Uranium’s Role in Meeting the Climate Challenge

Executive Summary

• Global electricity demand is projected to triple by 2050. Meeting this demand growth while achieving net-zero emissions will require a massive buildout of new low-carbon generation capacity.
• Nuclear power, which currently provides about 10% of global electricity, could play an expanded role. Modelling suggests an additional 400-800 GW of nuclear capacity may be needed by 2050, requiring the industry to scale up new builds to around 50 GW per year.
• Scaling up nuclear will require a corresponding increase in uranium production. Uranium fuel is essential for nuclear reactors, but supply has lagged as the industry stagnated. Uranium mining companies will need to boost output substantially.
• Historically, nuclear power plant construction has faced challenges like cost overruns, delays, and constrained industrial supply chains. However, new advanced reactor designs promise improved economics and construction timelines.
• To scale up nuclear and uranium output, companies, policymakers, and investors should consider actions across financing, workforce, regulation, industry collaboration, and technology innovation.

The Investment Case for Nuclear Power and Uranium

Global electricity demand is expected to triple by 2050, driven by the electrification of transport, buildings, and industrial processes. This poses an unprecedented challenge for power generation. Variable renewable sources like wind and solar will see massive growth but cannot meet all future electricity needs alone. Nuclear power provides reliable 24/7 carbon-free electricity to complement renewables, but it has stagnated at around 10% of global power supply.

Modelling by McKinsey suggests nuclear could need to expand by 400-800 GW of new capacity by 2050, doubling or tripling today's capacity. This is based on projected power demand and constraints on scaling other dispatchable low-carbon sources. It would require boosting nuclear construction rates up to around 50 GW per year. While ambitious, nuclear has seen similar growth rates before in the 1980s.

Ramping up nuclear power depends on increasing the uranium supply. Uranium is the essential fuel for all operating nuclear reactors. But the uranium market has been depressed, with low prices discouraging new mine investment. Primary uranium production would need to double by 2050 to fuel nuclear's expanded capacity. With supportive policies, uranium mining companies are poised to boost output.

Growing nuclear power is essential to achieving net-zero emissions for several reasons:

• Energy security and reliability benefits of nuclear's stable baseload power
• Limits on scaling renewables due to land constraints, transmission bottlenecks, and supply chain issues
• Challenges facing competing dispatchable low-carbon sources like long-duration storage and hydrogen
• Improved nuclear reactor safety, waste management, and political acceptance

With supportive policies, nuclear power is seeing renewed interest worldwide after a long lull. The U.S., UK, South Korea and other countries have announced support for new nuclear plants. Over 150 GW of new nuclear capacity is in development globally.

The industry faces headwinds, including high capital costs and a history of construction delays. But new advanced reactor designs promise cost reductions, shorter construction times, smaller sizes, and other innovations. With the right strategies across regulation, financing, technology, and industry collaboration, nuclear power and uranium are positioned for vital roles in powering the net-zero transition.

Key Recommendations for Industry Stakeholders:

1. New financing models to fund the estimated $500 billion per year required for rapid nuclear expansion. Options include government backstops, hybrid public-private financing, and spreading risks over large balance sheets.
2. Major uranium production ramp-up, potentially doubling output by 2050. Improved prices and policies can incentivise uranium mining companies to expand their capacities.
3. Workforce ramp-up across uranium mining, nuclear manufacturing, construction, and operations. The nuclear labour force may need to grow 5-10x.
4. Streamlined global licensing standards and processes to reduce regulatory delays. Industry consortiums can proactively coordinate with governments.
5. Project best practices from comparable industries to minimise nuclear plant costs and schedule overruns.
6. Industry collaboration on standard plant designs, replicable construction models, modular techniques, and coordinated supply chains.
7. Maintaining existing plants through optimised O&M while improving cost competitiveness against renewables.
8. Accelerated development of advanced reactors to drive down costs over time.
9. Policies like investment/production tax credits, R&D funding, and public-private partnerships to incentivise growth.

Uranium’s Essential Role in the Nuclear Value Chain

Uranium accounts for only 2-5% of the total cost of nuclear electricity generation, but it is obviously an essential input. Uranium is mined globally, then enriched and fabricated into fuel rods for use in reactors. The entire uranium supply chain will need to scale up to match nuclear power expansion.

With years of low uranium prices, mine production has lagged. Output would need to double from current levels of around 120 million pounds annually to meet projected mid-century reactor demand. Many idled mines can restart, and permitted projects can be built quicker than new nuclear plants. But major investments are still required across exploration, mine development, and processing capacity.

Some uranium supply can be filled by stockpiles and down blended weapons material. But the bulk must come from increased primary mine production. Higher prices will be needed to incentivise new sources. Both spot and long-term contract prices have shown some recovery but remain below incentive levels for most projects.

Publicly traded uranium mining companies like Cameco, Kazatomprom, and Energy Fuels stand ready to boost production if market conditions improve. Smaller developers are also advancing new projects and expansion plans. Supportive policies, like the US government's recent uranium reserve initiative, can complement market dynamics in enabling supply growth.

