Uranium Update from Per's Cabin
- 19 mins 49 secs
Just back from the 49th annual World Nuclear Fuel Market Conference, Per Jander joins Ed for a timely update on uranium. The theme of the conference was “Mind the Gap”, not in reference to the London Underground, but rather, the need for more uranium production as countries around the world scale up their reactor fleets.Channel: Sprott Asset Management
Ed Coyne: Hello and welcome to Sprott Radio. I'm your host, Ed Coyne, senior managing partner at Sprott Asset Management. With me today is one of our returning guests, Per Jander from WMC Energy. Per, as always, thank you for joining Sprott Radio.
Per Jander: Thanks for having me, Ed. Always good to be on.
Ed Coyne: Per, you just returned from the 49th annual World Nuclear Fuel Market Conference. First of all, I can't believe it's been going on for almost five decades, but secondly, what makes that conference so unique?
Per Jander: Yes. It's been going on for as long as it's been an industry, I think. And I think you may actually be attending all of them as well. There are some really good veterans out there. It's a really interesting one because it's coming after a very busy spring. Everybody gets together before summer and just does one last push of talk about current topics. It's great, too, because it's not one of the regular trade associations, so it's a little bit more of an open discussion. They have very interesting panels, and very interesting presentations, and most utilities are there, [along with] producers, traders, and all the who's who of the nuclear fuel business are there. It's always great to get to meet everybody.
This year, we're in Ljubljana in Slovenia. It's absolutely gorgeous country. I haven't spent that much time there, but it's almost like a Switzerland with a bit of an Eastern European touch to it. Beautiful city and just gorgeous high mountains, the Alps, and you got the Mediterranean in there as well. It's a very, very popular place among the people over there and me, too, certainly.
I suspect next year you'll need someone from Sprott to join you, and I'm hoping I get the nod for that. You mentioned something just in passing, [that it’s been a] very active spring. Is that typical in this space that you get a lot of activity in the first part of the year? What's going on with that?
It is. In a regular year, you do see quite a lot of people just come out of the gate, but this year has been off the charts. I think when you're tracking the contracting activity in general, even though the spot market hasn't been that busy, the term market has been very busy. Of course, it's hard to get a full line of sight to everything that's going on, but all you need to do is just listen to what Cameco announces, and you can just tell that this is going to be a record year, I think. Certainly the busiest one for almost two decades or at least a decade and a half. We're on track for a very, very busy year, and in listening to utilities, it's certainly not done yet.
Ed Coyne: Let's talk about the difference between the spot and term markets for our listeners who may not be that familiar with that. Help us get a better understanding of that--the differences between spot and term.
Per Jander: Sure. There is a spot market for [uranium], and you don't have to be a utility supplier to play in it. Everybody can have an account, they can buy and sell. It's all stored at the various facilities around the world where conversion is done. But traditionally, where utilities do the absolute majority of the contracting is direct via the primary producers, with the big ones being the Kazatomprom, the Cameco, the BHPs of the world. That's where the absolute majority of the primary demand is met if you want to. A lot of those contracts, even though they might be for 10 years with delivery starting two or three years out in time, they still get delivered at whatever the prevailing spot price is at the time of delivery.
Even though it feels like, "Oh, the spot price, the spot market is not that important," a lot of these contracts are already in place that are getting delivered throughout the year are delivered at whatever the spot price is. So, the spot market is important, and even though the volumes have shrunk a little bit this year, there is still a fair bit of activity going on, and obviously, we've seen a bit of a move in the spot here quite recently as well.
Ed Coyne: Let's go back to the conference for just a minute. Outside of the beauty of its location, what were some of the key takeaways or recurring themes that you are going to walk away with?
