This is part 1 of the two part series where we will discuss the Uranium industry in detail. This part will give an industry overview, whereas part 2 will focus on Uranium stocks that investors can buy to benefit from the growing industry.
Introduction
Uranium is a silvery-white metallic element with a periodic table number of 92, and is represented by the symbol U. It was first discovered in 1789 and was named after the planet Uranus. Uranium is found in most rocks, and is as common in the Earth's crust as tin. It is also found in Seawater, and is recoverable from the ocean.
Uranium has the second largest atomic weight, and has a density that is 70% higher than the density of lead. It is found in low concentrations in rock, water and soil, and it is often not economically feasible to extract Uranium. If the element is found in abundance, it is referred to as an 'ore body', and assumptions are made about the market price and the cost of mining. Therefore, reserves are calculated as tons recoverable up to a certain cost.
Uranium exists in different forms, known as Isotopes, and the differentiating factor in these Isotopes is the number of neutrons held in the nucleus. The two most commonly found isotopes in the Earth's crust are Uranium-235 (U-235), which accounts for about 0.7%, and Uranium -238 (U-238), which accounts for about 99.3% of the total Uranium found.
Uranium, being radioactive, decays and releases enough heat to keep the Earth's crust warm. U-235 decays faster than U-238.
Mining
Uranium ore can be mined through conventional mining (underground and open pit) or through situ leaching (ISL) mining.
In conventional mining, the uranium ore can be extracted by underground or open pit methods, depending on the depth of the mine. Conventional mines have a mill where the ore is crushed and ground up, which is then leached with sulfuric acid to dissolve the uranium oxides.
In ISL mining, the uranium ore is dissolved from a porous underground ore body in situ, which is then pumped to the surface.
The final product from both mining processes is uranium oxide (U3O8), which is the form in which uranium is sold.
Mining methods have witnessed a decrease in underground production, and the extraction from underground mines has dropped from 55% in 1990 to around 30% in 2011. In ISL mining, on the other hand, has witnessed an increase in its share of world uranium production.
Method | tonnes U | % |
Conventional underground (except Olympic Dam) | 16,059 | 30% |
Conventional open pit | 9268 | 17% |
In situ leach | 24,180 | 45% |
By-product (Olympic Dam) | 3987 | 7% |
Source: World Nuclear Association
Production
Approximately 64% of the world's uranium production is from mines in Australia (11%), Canada (17%) and Kazakhstan (36%).
The World Nuclear Association has projected 2012 production of uranium to be 52,221 tU, while the UxC expects production to be around 63,600 tU in 2012.
Country | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
Kazakhstan | 3719 | 4357 | 5279 | 6637 | 8521 | 14020 | 17803 | 19451 |
Canada | 11597 | 11628 | 9862 | 9476 | 9000 | 10173 | 9783 | 9145 |
Australia | 8982 | 9516 | 7593 | 8611 | 8430 | 7982 | 5900 | 5983 |
Niger | 3282 | 3093 | 3434 | 3153 | 3032 | 3243 | 4198 | 4351 |
Namibia | 3038 | 3147 | 3067 | 2879 | 4366 | 4626 | 4496 | 3258 |
Russia | 3200 | 3431 | 3262 | 3413 | 3521 | 3564 | 3562 | 2993 |
Uzbekistan | 2016 | 2300 | 2260 | 2320 | 2338 | 2429 | 2400 | 2500 |
USA | 878 | 1039 | 1672 | 1654 | 1430 | 1453 | 1660 | 1537 |
Ukraine (est) | 800 | 800 | 800 | 846 | 800 | 840 | 850 | 890 |
China (est) | 750 | 750 | 750 | 712 | 769 | 750 | 827 | 885 |
Malawi | - | - | - | - | - | 104 | 670 | 846 |
South Africa | 755 | 674 | 534 | 539 | 655 | 563 | 583 | 582 |
India (est) | 230 | 230 | 177 | 270 | 271 | 290 | 400 | 400 |
Brazil | 300 | 110 | 190 | 299 | 330 | 345 | 148 | 265 |
Czech Republic | 412 | 408 | 359 | 306 | 263 | 258 | 254 | 229 |
Romania (est) | 90 | 90 | 90 | 77 | 77 | 75 | 77 | 77 |
Germany | 77 | 94 | 65 | 41 | 0 | 0 | 0 | 52 |
Pakistan (est) | 45 | 45 | 45 | 45 | 45 | 50 | 45 | 45 |
France | 7 | 7 | 5 | 4 | 5 | 8 | 7 | 6 |
total world | 40 178 | 41 719 | 39 444 | 41 282 | 43 853 | 50 772 | 53 663 | 53 494 |
tonnes U3O8 | 47 382 | 49 199 | 46 516 | 48 683 | 51 716 | 59 875 | 63 285 | 63 085 |
Percentage of World Demand | - | 65% | 63% | 64% | 68% | 78% | 78% | 85% |
Source: World Nuclear Association
Reserves
The table below is based on the data complied on the known uranium reserves in 2009. As can be seen, Australia has the highest uranium reserves in the world, followed by Kazakhstan and Canada.
