sweden 50,000
Kazakhstan 50,000
Other countries 413,000
World total 5,385,000

PGM COMMENTS:

Uranium:
Despite all the controversy surrounding nuclear energy, global demand for enriched uranium and nuclear energy, is actually higher today than it was before Japan’s nuclear meltdown in 2011. And when it comes to China, there’s simply no other country like it, expanding as much, or as quickly, into nuclear energy.

Within the next 10 to 15 years, China is set to surpass the United States as the largest uranium-consuming nation in the world. As Mining.com reported, “As of November 2012, China had 15 operating reactors (11.9 GWe of installed capacity) and 26 reactors were under construction (27.6 GWe). That amounts to about 42% of reactors under construction worldwide. Additionally, 51 reactors were planned (57.5 GWe) with their building due to start within three years, and many more than 100 units have been proposed, which are likely to be commissioned before 2030.”

As you can see from below chart, the United States currently has just over 100 operating nuclear reactors. Before 2030, China plans to more than double that figure.

World Nuclear Power Picture

As can be seen from below 2000-2050 chart the world will experience a peak in Uranium production by 2020, while demand will keep on rising

Uranium-supply-forecast-from-2001- 2050

With the final shipment of civilian nuclear reactor fuel made from Soviet atomic bombs leaving port for the United States on Thursday, November 14, 2013, thus ending a post-Cold War program that has been a long-running boon for the nuclear power industry, we’ll see a disequilibrium – starting 2014 – in the supply and demand picture for Uranium, which has the potential for triggering the second leg of the bull-market for this commodity.

The latest stock price recovery of the two biggest miners of Uranium that export to China, namely the Canadian and Australian miners, Cameco (NYSE: CCJ) and BHP Billiton (NYSE: BHP), can also be seen as proof of the turnaround in Uranium price as discussed above.

Thorium:
Research and development of thorium-based nuclear reactors, primarily the Liquid fluoride thorium reactor (LFTR), MSR design, has been or is now being done in India, China, Norway, U.S., Israel and Russia.

Below Image shows a schematic of a Thorium based LFTR

Liquid Fluoride Thorium ReactorIf you want to profit from this coming Thorium and Uranium boom, please feel free to contact us for an appointment.

Before following any investment advise, please consider your investment horizon, financial position and risk tolerances and keep in mind that commodities prices as well as stocks of their miners may be very volatile and that sharp corrections may happen in the short term.

Until Next Time

Eric Panneflek

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