The Uranium Fuel Cycle
Uranium, as it is mined from the ground, is not directly useable for power generation. Much processing must be carried out before uranium can be used efficiently to generate electricity. Uranium's transformation from ore in the ground into nuclear fuel and ultimately the handling of waste products is described as the nuclear fuel cycle.
After a successful exploration program, uranium ore undergoes:
Steps one to four are known as the front end of the fuel cycle; steps six and seven, the back end, refers to what happens after the fuel comes out of the reactor.
Nuclear power plants are operational in 33 countries worldwide and in 2023 the International Energy Agency (IEA) reported that nuclear power represented approximately 9% of world electricity production.
Fourteen countries in 2023 produced at least one-quarter of their electricity from nuclear. France gets up to around 70% of its electricity from nuclear energy, while Ukraine, Slovakia and Hungary get about half from nuclear. Japan was used to relying on nuclear power for more than one-quarter of its electricity and is expected to return to somewhere near that level.
World electricity production by source 2023 (source: International Energy Agency)
Figure 3: Nuclear generation by country 2023 (source: IAEA PRIS)
The World Energy Outlook 2024, which is published by the OECD International Energy Agency, considers three scenarios. The Stated Policies Scenario (STEPS) provides an outlook based on the latest policy settings, including energy, climate and related industrial policies. The Announced Pledges Scenario (APS) assumes all national energy and climate targets made by governments are met in full and on time. The Net Zero Emissions by 2050 Scenario (NZE) looks at what must be done to limit global warming to 1.5°C.
Nuclear generating capacity increases from 416 GWe in 2023 to 647 GWe in 2050 in the STEPS scenario. In the APS scenario, nuclear generating capacity more than doubles to 874 GWe in 2050, while in the NZE scenario it reaches 1017 GWe in 2050.
"Policy support for nuclear power has risen in recent years," the IEA noted. "In December 2023, more than 20 countries pledged to triple global nuclear capacity by 2050. Notable developments in several European countries include extending operations for existing reactors in Belgium, lifting a ban on developing new nuclear plants in Switzerland, the identification of new builds as a priority in Sweden and Poland, and confirmation of the importance of nuclear in France. Many countries are showing interest in small modular reactors and the first projects outside China and Russia are expected to come online around 2030."
Uranium is the heaviest of all the naturally occurring elements (hydrogen is the lightest). Uranium is 18.7 times as dense as water.
Like other elements, uranium occurs in several slightly differing forms known as 'isotopes'. These isotopes differ from each other in the number of particles (neutrons) in the nucleus. Natural uranium as found in the Earth's crust is a mixture largely of two isotopes: uranium-238 (U-238), accounting for 99.3% and uranium-235 (U-235) about 0.7%.
The isotope U-235 is important because under certain conditions it can readily be split, yielding a lot of energy. It is therefore said to be 'fissile' and we use the expression 'nuclear fission'.Uranium is a naturally occurring element with an average concentration of 2.8 parts per million in the Earth's crust. Traces of it occur almost everywhere. It is more abundant than gold, silver or mercury, about the same as tin and slightly less abundant than cobalt, lead or molybdenum. Vast amounts of uranium also occur in the world's oceans, but in very low concentrations.
The chart above shows the current known recoverable resources of uranium by country. Australia has 28% of global uranium resources.
Following the Russian invasion of Ukraine in February 2022 supply from Russia and supply passing through Russian ports has become vulnerable to sanctions, transport disruptions and supply chain risk. Security of supply and geopolitical risk are important factors for uranium buyers when considering supply sources.
Figure 3: Uranium Production in 2021
The fundamentals for uranium are stronger now than when prices spiked during the early 2000s.
Nuclear power has been recognized as a clean energy source that is needed to meet future global climate change targets and government policies are being put in place to support nuclear generation from existing and future reactors.
Uranium demand in the near term is growing as existing reactor lifetimes are being extended and reactors under threat of shutdown for economic reasons are reprieved. Mid to long term demands continues to increase as new reactor programmes are announced.
On the supply side western the deglobalisation of the nuclear fuel market continues with western utilities looking to end their dependence on Russian supply.
Idled mines are restarting and operating mines are moving towards full capacity operation but increased demand forecasts and reduced secondary supply are increasing the probability of supply deficits in the near term.
Incentive costs for new mines, with some notable exceptions, have risen, as inflationary effects are included in feasibility studies, and are estimated to be close to $80/lb.
Despite the tightening market, the spot price has stayed in a range from the mid 40s to low $50s reflecting the stronger influence of equity markets, from which uranium had historically been insulated. The improving fundamentals have been seen in the increased level of term activity, the increase in the term price, the tightening of mid to long term contracting terms such as volume flexibilities and the return of the carry trade.
Security of supply is at the forefront of utility procurement strategy, and this includes limiting dependence on any individual company or geographic area. As utilities continue to work towards reducing dependence on Russian supplies, demand for uranium supply from geopolitically stable nations such as Australia will increase. Honeymoon with its first mover advantage is in pole position to benefit from these developments.
The marketing strategy for Honeymoon is to build a robust sales portfolio which would cover costs and protect the mine from any future market downturn while retaining sufficient uncommitted supply to take advantage of rising market conditions. An important pillar of this strategy is ensuring that the company has a diversified buyer base. The company will be targeting global utilities with long term strategic perspectives. Initially the focus will be on North America and Europe, where Boss Energy Ltd has strong contacts, and in parallel the company will be developing its links with South and East Asia.
