All Things Uranium: Bill Gates, Biden, Barclays & The Equator Principles
In June we checked in with Brandon Munro – CEO of Bannerman Energy (ASX: BMN) and market commentator – where he discusses the latest excitement surrounding uranium. From a Bill Gates-backed nuclear reactor in Wyoming to Barclays getting in on the action with their nuclear power report, we break down the latest developments with all things uranium.
Bill Gates' TerraPower
In 2006, Bill Gates and a cohort of like-minded visionaries came together to found TerraPower, a nuclear innovation company focused on the creation of advanced nuclear reactors.
October 2020 saw TerraPower receive USD$80 million from the Department of Energy (DOE), with its Advanced Reactor Demonstration Program (ARDP), as initial funding to demonstrate the Natrium technology. A further USD$160 million has been appropriated by Congress for the ARDP. The DOE will be providing additional funding subject to appropriations.
As of June 2, 2021, Governor of Wyoming - Mark Gordon - made it official that TerraPower’s new generation Natrium Reactor demonstration project will take place in Wyoming, replacing one of the coal fire plants in the Wyoming Pacific Core System.
Is TerraPower a good thing?
Brandon thinks it’s an exciting development for two reasons:
First, there are solid plans in place for the project. It’s going to run a 345 MW sodium-cooled fast reactor with a molten salt-based energy storage system. With its storage technology, power can be boosted to around 500 MW for roughly 5 hours a day. Brandon says this gives it a good capacity to balance intermittent renewables and the natural flows of the demand for power.
Second, it’s replacing a retiring coal-fired power plant. Brandon thinks this is perfect for new and next-generation nuclear, especially when it concerns the decarbonisation debate. Mark Gordon emphasised the new plant will be built and operated in such a way that it will uphold commitments to enhancing wildlife and the environment as part of Wyoming’s commitment to being carbon negative. Of course, building on a retiring coal-fired power plant is also ideal for job preservation, as well as reducing the number of extra costs by utilising existing infrastructure.
The demonstration is likely to be running well ahead of its 2030 mark, so it will be interesting to wait and see how it progresses.
Biden's Uranium 'Weapon'
USD$14 billion of Biden’s USD$6 trillion budget is being put towards the advancement of nuclear. Brandon thinks it’s a long-overdue push toward the US’s ability to participate in the global export industry for SMRs and new technology.
At first, it looked as though the USD$75 million uranium reserve number entirely disappeared. The Twittersphere concluded it wasn’t allocated in the budget. There was volatility with US focussed uranium equities because of this issue, as Brandon puts “Twitter research has the ability to move markets”. They thought its absence was a signal that US Uranium Juniors no longer mattered. However, it turned out everyone was looking in the wrong place. To find the uranium allocation, readers needed to turn to page 284; the Department of Energy under the 'Weapons' section.
Brandon admits this may not be the best place to put it. Uranium got squeezed into weaponry as part of their justification for having the reserve and the need for the continuation of naval replenishment, which is still classed as military.
Will this be a problem for Uranium investors?
Brandon thinks it has the potential to be a problem unless there is good PR handling, otherwise a company signing up for selling to the reserve could be interpreted as allowing their production to be used in weapons. Not a great ESG look, Matthew observed. Brandon’s approach for Bannerman Resources, for example, makes it clear that Namibian uranium, by the force of a multi-lateral treaty, will only ever be used for energy purposes.
Barclays' Decarbonized Future
Brandon highlights that uranium equities were deeply under-priced only a few months ago. However, when you look at the markets, “all the boats seem to be floating right now.” Therefore, people are trying to ride this momentum for as long as they can. Even Barclays is getting in on the current market narrative by publishing a 37-page report defining the opportunity with nuclear, titled 'Nuclear for a decarbonized future'.
“I think [it’s] good for investors because a lot of materials that we do get, tend to have a lot of sell-side bias” As a whole, this report tends to be well balanced.
