David Talbot discusses the metal’s challenges and potential, and the Athabasca Basin’s excitement
by Greg Klein
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With uranium now “languishing below 40 bucks a pound, these are the lowest prices we’ve seen since 2006 or earlier,” says David Talbot. A former exploration geologist who’s currently vice-president and senior analyst for uranium and iron ore with Dundee Capital Markets, he’s specialized in uranium research since 2007. Talbot found time to speak with ResourceClips.com about supply, demand, prices and why the Athabasca Basin continues to attract attention despite the metal’s poor price performance.
He emphasizes that uranium prices must rise if miners are to meet projected demand. And supply could be a problem as early as 2014. This year ends the highly enriched uranium (HEU) program, in which the United States gets fuel from former Soviet warheads. As megatons to megawatts fades to memory, so does up to 24 million pounds of uranium a year.
Talbot sees little likelihood of the program being renewed. “The Russians say they’re not going to do it. The Russians aren’t making money downblending uranium and they’ve said they’re going to sell forward a lot of their enrichment capacity…. The last time this HEU agreement came into play, it took I think four years and six governments plus all the agencies to put it in place. It was a very gruelling process. That process is not underway right now.”
But HEU’s demise will be just one factor limiting supply. “A lot of the primary supply that had been expected over the next couple of years is not coming down the pipeline. It has everything to do with the uranium price and whether or not these mines can attract investment to be built.” From the United States to Australia to Kazakhstan, proposed mines have been postponed and previously operating mines have shut down. “All told, that’s about 60 million pounds a year that’s not going forward,” he says. That would have equalled nearly half the production for 2011, the most recent annual total reported by the World Nuclear Association.
Despite that, “there are more power plants planned, proposed or under construction today than we had before Fukushima,” Talbot says.
“What do we need to move forward?” he asks. “We definitely need the uranium price to rise. But having said that, I think we need confidence even more. We’ve had a fairly good uranium price over the last eight years and what have we done? We’ve added 46 million pounds, 91% of it from Kazakhstan…. So what do we need by 2020? We need 90 million pounds extra. That’s twice as much as we’ve done in the last eight years.”
Developments in Japan could prove persuasive. “It’s not whether their reactors are coming back online because I think everybody realizes they are. It’s how many reactors are going to come online and how quickly…. How many of these reactors get up and running by the end of the year is probably one of the biggest questions. Once they start coming back online, I think that’s going to give a psychological push to the entire sector.”
Once that happens, there seems little barrier to higher prices. Uranium itself plays a minor role in the cost of nuclear energy. “The big price is the capital cost,” Talbot says. “I think uranium is about 15% of the total cost, and about half of that is enrichment, conversion, fuel fabrication, delivery on site. So that makes uranium a very tiny portion of nuclear power.”
Looking ahead, “the Americans have roughly a year and a half of supply at their utilities. I would say that’s probably less than most of the world. A lot of the world tends to have multiple years of supply. The Americans aren’t going out and buying companies and projects, they’re not taking a strategic interest in projects, like the Chinese, Koreans, Russians and Japanese are doing, or have been doing in the past several years.
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