Per Jander: I would say this year, much more so than prior [years have] been, it was very focused on utilities. There were some really great presentations. It was a great panel. A lot of insights were being shared. It started off with a very good session where you had a representative from the Chinese organization just giving a little bit of a glimpse into the program that theyhave there. Even though you're familiar with it, and you hear it, once you actually hear someone showing it to you and showing you the slides, [you realize] they have 21 reactors under construction. They're going to be completing 10 to 12 reactors per year over the next 5 years, between 2025 and 2030.
It's just absolutely mind-boggling what they're doing there, and they're doing it very well. They're being very successful at it, but this obviously means that they're going to need a lot of uranium and a lot of conversion, and a lot of enrichment to fire up these reactors as well. Even though it's not overlooked, it kind of is--because the sheer size of it just pales everything else. It's always good to hear from the Chinese when they are there.
There was a representative from EDF [Electricite de France] who was speaking as well and just giving a glimpse into the French program. He was saying that the 56 reactors they have in France, all of them are going to do life extensions to go for 60 years.
That's a very significant increase in demand. In most models, they look at the French reactors, it's 40 years, maybe 50 years, but you're adding a lot of demand into models by just assuming that now they're going to be going for 20 years. This is not even counting the 14 French reactors, the EPRs [evolutionary power reactors] that they're going to be building, too, which are 1,600 megawatts each. Those are just absolutely enormous reactors.
Very, very bullish when it comes to the development of new demand. Obviously, nuclear energy in general has some good tailwinds right now, and it's just in a really good space. It's more up to the challenge here for the nuclear fuel industry to be able to meet that, to make sure that the fuel is there when it's needed.
Some very interesting panels, too, where you had U.S. and EU utility fuel buyers just sharing some of their thoughts and what they're seeing coming around the corner-- what their focus is. It was interesting to hear that a lot of them are shifting to security of supplies, [which] is key at this point. We talked last year about also we saw a lot of conversion and enrichment contracting coming right out of the gate after the Russian invasion of Ukraine. At some point, you're going to see it slip over into U308, and it certainly has started.
You also had utility saying that "Even if we haven't contracted for enrichment yet, we are going to buy uranium and conversion anyway because we know that there's going to be a crunch and security of supply is key. We're just going to go ahead and contract. We'll just do it all simultaneously if we have to." This is a bit of a shift. Certainly, the sense of urgency and importance is really shining through, and I think that will also be reflected in contracting activity going forward.
Ed Coyne: You talk about the sheer number of reactors being either extended when you talk about in France, or new reactors being built as well, as [is happening] in China. Those numbers are pretty staggering, frankly. In previous podcasts where we've had you on, you've talked about the SMRs, the small modular reactors. Are some of those going to be SMRs? Are they all the major sites? Walk us through that a little bit, what that's going to look like from a landscape standpoint.
Per Jander: The funny thing is that the modeling that's being done and talked about at these [conferences]-when we talked about forecasts from the price reporters and the big reporting agencies, they don't have SMRs in their models. The way things are looking today will probably be you'll be well into the 2030s before that happens. It still will happen. I think there were quite a few of them as well. But on a much more of a near term what was creating the time crunch or the sense of urgency now is the current reactors operating longer and the really large ones coming online in the next five to seven years.
We need new [uranium] mines to come online. It's not enough what we have today. It's not that it's just that little hump you need to come over. After that, like you mentioned, the SMRs will start to kick in as well. That's going to certainly create demand, too. It is a challenge, but a challenge I think we're all happy to see because we want to see this industry succeed.
Ed Coyne: You talk a lot about supply and demand. There are inventory squeezes, particularly with more and more of these utility companies looking at [uranium] from a security of supply standpoint. What's the health of that market right now from a supply-demand standpoint? Are there shortages? Are there gaps? What is that looking like?
Per Jander: Yes, it's an excellent question. The title of the conference was Mind the Gap. Everybody knows that there is a gap. Utilities need to contract to make sure that they have fuel for the power stations. And the producers, they need to be sure that they have mines online in time, and that they can actually deliver on their contracts. It was a good presentation from Grant Isaac at Cameco, and he just gave a snapshot of, "This is what it looks like today when we're looking at 2030." Like I said, there was no SMR demand, no nothing in there. It's about 200 million pounds a year is the demand we're looking at.