Brandon highlights the pages dealing with ESG, in particular, whether nuclear will benefit or suffer from the movement towards green and carbon-neutral finance. The conclusions seem to admit that we don’t really know what the impacts will be, but we will need to watch green taxonomy developments and restriction lists carefully.
“There’s a very solid upside from here in terms of green finance funnelling into nuclear.”
This impacts demand in a variety of ways. The primary example Brandon uses is its relation to new reactors. Further, the process of financing refurbishments and expansions, as well as life extensions, are a lot less expensive. This trend can filter upstream from nuclear power production and ultimately into Uranium mining. It’s definitely worth the read!
First Nations and the Equator Principles (EP)
First Nations group have put up a roadblock (security checkpoint) into Saskatchewan, and want to potentially reopen negotiations that they’ve been having with Fission and NextGen. The Clearwater River Dene Nation (CRDN) felt the Security Checkpoint was needed due to the amount of uranium exploration activity occurring in the area - and that the community has little to no knowledge of the third parties entering its lands and conducting activities harmful to land, water, animals and the CRDN People. The response is due to the ongoing granting of approvals by the Government of Saskatchewan (GOS) to uranium exploration companies, allegedly without consultation with the CRDN, or community member consent.
As this story evolves, it’s useful to look at its relation to the new Equator Principles and their implications, in particular on Canadian and Australian Projects.
What are the Equator Principles?
The Equator Principles (EP) are a risk management tool to assist financial institutions and industry to determine, assess and manage environmental and social risk in projects. It’s an IFC requirement that 104 financing institutions have signed up to. These banks have committed torequire all their project proponents to comply with these principles.
As Brandon puts it, “They really are a big deal, particularly for Projects who are intending or dependent on conventional financing.”
With the Equator Principles, mining jurisdictions are classified as either “designated” or “undesignated” countries, with the distinction broadly following the level and sophistication of mining legislation and the capacity for enforcement of social-environmental protections. For Uranium, Australia and Canada are the two most important designated countries. Before EP4, negotiating in designated countries with First Nations people and indigenous people was not dealt with under EP4 requirements provided the project proponent satisfied the laws of that designated nation. In other words, under EP3, projects located in designated countries are deemed to satisfy Equator Principles 2, 4, 5 and 6 if they meet host-country laws.
Now with EP4, projects in both designated and undesignated countries will be reviewed for compliance with all the principles. In particular, projects in designated countries will have to demonstrate a full first nations consultation, including obtaining Free, Prior and Informed Consent from those peoples. This creates risks of proper compliance falling between the EP3 and EP4 cracks, particularly for management teams not alive to the distinction. The worst-case scenario, is that consent obtained during EP3 by following the legal route, will not be judged as being Free, Prior and Informed under EP4 requiring the project proponents to re-engage with the local community or indigenous groups. For non-designated countries, like Namibia, the impact is less given this requirement has not changed.
Who does it protect?
A key component to the First Nations argument is ensuring genuine agency of indigenous groups. They need to “buy-in” to what the Uranium producers are doing. A key comparison drawn from this debate is with K92, a company operating in Papua New Guinea. In a discussion with us, the CEO of K92 emphasised the fact that they are “guests in the country” in which their projects are being undertaken. It is integral to obtaining as much local buy-in as possible; educating them to work on the property, pay the taxes due instead of finding loopholes to minimise costs. It is an interesting contrast.
Many questions are surrounding the First Nations story and as it develops, hopefully we will start to get clear explanations on why this has happened. Moving forward, when discussing Uranium Projects, EP4 is definitely worth questioning and looking into.
Want to hear more from Brandon?
Brandon hosts a weekly Uranium show in Crux Investor covering:
- Market updates
- Uranium fundamentals
- Mistakes beginner (and experienced) investors make
- The implications of new discoveries
- The spot price and how it should affect investment decisions
- What it takes to run a uranium company
- International nuclear agreements
Basically, everything you need to know.
Watch Brandon here.