For the last ten years, uranium has experienced a consistent decline in exploration budgets, particularly since the 2011 Fukushima Dai-ichi reactor disaster in Japan, which forcefully influenced global attitudes away from nuclear energy. Uranium mining companies, more recently, have seen a significant increase in exploration budgets from 2021. This surge is set to reach even further in 2022 as ever more companies are becoming invested in rising prices of yellowcake and are progressively adopting positive attitudes towards nuclear powered energy solutions.
According to S&P Capital IQ, exploration budgets increased in 2021 by 10.7%, compared with corresponding budgets in previous years. Canada was at the forefront of the charge towards nuclear exploration, allocating US$67M to its exploration finances. Second in the race was the U.S., with US$10.1M. S&P Capital IQ data also shows that global junior mining exploration budgets totalled around US$94.3M in 2021, in comparison to their majors’ counterparts, which combined to approximately $22.7M.
The dwindling uranium mining industry has seen a revival with these modest increases. Despite not quite reaching optimal budget levels experienced in the early 2000s, it suggests the uranium industry is slowly shaking off the once stigmatized notions of nuclear catastrophes, such as Chernobyl and The Three Mile Island accident, but instead is offering lower-carbon power solutions.
This swing in global opinion has also been accentuated by a plan drafted by the European Union (EU), which is expected to propose regulations in January, determining whether gas and nuclear projects will be incorporated in the EU’s “sustainable finance taxonomy”. The outline of the commission’s plan, as reported by Reuters, will only label nuclear power plant investments as fundamentally green if the project has a strategy, funds, and a location to safely discard of radioactive excess. To be considered as green under the plan, new nuclear plants must obtain assembly permits prior to 2045.
“Taking account of scientific advice and current technological progress as well as varying transition challenges across member states, the Commission considers there is a role for natural gas and nuclear as a means to facilitate the transition towards a predominantly renewable-based future,” the European Commission said in a statement to Reuters.
In the wake of uranium’s evident rise from the ashes, Toronto-based investment fund, Sprott Asset Management LP, has taken action to secure their place in the commodity’s future. The company rocked the global uranium market by purchasing significant amounts of surplus supply, in preparation for a new trust in the summer of 2021. In response to Sprott’s excessive purchasing, spot prices for uranium rose steeply, triggering companies to search for alternate uranium sources.
Furthermore, according to S&P Capital IQ, civil unrest in Kazakhstan also triggered uranium prices to surge in January 2022. As Kazakhstan produces almost half of all the worldwide uranium supply, any political or civil unrest is likely to limit the country’s production capacities. This has prompted the JSC National Atomic Company, Kazatomprom (KAS: JZAP), to ascertain an expected supply disruption amid the political and civil disarray. S&P Capital IQ calculated the month spot price of U3O8 to Canada at US$42.25 per lb on 4 January 2022 and US$45.75 per lb on 6 January, an 8.3% uptick, as shown in the following graph.
Additionally, President Kassym-Jomart Tokayev ordered the government to draft a plan to increase tax revenue from mining companies that have profited from larger metal prices.
“I am ordering the government to come up with a plan [to bring] additional revenues to the budget. In exchange, we can provide large incentives for the exploration and development of new deposits for large mining and other companies.” Tokayev addressed to Kazakhstan parliament.
The anticipated supply disruptions in Kazakhstan have instigated several North American uranium companies to offer to fill the supply deficit. Companies such as Cameco Corporation (TSX: CCO) and Energy Fuels Incorporated (TSX: EFR) have said they will both step up to the plate if commodity prices rise high enough.
Cameco stated that if the commodity price rose to the point where the market was calling for increased production, it could lead to the revival of some, if not all, of its five suspended North American uranium sites, including the McArthur River mine, Crow Butte mine, and the Smith Ranch-Highland mine.
Similarly, Energy Fuels stated it also had the capacity to produce between 2 to 2.5M lbs of uranium in between 18-24 months by revitalizing production at suspended mines or mills, also depending on if the political tensions in Kazakhstan resulted in drastically improved market conditions.
For now, the future for uranium appears optimistic, with the International Energy Agency releasing a report in November 2021, anticipating global nuclear capacity to reach 582GW by 2040, an increase from the 415GW recorded in 2020.