Tuesday 27th September 2016

Resource Clips


The Fukushima effect

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Nuclear expert Thomas Drolet offers a first-hand look at the disaster, the aftermath and the outlook for uranium prices

 

On the other side is “a newly revised regulatory authority that’s far more independent and far better staffed than before. They’re being very cautious and in my opinion rightly so. Joined with them are the public.”

Back in the 1960s, with the devastation of WWII in especially stark memory, “the Japanese public had to be talked into nuclear power because of a lack of home-grown energy fuels. They import 90% or 95% of the fossil fuels that they burn. They had to be convinced. Fukushima Daiichi has exacerbated that sort of concern. From my experience the vast majority of Japanese are still against it, despite the recent Tokyo election.”

A February 9 election for governor of Tokyo brought victory for nuclear advocate Yoichi Masuzoe. That might suggest some ambiguity in a city that Drolet characterizes as preoccupied with radiation. “I was invited for Friday night dinner at the home of a Japanese nuclear worker. His wife greeted us at the door with a Geiger counter,” he says. “You see shoppers in food stores running Geiger counters along the produce and other products. But it’s not that prevalent outside Tokyo. Other centres are much farther away from the disaster.”

Although he’s convinced Japan will return to nuclear energy, “I don’t believe predictions that most of the 49 reactors will come back,” he contends. “My prediction is that about half of that, about 25, will eventually come back, gradually and carefully over the next five years. The basic rationale for that is some of the reactors, the Mark I BWR, may never get re-permitted in Japan. Secondly, some local governments just don’t want them.”

I was invited for Friday night dinner at the home of a Japanese nuclear worker. His wife greeted us at the door with a Geiger counter.—Thomas Drolet

“On the other hand, the country is in trouble anyway. If you consider factors like Japan’s demographics, the highest debt-to-GDP ratio in the industrialized world, there are a number of reasons why government and industry want to have some of those reactors back. Replacement power costs are horrendous. They have to replace a total of 25,000 megawatts. They have to do something.”

Would 25 re-starts over five years be enough to stimulate uranium prices? “The very fact that the first reactors start to come back online will create a media-driven message that nuclear power is safe again,” he responds. “That will, in my opinion, cause the price to move up gradually.”

But looking beyond Japan, he sees more important price significance “in China, in Russia, in the Middle East, in places where all these 60 new reactors will be coming online for the first time in the later part of this decade. Uranium consumers buy approximately three and a half years before they use the fuel. So if you look at all those 60 reactors coming online by the year 2020, there will be a massive amount of long-term U3O8 buying. So I see in the latter half of 2015, early 2016 a lot of long-term contracting between suppliers and users. That will cause the long-term price to start to move up substantially, up from this bottom of $50 long-term somewhere to the mid-60s or perhaps the early 70s.”

Optimistic as he is, Drolet’s careful not to overstate the case. “That will be a gradual move as all of those contracts are closed,” he emphasizes.

Read part two of the interview, covering other aspects of the uranium space, here.

Disclaimer: Lakeland Resources Inc is a client of OnPage Media Corp, the publisher of ResourceClips.com. The principals of OnPage Media may hold shares in Lakeland Resources.

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