The Black Swan

Denison Mines: A Play on Escalating Uranium Demand

Estimates of "cost per kwh" are, in all cases, highly subjective depending upon factors such as:

-legacy cost of plant construction
-discount rate assumptions
-fuel costs

To quote these inherently speculative estimates as precise facts demonstrates either a lack of understanding of the data being used as evidence or an intention to mislead.

The author cites numerous plants under construction. Recent reports by Goldman and UBS have made similar points. But let's do the math to put this in perspective: Nuclear reactors take 5 years to build, and that usually comes on top of several years of planning and approvals - even in dictatorial countries.

So perhaps all 39 plants "under construction" are completed in what, 5 years? That is roughly a 10 percent increase in global nuclear capacity. They may have higher capacities than some of the smaller reactors out there now, so perhaps more than 10 percent. But that is over a period of 5-10 years.

As other commenters have pointed out in the past, uranium mining production is expected (by the miners) to increase massively. Denison alone expect to add AT LEAST 3 million pounds of production by 2011. 3 million pounds is nearly 5% of current consumption, and nearly 10% of current mine production. Uranium One has similar growth in mind, and I'm sure Cameco and BHP aren't slouching either.

So we have negligible reactor growth over the next couple years, and possibly 10% in 5-10 years. Current reactors are increasing fuel burnup rates, which has increased their capacity factors and uranium consumption, so that could also drive uranium demand. However - we should also be aware that many in the current fleet are approaching the end of their useful lives, and could well come offline in 10 years.

There is indeed a chance that the Russians could engage in "extreme resource nationalism" as one poster puts it, and cut off its HEU shipments to the US. That would, for certain, impact uranium prices, as 20% of US electricity capacity would be at risk.

But let's look at this risk for what it is: highly binary. If the Russians continue to downblend HEU to power our PCs and hairdryers, the rest of the uranium market points to a surplus over the coming years.

The longer term market for uranium and nuclear power may well grow significantly, as uranium is the only non-fossil energy source that actually produces any real power today.

But let's also not play around with the truth about pollution: Nuclear is NOT carbon-free. This is an outright lie. All that uranium is mined, crushed, processed, enriched and shipped. Mining alone is a massively energy intensive process - and could become much more so if lower ore grades are used in the future. You mine a ton of rock to get a pound of uranium. That takes a lot of energy.

Uranium miners may well see large gains over the longer term, but near term they remain a speculative bet.

I should also comment on the writing style of this author. I am not a stickler for grammar, but I also question the level of introspection on the fundamental topic - nuclear power - from a writer who makes basic mistakes such as not capitalizing political party names and cannot make his verbs agree with his nouns.