Advanced Reactors: The Next Wave of Nuclear Innovation

Today's nuclear reactors are large, bespoke, and expensive mega-projects. But innovative new advanced reactor designs promise major improvements in cost, construction speed, safety, and versatility.

Small modular reactors (SMRs) based on proven light-water reactor technology can be manufactured in factories and shipped to sites for fast assembly. Their smaller size and simplicity compared to traditional nuclear plants allows for economies of series production. SMRs have attracted lots of entrepreneurial advanced reactor companies.

More radical Gen IV advanced reactors use alternative coolants, fuels, and reactor physics. They unlock new capabilities like inherent safety without active cooling, high-temperature industrial process heat, and closed fuel cycles that maximise resource utilisation. Advanced reactors open up markets like industrial decarbonisation, hydrogen production, desalination, and off-grid power.

Many advanced reactor startups have promising designs, but most are still at the conceptual or early prototype stage. Reaching commercial viability will require significant R&D funding and demonstration projects before private-sector deployment investment can scale up. But if advanced reactors can realise even some of their promised improvements over conventional reactors, they could be a game-changer for affordable, sustainable carbon-free energy.

Investment Risks and Returns

Expanding nuclear power five-fold or more in just a few decades poses substantial risks for investors, but also opportunities.

• Construction delays and cost overruns have impaired returns on past nuclear plants. Strong project management and proven best practices from other industries can mitigate these risks.
• Advanced reactors are largely unproven and will require significant R&D before commercialisation. Investors must take a portfolio approach across diverse designs to manage technology risks.
• Uranium producers face potential mining delays, price volatility, and resource uncertainty. Market growth and supply discipline can improve investment cases.
• Supply chain constraints, commodity price volatility, and competition for technical skills could challenge rapid nuclear scaling. Industry coordination is essential to expand manufacturing and train workers.
• Policy and regulatory uncertainty remain headwinds in some geographies. But the climate imperative, energy security, and technological advances are making nuclear more politically appealing.
• High upfront capital costs and long project timelines mean financing challenges. Innovative funding solutions and government backstops can open investment.

At the same time, success for advanced nuclear could be tremendously lucrative given the sheer magnitude of low-carbon power demand. First movers also stand to gain valuable intellectual property and competitive advantages. And nuclear power has a compelling social purpose enabling deep decarbonisation.

While risks exist, the investment case for ramping up nuclear power and uranium is compelling in the context of clean energy's trillion-dollar growth potential. Nuclear can address a major gap in the net-zero transition by providing abundant, reliable carbon-free electricity. With technology innovation and enabling policies, nuclear is positioned for a new era of scalable sustainable energy.

Companies to Watch

Energy Fuels‍

Energy Fuels is the largest uranium and advanced rare earth element producer in the United States. The company has significant uranium production capacity and long-term sales contracts with U.S. nuclear utilities that it expects to fulfil starting in 2023-2024. Energy Fuels is also quickly moving to establish a domestic rare earth element supply chain, with plans to produce high-value separated REE oxides by late 2023 or early 2024. The company additionally produces vanadium when conditions warrant, recycles materials to recover uranium, vanadium and medical isotopes, and is advancing capabilities for medical isotope production. Overall, Energy Fuels is a major U.S. producer of strategic minerals like uranium and rare earth elements that are critical for energy, technology, and medical applications.

Global Atomic‍

Global Atomic Corporation is a publicly traded company with two main divisions - a Uranium Division that is developing the large, high-grade Dasa uranium project in Niger, which is now fully permitted with excavation underway, and a Base Metals Division that holds a 49% stake in a zinc production joint venture in Turkey operated by Befesa. The joint venture recycles Electric Arc Furnace Dust to produce zinc oxide concentrate sold to zinc smelters globally. Global Atomic’s unique combination of uranium production and cash-flowing zinc operations positions it well for growth.

Latitude Uranium

Bannerman Energy is an Australian uranium development company focused on advancing its flagship 3.5Mlb pa open pit uranium project in Namibia, a major global uranium producer. Bannerman is currently working on Front End Engineering and Design (FEED) and financing for the Namibia project. The company also holds a significant 41.8% stake in Namibia Critical Metals, developer of the large-scale Lofdal heavy rare earths project in Namibia, one of only a few heavy rare earth deposits outside China.

American Lithium

American Lithium is developing large-scale lithium projects in Nevada and Peru as well as one of the world's biggest uranium projects, with the goal of playing a major role in the transition to sustainable energy. The company's core assets are the advanced-stage TLC lithium project in Nevada and Falchani lithium project in Peru, which have robust preliminary economic assessments. American Lithium also owns the Macusani uranium project in Peru, which has seen significant historical development. With assets at various stages of pre-feasibility and feasibility studies, American Lithium is positioned to be a major player in lithium and uranium mining.

Bannerman Energy

Bannerman Energy is an Australian uranium development company focused on advancing its flagship 3.5Mlb pa open pit uranium project in Namibia, a major global uranium producer. Bannerman is currently working on Front End Engineering and Design (FEED) and financing for the Namibia project. The company also holds a significant 41.8% stake in Namibia Critical Metals, developer of the large-scale Lofdal heavy rare earths project in Namibia, one of only a few heavy rare earth deposits outside China.