Seventy-five percent of that can be met by the existing mines, or you can expand the ones you have, and ramp them up. Twenty-five percent of that--or when it was broken down, the Western demand that would be 34 million pounds a year--is going to come from greenfield mines that are not in operation yet. They might be in project status, but certainly, [there are] no permissions and constructions clearly haven’t started yet. This is going to come at a very different price point than what we're looking at today. I can bet you that 100% of the fuel buyers believe that they're going to get that 75% wedge. Clearly, it's not going to work.
Talking to some juniors, they say that while they had to chase utilities before to even get the time of day, they're actually getting phone calls today. Utilities are starting to think strategically. They need to talk to some of these junior mining companies and at least engage in a discussion and see what they're thinking, [get the] cost picture and all these things.
Ed Coyne: We've talked about that on previous podcasts as well as far as price points. The price point of an existing producer, and the price points of a producer that's turning the switch back on. Then probably most importantly to your point, filling this 25% gap—new producers. What, in your view, is that price point? What would it take for a new producer to come online and start doing this?
Per Jander: It's really difficult. It depends on the type of mine, and clearly costs have been increasing quite a bit now. When you're looking at what the price point is going to be to get that online five years from now, I think it's at least $80 a pound. Again, this is not my expertise, and I'm just guessing, but I would think it's probably higher even. If it's a clear, pure greenfield, it'll be up there. There'll be something very different than what it is today. That I'm quite certain of.
Ed Coyne: We spend a lot of our time in the precious metals market as well as the energy transition market thinking from a geopolitical standpoint. It's getting challenging for new mines to come online from a geopolitical standpoint and from a nationalization standpoint. Let's shift gears and talk about risk for a minute. What are some of the potential speed bumps or distractions that you are currently seeing or anticipate seeing as we go down this path as well?
Per Jander: It's a lot of uncertainty around government sanctions, both in Europe and in the U.S. It's really hard to read on this. These are obviously not market forces here. Then you get something else that's much harder to predict and know what's going to happen. That certainly creates uncertainty. What every primary producer is saying, whether it is a big miner like Cameco or whether it's ConverDyn with their conversion or Urenco with their enrichment, it's, "We need to see the long-term contracts in place before we are going to spend the capital needed to build these [new mines]. Because we don't want to see a situation where we'll build these large facilities, and then all the Russian supply is going to come flooding into the market again. We're going to see depressed markets for all fuel components again. We've made that mistake before. We're not going to do it again."
They're really driving that point home and putting the ball into the utilities’ court. I think they are having discussions, too. There is a challenge ahead, and both sides want the industry to succeed. There will be some negotiations. There will be some tough discussions. I think everybody's got the eyes on the prize at the end of the day.
Ed Coyne: Going back to China and France, it's been long understood that France is probably the leader. China clearly is putting a major flag on that as well. In the U.S., we still don't think of it that way. We do to some degree, but not to the large extent of France or China. What other parts of the world are really starting to embrace nuclear in a more opportunistic or aggressive way?
Per Jander: There are a lot of new projects popping up. Finland is building big reactors. There are some really positive announcements coming from Poland, which doesn't have a program today, but five, six reactors that they're going to plan to build. I was just in the UK for a couple of days after the conference and came from there. Now, it's [getting] bipartisan support, and they have a very aggressive program. They used to have a very good program and developed their own technique and really provided a lot of insight and knowledge and developed all sorts of methods. They really want to get back there.
Great work is being done in Australia. They have a lot of uranium, obviously, but they've traditionally been very anti-nuclear. There are some great movements happening there, too. Really, across the board and in various stages, you see it’s all going in one direction anyway. That’s what’s really a good sign in my view.
