History
An experimental nuclear reactor in Idaho first produced electricity in 1951 and by 1954 the first nuclear powered electricity generator was supplying the then closed city of Obninsk in the USSR. In the same year a pressurised water reactor (PWR) powered the newly launched submarine USS Nautilus. Westinghouse designed the first fully commercial PWR and General Electric the first boiling water reactor (BWR), both commissioned in 1960. Nuclear power stations were widely constructed throughout the 1960’s and 1970’s.
The price of uranium oxide (yellowcake) rose to US$43 in 1979. The establishment of the International Atomic Energy Authority in 1957 imposed operational and safety standards. Accidents at Three Mile Island, Pennsylvania, in March 1979 when there was a partial meltdown, and at Chernobyl near Kiev in April 1986, where many people died or were affected, halted further development.
For decades, there have been more than ample supplies of enriched uranium for nuclear power stations. There were above-ground surplus stockpiles of the metal put aside by utilities and countries and enriched uranium in decommissioned bombs to reprocess. Since 1984, the existence of secondary supplies has meant that the uranium mining industry has only had to provide the balance of world demand by primary mining. Contract prices for supplies of “yellowcake” have been low and exploration and mine development ground to a halt. By late 2001, the world spot price fell to US$7.10 per pound. By 2003, just 10 mines produced two-thirds of the world’s uranium stock. In 2004, world demand was 170 million pounds of uranium oxide but mined production was still only 104 million pounds.
Since then the picture has changed dramatically. With above-ground stockpiles now heavily depleted and demand rising, increasing pressure on supply has driven the world spot price for uranium oxide to US$15.50 at the beginning of 2004 and on to US$31 now, a 25-year high. In 2004, spot prices increased by 43% and long-term price indicators rose by 61% reflecting a current and projected excess of world demand over supply. The International Atomic Energy Agency forecasts a 47% rise in global production of nuclear power in the period 2003-2020.
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The current nuclear climate
Today, coal provides 39% of global electricity production and hydro 19%. However a significantly high 16% is nuclear-generated, which is more than from gas (15%) and oil (10%). At end May 2005 there are 439 nuclear reactors operating in 30 countries around the world. The US contains most with 103; and France 59. In France, over 75% of power is from nuclear reactors. The advantages are minimal emissions of greenhouse gases, economic operation and, up to now, high availability of uranium supply. These advantages, coupled with higher prices for coal, oil and gas and the needs of the Kyoto Agreement mean nuclear power is at last enjoying greatly increased attention in providing energy for the future.
At the end of May 2005 a further 25 new reactors are in construction, another 39 are planned and 73 more are proposed. Japan, India, Russia, China and Taiwan are notably planning substantial increases in nuclear capability.
| Demand | |
 |
World Nuclear Association Upper case. WNA 2003 higher estimate of global demand |
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World Nuclear Association Base case. WNA 2003 base estimate of global demand |
| Supply | |
| Stockpiles of suppliers and utilities | |
| Secondary above-ground sources. Including tailings recoveries; Russian recovery of commercial uranium from weapons in its current Highly Enriched Uranium (HEU 1) programme; stocks contained in the current US Government Enrichment Corporation stockpile; other US Government inventories; recoveries from Mixed Oxide Fuels (MOX) | |
| HEU 2. Possible Russian second programme down blending enriched uranium from weapons. Russia may retain this material for its own use and not export it | |
| Potential mine expansions. Increases in production levels possible from existing major mines | |
| Production from new mines. Uranium mined from known new sources due to come into production | |
| Existing production. Uranium mined from mines currently in production and with adequate reserves | |
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Yellowcake’s Directors believe that the uranium market is in the early stages of a multi-year uptrend and will be seeking to capture the resultant growth for the Company’s shareholders. One ton of natural uranium can produce more than 40 million kilowatt-hours of electricity. Just one pound of uranium oxide will generate the same power as 31 barrels of oil or 10 tons of coal.