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.
The Uranium Fuel Cycle
Boss Energy is focused on uranium mining which is the first stage of the front end of the fuel cycle. Uranium from the Honeymoon mine will be transported to Adelaide from where it will be shipped to a Conversion Facility and stored until it is purchased by a customer. Once the uranium has been purchased by a nuclear utility, it will undergo conversion, enrichment and then be fabricated into fuel and used to generate electricity in nuclear power stations. All uranium from the Project is solely for use for the generation of electricity in civil nuclear reactors. Throughout all stages of the fuel cycle, uranium from Honeymoon will be subject to the provisions of the Nuclear Non-Proliferation Treaty and all applicable Australian bilateral safeguards treaties with customer countries.Conversion plants are operating commercially in the USA, Canada, France, Russia and China. The principal destinations for the uranium from the Honeymoon mine will be the Western conversion facilities: Cameco’s facility in Canada, ORANO’s facilities in France and Converdyn’ s facility in the US.
Nuclear power plants are operational in 32 countries worldwide and in 2020 the International Energy Agency (IEA) reported that nuclear power represented approximately 10% of world electricity production.Thirteen countries in 2020 produced at least one-quarter of their electricity from nuclear. France gets around 70% of its electricity from nuclear energy, while Ukraine, Slovakia, Belgium and Hungary get about half from nuclear.
Figure 3: Nuclear generation by country 2021 (source: IAEA PRIS)
The World Energy Outlook 2021, which is published by the OECD International Energy Agency publishes annual scenarios related to energy. The ‘Sustainable Development Scenario’ which is consistent with the provision of clean and reliable energy and a reduction of air pollution, among other aims forecasts electricity generation from nuclear increases by almost 75% by 2050.
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.
Table 1: Uranium resources by country in 2019 as a percentage
The table 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.