tonnes U | Percentage of world reserves | |
Australia | 1,673,000 | 31% |
Kazakhstan | 651,000 | 12% |
Canada | 485,000 | 9% |
Russia | 480,000 | 9% |
South Africa | 295,000 | 5% |
Namibia | 284,000 | 5% |
Brazil | 279,000 | 5% |
Niger | 272,000 | 5% |
USA | 207,000 | 4% |
China | 171,000 | 3% |
Jordan | 112,000 | 2% |
Uzbekistan | 111,000 | 2% |
Ukraine | 105,000 | 2% |
India | 80,000 | 1.5% |
Mongolia | 49,000 | 1% |
Other | 150,000 | 3% |
World total | 5,404,000 |
Source: World Nuclear Association
Demand
Uranium demand is expected to be around 77,000 tons in 2012, and of this about 85% is driven by nuclear power generation. However, the demand for uranium is expected to increase 7% per year, and is expected to reach 110,000 tons by 2017. The increased demand for uranium is expected to be driven by energy requirements in Asia, which have resulted in a surge in Nuclear power plants in the region (China and India). This increased demand is also likely to boost the prices of Uranium going forward.
Nuclear Crisis in Japan after Earthquake
The prices of uranium have seen significant volatility, and prices decreased significantly in light of the nuclear crisis witnessed in Japan after its nuclear power plants were damaged and shut in the aftermath of the earthquake and tsunami that devastated the country. This has led to a decrease of 21% in uranium prices, to date.
However, nuclear plants in Japan are gradually coming online after receiving safety clearances.
Mining Companies
About 85% of the uranium produced in 2011 was marketed by only eight mining companies. This is due to the consolidation and mergers witnessed in the 1990's, when the world demand and prices of uranium had decreased.
Company | tonnes U | % |
KazAtomProm | 8884 | 17 |
Areva (AREVA.PA) | 8790 | 16 |
Cameco (CCJ) | 8630 | 16 |
ARMZ - Uranium One | 7088 | 13 |
Rio Tinto (RIO) | 4061 | 8 |
BHP Billiton (BHP) | 3353 | 6 |
Navoi | 2500 | 5 |
Paladin (PDN.AX) | 2282 | 4 |
Other | 7906 | 15 |
Total | 53,494 | 100% |
Source: World Nuclear Association
Outlook
As mentioned above, energy demand is expected to increase, driven specifically by the increasing demand in Asia. This will exert positive pressure on the prices of uranium in the future, which will be beneficial for the profitability of uranium miners.
A few companies that may benefit from increasing uranium prices include Cameco Corp , Rio Tinto plc , BHP Billiton plc , Paladin (PDN.AX), AREVA (AREVA.PA) and the Uranium ETF (URA). In part 2 of this series we will discuss Uranium stocks and ETF in detail.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
