Ann: High-grade uranium intersected at Gemini Uranium Project, page-19

Uraniumdemand 2x by 2040 and 3x by 2050!

He guys.Sorry for the delay but I have finally managed to write a follow up on myprevious demand scenario. The numbers I got are shocking. I want to buy moreUranium stocks!

This pieceis a follow up of my previously posted base case Uranium demand scenario whichsaw output doubling.

I won’trepeat everything so please read or refer to my previous piece posted on the 6^thor April if you the number are unclear (if still unclear after that or youthink there is an error please let me know).

I willrepeat that everything written here is not meant as investment advice. EverythingI write is purely my opinion and based on my best understanding which might beflawed. As I am here to learn as well, if you do spot any error in my math’s,my assumptions or my logic or any other things you believe to be incorrectLEASE let me know! The better my information and understanding the more likelymy projections are close to reality.

I will runa more bullish scenario’s. This scenario will assume 3x Nuclear power outputand the 2050. I will run an analysis of what that would mean for Uranium demandin 2040 (reasonably detailed) and possibly a rough guide to 2050. Unlike thepreviously run base case I will also assume demand from financial players,overfeeding, mine depletion, restocking and I will include the demand forSMR’s. All these figures are off course predictions and we will need to follow developmentsclosely to see which figures might need to be adjusted. My assumptions mayprove to optimistic either in scale or timeline….or they may proof to beconservative. But from what we are currently seeing I believe them to beentirely possible and reasonably probable. My guess is they might be in the “ballpark”. The consequences if this projection is “in the ball park” areincredible.

So totriple output by 2050 we would need to have 1185GW Nuclear capacity. I willassume we will need to at least a doubling by 2040 to achieve this so 790GW.

I willmaintain the previous assumptions of 40GW in shutdown prior to 2040 and 25GWmore until 2050 for a total of 65GW. I will also maintain 40GW worth ofrestarts and retrofits in Japan. In the previous example I assumed the rest ofthe world would add 100GW on top of under construction reactors, China andJapanese restarts for a total of 653.6GW online. So we have a 136.4GW gap tomeet 790GW in 2040.

In theprevious example China would build 8 new reactors per annum at 1.1GW each for atotal of 92.6GW online by 2040. We are now going to assume 10new reactors peryear adding another 22GW. (China aims to increase its nuclear output by 7x by2060 and wants to install 12GW+ per annum from now on according to the latestmessages)

We are goingto assume the mid case out of my piece “SMR’s! The coming Revolution?” whichassumed 1GW start up in 2030 ramping up to 10GW per annum by 2040 and then 10GWper year every year till 2050. This adds 48.5GW by 2040 (and 148.5GW by 2050)(Poland alone has plans to build 93 SMR’s and 24 Micro Reactors for a total of approx.25GW, A US steel maker has recently announced they want an SMR to produce steeland the amounts of money and legislation going towards SMR tech is stellar!)

We willassume the US will hit 50GW added in 2040 and 100GW in 2050 (this is 50% of therecent DOE recommendation).

Now weassume the rest of globe excluding the US, China and Japan add 114.9GW (vsprevious 100 GW including the US) which is still quite doable and only 6.75GWper year until 2040. (Many countries have plans to do so: Poland 10GW+, UK 18GW,France 6GW (+maybe 8 GW) Netherlands 2GW+ just to name a few in Europe….)

And therewe have 790GW installed by 2040.

For 2050SMR’s would add another 100GW, the US would add 50GW and China would add 110GW.So the rest of the world would need to add 130GW or 13GW per year. All quitedoable.

Othersources of demand will be assumed to be:

Assumedfinancial demand: 15M lb per annum (approximately 50% of current. We will alsosee several new financial players coming online including Zuri invest and ANU. Financialplayers at any time can take the reins here and blow up the spot price…at anytime possibly for at least a decade!!)

Assumeddemand due to overfeeding: 100M lb total (Assuming 20M lb overfeeding for thenext 5 years. If Russian enriched U gets banned or Kazakh U becomes had to get,and/or demand grows faster than enrichment capacity it could be more, a lotmore).

Assumeddemand to replenish shortfalls in current reserves or new strategic reserves:100M lb (This is just a very conservative guess…it is possibly many multiplesand with much higher demand could be more than a factor higher).

Assumedmine depletion: 225M lb (only taking Cameco’s mines into account)

Plus SMRdemand will be:

Scenario 2reasonable uptake of SMR’s (base case): Year 1: 1GW, Year 10: 10GW and 10GWadded per annum through year 11 to 20. (detailed: 1, 1.5, 2, 3, 4, 5, 6, 7,8.5, 10)

Demand year1: 4.5million lb

Demand year10: 45million lb

Demand year20: 90million lb

Totalinstalled capacity at the start of 2050 is 148.5 GW

Pleasenote; Demand is in Fuel. U3O8 Demand will be assumed to be about 5 yearsearlier. HALEU is made from previously enriched Uranium suitable for regularreactors at approx 5% U235 so will need to be re enriched and as with anyreactor type due to the cost of the reactors no one wants to risk running outof fuel so we assume a couple of years of reserve.

