Many of usUranium investors will have taken note of Warren Irvin and his “1 billionpounds of yellow cake in a shed somewhere in the dessert”…. Now this has beenwidely debunked and is ridiculous for obvious reasons (I went into this sometime ago) so I won’t go into that again.
Howeverthat doesn’t mean there isn’t 1 billion pounds worth of reserves out there…Infact Justin Huhn recently said if we include fuel and intermediates there maywell be closer to 1.5 billion pounds out there…
1.5 billionpounds! Annual demand is only 180 million pounds, so there could be as much as8 years worth of supply floating around! Or if we put it in terms of thecurrent shortfall of 50 million pounds it would imply a buffer of 30 years!Even if (as expected due to overfeeding, financial demand and restocking) theshort fall goes to 100 million pounds in the next couple of years, there isstill 15 years worth of reserve…!!!
That’sinsane! How are they even talking about URGENT shortfall? This whole thesismust be terrible and it is going to take FOREVER to see an actual shortfall…Right?!!....Well….NO.
Let’s dothe numbers shall we? For clarity the numbers I use are based on the bestinformation I have available and they are either the most recent numbers I haveor based on (IMO reasonable) assumptions. They are however not exact and thereare variables that are hard to account for exactly. Some of these arecomplicated and although I have some grasp of them I will try not to go intothem as this will become a very long piece and some of the concepts aredifficult to explain. They also shouldn’t have a huge impact so by keeping itsimple I should still get good approximation of the actual numbers. Having saidthat: Let’s dig in!
First ofall the 1.5 billion lbs number INCLUDES fuel and intermediates. This is quiteimportant as the fuel cycle takes about 2 years to get from U3O8 to actualreactor fuel. It also stands to reason Utilities would have or at least aim tohave at least 1 single spare fuel load for their reactors. A fuel load lastaround 18 months.
So if we goby the current demand estimate of 180 million pounds of uranium in annualdemand that equates to 360 million pounds being locked into the fuel cycle (asintermediates like UF6, in the enrichment cycle or enriched uranium stillhaving to be made into fuel) and another 270 million pounds in actual fuel. Soof that 1.5 billion pounds approximately 630 million pounds is fuel or in theprocess of becoming fuel.
That leaves870 million pounds as actual uranium. Still a very large amount!
So where isthis uranium. Obviously I don’t know exactly where every pound is but I do knowthat China holds a lot….As in a LOT lot. Infact the last numbers I saw was theyheld 198.000 Tu at the beginning of 2022. 1 Tu (pure Uranium) is 1.18 tons orU3O8 so China held 233.600 tons of U3O8 which is 514 million pounds of Uranium!Lets call it 500M lb flat.
Why doesChina have 500M lbs U3O8?? Well probably not all of that is meant for use inreactors, some of it is likely meant for military or strategic purposes. Butlets ignore that for the moment and assume the lot is meant for reactor use.That means that at their current burn rate of approx. 25M lb U3O8 they have 20years of supply! Surely China can easily start dumping large quantities ofUranium on the market as soon as the price really goes up and make a big profitright? Well..Again probably not!
Chinacurrently has about 25 reactors under construction and is planning to start buildingabout 100 new reactors in the next decade. So their demand will at least triplein the next 15 years orso and this excludes any potential SMR or military demand.Furthermore to start a reactor the first core load contains about 2.5x theusual amount of Uranium. Or about 3.75 years worth which is about 2 million lbsfor the large reactors China is mainly building. So with a decent portion ofthe current reserve (about 50% actually) would be required just to start up thereactors currently being build or started in the next decade! For a countrylike China with little home mined Uranium and significant supply risks thereseems little chance they are going to sell a lot of their current reserve. Weare seeing the opposite. China is deliberately securing more supply.
Now we aredown to just 370 million pounds.
Its likelyJapan holds a decent portion of that. And although I don’t have numbers I thinkit is at least 100 million lbs. That again looks like a lot when compared tothe current 10 active reactors but when you account for 23 more to be restarted(in the next 5 years) and 20+ more to be refit with new reactors (probably inthe next 10years) and you account for start up reactor loads its really notthat much at all. And again I am budgeting zero for SMR’s
So thatleaves 270 million pounds. Obviously we need to take China and Japan out of theequasion which is currently about 30 million pounds of demand (and China andJapan should show most demand growth) which leaves 150 million pounds of demandfor the entire rest of the world. With a shortfall of 50 million pounds thatisn’t even 5.5 years…And if as expected the shortfall grows to 100 millionpounds its just about 2 years and 9 months to burn through the entire reserve!!
How onearth are we going to mine 100 million pounds extra within max 5 years? Weprobably aren’t! So there is going to be a scramble for material and utilitiesand governments are going to run down every spare bit of reserve they have. Andthe price is Uranium is going explode!
Its appearto be 5 minutes to midnight.
Now maybethere is actually even more then 1.5 billion pounds out there and maybe theChinese and Japanese will sell some of their reserves. But when the overfeedingkicks in and they have to start replenishing depleted reserves and we haveSPUT, ZPUT and ANU buying on market the reality is any spare uranium will meltlike snow on a hot day. And with the now more and more pronounced Nuclearrevolution with what looks like an ever bigger part for SMR’s to play (whichneed about 10years or uranium to front load!!) there is simply going to be a100 million+ shortfall to be filled well before 2030 and possibly 200 million+lb annual demand shortfall to be filled by 2035/40.
Well goodluck with that! But it isn’t going to happen at $50 Uranium, nor at $70 or $90.We will need triple digit prices for a long time to make that happen, and itneeds to happen fast!
Easiesinvestment ever! Frustrating as hell, but I am absolutely convinced this willpay off, and pay big! Our patience will be rewarded.
Thanks forreading another piece of my random thoughts on uranium! Comments and or correctionsare welcome.