Nuclear Energy - A Paradigm Shift

The availability of energy, particularly electricity, dictates economic well-being. The world as a whole is undergoing drastic reappraisal of its energy needs and the mix of fuels that will sustain production.

High oil prices have focused attention on the inexorable growth in demand for energy, and made even the most indifferent of people think about the global implications of continued economic growth in China, and India, as well as the emergence of Russia as a global energy supplier and consumer.

In last year’s Annual Report we described the milestones which marked the world’s acceptance and implementation of nuclear electricity. It is now obvious that the change in attitudes to nuclear power reflects a fundamental shift in thinking about the provision of energy worldwide. This change, a paradigm shift, will have enormous implications for the uranium industry.

Nuclear power will be, in many countries, the preferred technology for significant new base-load electricity generation. Nuclear power offers energy security without compromising climate change defences or undermining economic performance. The uranium industry must adjust to this new paradigm in terms of undertaking more exploration, creating more production, improving technical and operational efficiency, and developing a sophisticated dialogue with nuclear power utilities to ensure the market adequately reflects the costs of providing nuclear fuel on a sustainable and secure basis.

Demand - need re-appraisal

Thirty-one countries currently operate 441 nuclear power reactors, contributing 16% of world electricity production. Electricity production represents 40% of world primary energy consumption, and is growing at an annual rate of 2.7%, which is twice the rate of growth for all energy sources.

Last year we said that world uranium requirements for the existing, and currently planned new reactors is about 77,000 mt U3O8 per year, rising by about 1.5% each year to reach a forecast peak of 125,000 mt U3O8 by the early 2020’s.

We identified the historical importance of inventories and down-blended weapons grade material in maintaining a market "balance" between primary uranium production, 49,000 mt U3O8 in 2005, and reactor consumption. There was a clear uranium supply deficit which we predicted would exert considerable upwards pressure on uranium prices. In fact, the spot uranium price has risen from US$29 per lb U3O8 in June 2005 to over $47 per lb U3O8 in June 2006. However, these figures do not take account of the new paradigm.

The challenge of the new paradigm, and Paladin’s opportunities –

Supply continues to lag demand

Despite the significant rise in reported uranium prices, world primary uranium production only increased by 2,540 mt U3O8 (5%) in calendar year 2005. In fact, in the first six months of 2006, uranium production in the two dominant production centres, Canada and Australia, actually declined by 2,610 mt U3O8 (19.5%), demonstrating the fragility of the existing supply chain.

Worldwide the only new uranium production facility built and brought on line in 2006 as part of the industry’s supply response is Paladin’s Langer Heinrich Uranium Project. This illustrates both the difficulty of bringing new production to market, and the skill and dedication of the Paladin people who have made it happen.

New reactors and a new nuclear industry

There are significant developments at international and national levels which will facilitate the building of new nuclear power stations and increase our reliance on nuclear energy.

• USA Resurgence of a major influence
  • Wide public acceptance with at least 68% of Americans favouring the use of nuclear power
  • New national Enrichment facility granted construction and operation licence
  • Global Energy Partnership proposed to facilitate world nuclear fuel trade
  • 19 applicants expected to seek licences for construction of up to 25 new reactors
• Canada Refurbishing a successful program
  • Refurbishment and recommissioning of 2 nuclear power plants
  • Applications filed possible 4 new plants
• EU Revising nuclear energy policies
  • Finland – New 1600 MWe plant under construction
  • UK Complete turnaround
  • UK Energy Review supports building new nuclear power plants and recommends streamlining licensing process to facilitate construction by private operators.
• France Committed to renewing its fleet
  • New 1600 MWe reactor at Flamanville begins construction
• Turkey Recognising nuclear’s value
  • - Plans for up to 5 new nuclear plants
• Russia World’s most ambitious nuclear energy plans
  • Structural reorganization of the civil nuclear sector to reflect world’s most ambitious nuclear energy plans
  • 10 new reactors to be built by 2015, with plans for a further 10 announced
  • High Enriched Uranium program terminates in 2013
  • Significant investments needed to secure long term uranium supplies will impact world market
• China Powering up its nuclear energy needs
  • Plans to increase nuclear power to 40 GWe by 2020 (30 new reactors)
  • Entering world uranium market with significant new demand
  • Bi-lateral safeguards agreement signed with Australia
• Japan Revitalised plans
  • 3 yearly revision of the Basic Energy Plan reaffirms commitment to nuclear power in order to meet Kyoto Protocol CO₂ targets
  • Entering world uranium market with significant new demand
  • Bi-lateral safeguards agreement signed with Australia
• India Joining the world nuclear community
  • US-India Nuclear Agreement will end nuclear sanctions and open market for uranium and civil technology
  • Significant domestic nuclear program will expand rapidly
• Australia A major supplier growing bigger
  • Prime Minister’s Taskforce established to review entire nuclear fuel cycle
  • Bi-lateral safeguards agreement signed with China opens market for Australian uranium sales

  • Federal Labor Party Leader announces proposed abandonment of restrictive "no new uranium mines" policy at 2007 National Conference

Links to Uranium Websites:

• Weekly Uranium Spot Price
• World Nuclear Association
• Uranium Information Centre
• AIEA International Atomic Energy Agency (Austria)
• Uranium Exchange Company UxC
• Nuclear Energy Institute (USA)