So whatdoes that mean for demand?

Well at atriple capacity the run rate of reactors is also going to be close to triple.There may be some efficiency improvements to lower the U demand but this shouldhave limited impact.

Currentglobal demand is 180M lbs to run 395GW

In 2040 itwould 360 lbs

And by 2050we should hit about 540 lbs per annum.

But thatisn’t all.

By 2040 wehave 369 GW of starts or restarts. (Which I will assume require an initial coreload) that require an initial core load to get going. An initial core loadcontains about 2 years’ worth of extra fuel needed to start the reactor. ThatIs 0.9 M lbs per started GW or about 332.1M lbs in extra demand.

By 2050 Wehave around 755GW worth of starts or restarts/retrofits That Is 0.9 M lbs per started GW or about 679.5 lbs required in fuel by 2050 (Uranium demand is pushed forward at least 2 to 3 years).

Furthermorefor any reserves to be equal in run time they would need to be increased. If weassume a comfortable reserve is 3 years and we assume Utilities currently holdthat (Many don’t!) than the current reserves would be 540M lb but would need tobe 1080M lb by 2040 and at 1620M lb by 2050. Creating 540M lb+ in extra demand till 2040 and 1080M lb by 2050.

So by 2040we would need about 180M lbs above current demand of 180M lbs as a run rate andon top of that we would require 332.1M lbs + 540M lbs for initial core loadsand maintaining reserves which is about 51M lbs per annum if we spread it outuntil 2040…. We add in financial demand (17x15) at 255M lb…Overfeeding at 100Mlb, Restocking at 100M lb and mine depletion at 225M lb for a total of 680M lbor an average of 40M lb per annum through till 2040 and we add in SMR demand at492.75M lb (that is fuel demand until 2045 which would translate to U demand by2040). That is a total demand of 6634.85M lb…. Or about 390M lb per annumaverage through to 2040!!!

If weassume a reasonably straight forward demand increase from today till 2040 (someof the demand comes early some late) we need an annual amount of 390M lb peryear of mined uranium all through to 2040.

At currentproduction of about 150M lb per annum we are short 240M lb per year! Even if inthe next 3 years its gets cranked up to 200M lb (this will need A LOT of investmentand these investment will not start until U prices got through at least $70 butpossibly only go in full swing at $100) there will need to come about 190M lbsper annum worth of new mines…Since that simply won’t/ can’t happen in the nextfew years and since the actual annual demand in 2040 is going to be much higherthan 390M lb the actual new amount of mines needed by 2040 is considerablyhigher than this!

Thisscenario projects much higher demand then some of the institutional projectionswhich don’t take into account certain factors (like financial demand which issimply impossible to project) and assume very conservative growth in theNuclear sector (despite more and more evidence to the contrary).

Its prettyclear that if this scenario plays out it will be an almighty challenge toactually meet demand. And we haven’t even factored in then possibility of sayKazakh Uranium no longer being available to the West.

I predictthat for the very first time in the history of Nuclear power there will beactual direct competition for Uranium and fuel between utilities which willface real risks of running out of fuel and having to shutdown reactors thatcost billions of dollars…. For the first time in history uranium might not becheap! Yes even when Uranium was trading at $137 USD at the absolute peak in2007 it was still cheap! There was no actual shortage of Uranium and demandwasn’t growing at a rapid paste. The price of uranium still only made up asmall percentage of the cost of Nuclear power. I think at some point in thenext 3 to 10 years (Yes this is going to be a long bull market!) that will forsome time no longer be the case. I think utilities will actual have to outbideach other and pay as much as they can just to be able to run their plants.

And withthat scenario we are looking at prices very different from anything in thepast. We can look at Lithium in late 2020 and 2021 or Natural Gas recently tosee what sort of price gains might happen.

It is mystrong opinion that the current situation in Uranium and the coming wave ofdemand is entirely unprecedented and I think the price response will also beunprecedented.

I wouldn’tsuggest you bet the farm on the above projection. There is no reason to nottake some profits when price go up a lot. But I will personally not sell 100%of my holding at $100, $150 or even $200 since I think there is a high probabilitythat at one time we will far exceed any previous top in prices, even if weadjust for inflation.

The setupis simply incredible. The stuff of dreams really….Hasn’t felt like much of adream when looking at your U stock portfolio, more like a nightmare really…Butall indicators apart from the price of U stocks are firmly pointing in onedirection. And I think the current uncertainty with coming global slowdown, droppingenergy prices, war and low liquidity simply mean investors are distracted. Thisis similar to Lithium which was poised to break out when Covid hit and it madethe eventual (delayed) shortage and Bull Run all the bigger and sweeter. ThatIMO is where we are headed. Keep the faith!