Ed Coyne: What about the financial market? Are you seeing more investors come into this market or some of the volatility sidelining them? How engaged is Wall Street, so to speak, in this trade as well?
Per Jander: It’s a very interesting and timely topic, too. Because the financial market, it feels like they’ve been in a toilet for more than a year almost, and cash is king, and most investors are still on the sidelines. [Investors aren’t] really brave enough to step back in or maybe wise enough not to do it because they feel there could be more rate hikes, and it doesn’t really feel certain enough. I think at the heart of everything, if the contracting cycle has really started, we are seeing it on the ground. Obviously, the question you keep being asked by the investors is, "How much contracting are you seeing?"
We are seeing a lot of contracting. We're just starting to see the price move. I think over the next months for the remainder of the year, you will see the price move. There were a couple of investors there, which was great to see. I have had a few investors reach out to me via email and phone here over the last few days, too, just to get an update. They're definitely clued-in. It's not necessarily the retail, small ones either. There are some really large investors who are getting very interested in this. I actually just saw in the news today that there's a very large ESG fund that actually cleared nuclear energy for the first time since its inception in the mid-'80s. Parnassus, I think is the name of the fund.
It's a $42 billion fund that cleared nuclear energy to be able to be part of their portfolio for the first time. If you have those kind of players looking at it for the first time, they might be only at the tip of the iceberg. It's all very, very exciting.
Ed Coyne: We always feel like we're the unique people in the corner of the room talking about nuclear from a financial standpoint, but I think you're right. More and more people are starting to see the opportunity there longer term and following suit.
First of all, Per, it's always great to have you on. You give us insight that we really can't get anywhere else as it relates to the uranium and nuclear market. Before I let you go, what's coming up for you personally in the world of uranium? You travel around a lot. I know we would all love to hear something cool that you're going to be doing down the road. What's the rest of your year look like?
Per Jander: [chuckles] I am going to do something very cool in a couple of hours because I'm actually at my cabin in Sweden right now at my parents' place. It's getting close to the midnight sun, so I'm going to take a midnight dip in our lake here. I'm staying here over the weekend. Then early next week, I'm heading over to Finland to visit the brand new Olkiluoto 3 reactor, which is one of these really large French designs. The 1,600-megawatt reactor. The world's largest reactor is operating. I toured it when it was being built, but now I'm going to see it when it's in operation. I'm quite excited about nerding out there and seeing that. Nerding out more than normal, actually.
Then in a couple of weeks, I'm going to Japan to be an instructor for a couple of days at the World Nuclear University. It's a leadership seminar for about 80 people from all over the world that they do on an annual basis for six weeks. I did it in 2005 when it started. Now, I'm coming back as the veteran. I'm actually going to talk about ESG investments and taxonomy and how that is affecting the nuclear industry. It's going to be very exciting. Also, I’ll get input from the very brilliant people that are there and hear from the people on the ground in various countries what's happening there. I'm sure there will be very interesting discussions over there, too.
Ed Coyne: That sounds really cool. I suspect if schedules allow, I'd love to have you on toward the end of the year again just to hear about your travels. Being an instructor and being a veteran instructor now, 15-plus years later--hats off to you for that one.
You said it's close to midnight. The sun is still brightly shining behind you there, which is amazing. Much-earned rest and relaxation, and I love the fact that you're hanging out at your mom and dad's place. That's fantastic.
For our listeners who'd like to learn more about Sprott and our full suite of uranium opportunities, both on the physical side and the equity side, as always, we encourage you to visit us at sprott.com. That's S-P-R-O-T-T.com. Per, once again, it was really great to have you on, and enjoy some much-earned time off.
Per Jander: Thank you very much, Ed. Any time. I'm always happy to come back.
Ed Coyne: Thank you. Once again, I'm your host, Ed Coyne. As always, thank you for listening to Sprott Radio.