#4. Uranium: Clean Energy That Offers Secure Power Generation and Enhances National Security

Nuclear energy has the highest capacity factor (amount of energy produced) of any fuel energy source (traditional or alternative) with the lowest carbon emissions.12 Nuclear energy remains the cleanest, most reliable and safest baseload power generation. Nuclear power is essential to complement renewable sources of energy, such as wind and solar, which operate intermittently. Demand for uranium will continue to outstrip supply as countries worldwide move to build new reactors, restart idle reactors and reconsider the closing of legacy reactors.

2022 was a breakthrough year for positive sentiment for nuclear power and an affirmation of the long-term bullish fundamentals for uranium (Figure 1). The fallout from the Russia-Ukraine war has skyrocketed energy prices in the EU, cascading into crises on multiple fronts. But the most important was the realization that national security requires energy security and the recognition of the strategic importance of nuclear power. Since then, nearly every country with a nuclear power fleet has announced extensions to the service life of their plants, announced future expansions and affirmed that nuclear energy is a cornerstone of their national energy policies. There is no alternative to nuclear energy in terms of baseload generation capability and security, with such a low carbon footprint. Uranium will be the critical generation component of the global energy transition theme.

The uranium supply chain, however, is strategically vulnerable. Russia controls about 39% of the global uranium fuel enrichment and 27% of the conversion capacity. With sanctions on Russia, Western enrichment will need to switch to "overfeeding" (using more uranium hexafluoride UF6 as feedstock), significantly increasing U3O8 demand. In terms of mine supply, Kazakhstan supplies 45% of the world's uranium. Kazakhstan’s internal unrest and tenuous relationship with Russia highlight the vulnerability of the world’s uranium supply and the need to secure and reshore a significant portion of the uranium supply chain back to the West.

Figure 1. Spot and Long-Term Uranium Prices, Trending Higher (2013-2022)

Source: Bloomberg. Data as of 12/31/2022. Included for illustrative purposes only. Past performance is no guarantee of future results.

SOURCE: https://sprott.com/insights/sprott-monthly-report-2023-top-10-watch-list/