Stranger Things

It’s been a strange year for the Nuclear industry. First, the long-awaited announcement by new Energy Secretary, Dan Brouillette, of Government financial support to the much beleaguered and depressed Uranium market gave food for thought, and early celebrations for some, this week.

Maybe the Energy Fuels (TSX: EFR | NYSE American: UUUU) and UR Energy’s (NYSE: URG | TSX: URE) Section 232 petition has finally had the effect originally envisaged. Could this be the beginning of something beautiful for North American uranium juniors; the first step in rekindling a once strong and seemingly lasting relationship. Or was it just watered down political speak, leading to more questions than answers?

The United States Nuclear Fuel Working Group (NFWG) made an announcement that they were recommending the allocation of USD$150M pa, starting 2021 through to 2030; 10-years and $1.5Bn, for the purchase of uranium to build a US uranium reserve. There are other discretionary funds available too, but it is less clear as to what those are allocated too. That’s the trouble with the word ‘discretionary’ when used by politicians.

In the scheme of things, that is not a lot of lbs compared to domestic consumption. The US consumes about 48Mlbs of uranium per year, not including military requirements. If we take this announcement at ‘face-value’, then this budget allocation could support sustainable domestic uranium production of about 2Mlbs – 2.5Mlbs per year (depending on the, as yet, unknown price mark agreed – that’s a whole other discussion).  However, if the US Government wants to have an industry capable of producing and supplying 5-10Mlbs per year, it’s going to take a lot more government intervention and money. 

There are less than a handful of US uranium companies capable of producing uranium today. And clearly those companies would expect to the be at the front of the queue. Energy Fuels with the only working uranium (and vanadium) mill in the US, White Mesa, probably think it deserves to be at the head of that queue. In the current market it would be hard to argue against that.

Energy Fuels and UR Energy may also be buoyed by a statement put out by The Office of Nuclear Energy, which sits within the US Department of Energy, asking for the $150M to set up a uranium reserve to further protect the nation’s energy security interests. The new program will help to re-establish the nation’s nuclear fuel supply-chain through the domestic production and conversion of uranium. The reserve is expected to support the operation of at least two U.S. uranium mines and will ensure there is a backup supply of uranium in the event of a significant market disruption that prevents entities from acquiring fuel. NE would begin the procurement process for the reserve in FY21.”

“…the United States uranium industry faces significant challenges in producing uranium domestically and that [sic] this is an issue of national security.”

US President, Donald Trump

At the very least it brings little more clarity to the July 12, 2019 statement, when the President determined that “…the United States uranium industry faces significant challenges in producing uranium domestically and that [sic] this is an issue of national security.” It would appear conversations were being had and budgets were being drawn up, albeit at the sedentary pace that politics moves at compared to the demanding equities markets. Will we ever know the detail of the who, the why and the how behind the negotiations? I doubt it, but uranium bulls have seen a chink of light and they like it. Chatrooms and social media is on fire. Lots of conversations, lots of ‘I told you so’, lots of hope and few fantastical scenarios too. This is the fun of equity investing. Like the WWE, it’s about entertainment and making money, but without the make-up.

Away from the dreaming and back to the guys doing the hard work. The questions domestic producers want the answer to is, ‘how much of this discretionary $150M is allocated to US producers and at what price’. This is unclear. Will it include US friendly countries such as Canada, or indeed Australia or Africa if they can get in to production. Both those seem dependent on Chinese funding so perhaps would be taken out of this equation. So that leaves the Canadians. Depending on where investors have placed their bets, the answer varies, but the truth is that it is still uncertain. More steps and more announcements are required to bring certainty and a change in sentiment to the market. We all hope that the previous sedentary pace picks up a knot or two this year.

“Nuclear energy is also critical to the Nation’s energy mix and the Budget supports an array of programs to advance nuclear energy technologies. This portfolio promotes revitalization of the domestic industry and the ability of domestic technologies to compete abroad. The Budget provides $1.2 billion for R&D and other important nuclear energy programs, including nearly $300 million for the construction of the Versatile Test reactor—a first of its kind fast reactor that would help the private sector develop and demonstrate new technologies.” Which budget they are referring to is again unclear, or at least unclear to us.

We gain some comfort from the DOE Undersecretary Mark Menezes, who commented on Monday that, “This is the beginning of a long process” to address the nuclear fuel cycle. “It won’t stop with the creation of the uranium reserve.” Let’s hope he means it. Actions, not words, gentlemen.

It’s time to address US strategic mineral requirements and initialize the rebuilding of America’s nuclear fuel cycle. Plain and simple, the US’s crumbling Nuclear reactors and facilities need more money too. More money than has been talked about today. How this is paid for and what role the government chooses is yet to be made clear.

We look forward to the release of more recommendations from the Nuclear Fuel Working Group (NFWG).

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

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