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Red Books And Yellowcake - The Permanent Quest For Uranium

Commodities / Uranium Aug 30, 2010 - 07:24 AM GMT

By: Andrew_McKillop

Commodities

The nuclear industry, both military and civil has been short of uranium since the start. Enrico Fermi's very first experimental plutonium brewing Manhattan Project reactor was built under a New York City football stadium in 1941, to produce radioactive explosives for the USA's first atom bomb. This tiny reactor of a few kiloWatts power contained a few dozen kilograms of enriched uranium and produced only milligrams of plutonium, which was feverishly gathered and stored.


One tonne of yellowish coloured uranium oxide, called "yellowcake", produced from mined uranium ore, yields about 750 kilograms of uranium fuel for reactors. The first systematic mining of uranium was at Jáchymov, located in today's Czech Republic, but by 1941-1945 and the US bomb programme much bigger quantities were needed. For the Manhattan Project, the then Belgian Congo's Shinkolobwe mine was a major uranium supplier.

Only taking the world's present 439 civil reactors and ignoring the 200-plus reactors called "research and military", these civil reactors will need about 68 000 tonnes of uranium in 2010, but world mine output will be less than 55 000 tonnes. If the vaunted "Nuclear Renaissance" takes place as planned by the industry and about 200 - 225 new reactors are added in 2010-2020, world uranium fuel needs will grow to about 125 000 tonnes a year by 2020.

The OECD's nuclear agency the NEA publishes the "uranium industry's bible". Officially called the biannual report on Uranium Resources, Production and Demand but nicknamed the "Red Book," it was first published in 1965. Over the 45 years of its existence, the Red Book has collected impressive quantities of official uranium data from OECD governments.

Concerns about uranium resource depletion and fast-growing numbers of new reactors pushing demand ever higher led to the industry's first "Supply Shock". From 1974 uranium prices tripled, and the reactor manufacturer and fuel supplier Westinghouse was forced to declare "force majeure" on its fuel contracts. Uranium prices, in dollars of 2010 value, reached about US$ 260 per kilogram in 1977 (compared with US$ 100 per kilogram in mid-2010). This price of more than US$ 250 per kilogram was briefly attained again, then surpassed in 2005-2007. In both cases the "uranium boom" of constantly rising prices lasted about 3 years.

One of the main causes of this delayed, but then hysterical market reaction in the ultra-opaque and secretive uranium market is the constant fear of resource depletion and supply shortage. The reality of this is shown by Red Book data on the uranium production history in the "old nuclear" countries such as the USA, France, Germany, Japan or UK. Some attained outputs as high as several thousand tons a year, in the 1950-1980 period. Today they produce much less uranium and in some cases none at all, because their reserves are depleted, production is very expensive, environmental legislation is restrictive, and so on.

Very much like its "Peak Oil" history for national oil output, the USA attained its "Peak Uranium" output in 1979-1981. For the European uranium producers, it is necessary to go back to the 1970- 1980 period to find their "Peak Uranium" production, for example more than 3 000 tonnes a year by France as late as 1988. By 2005, French uranium production was less than 10 tonnes a year.

The uranium price is only in theory a very important factor deciding mine development and mine output. During the price boom of the 1970s, the OECD's NEA forecast in 1979 that if the uranium price averaged US$ 111 per kilogram, in dollars of 1979 (at least US$ 235 in dollars of today) then the word's uranium mines would expand rapidly, and could produce 123 000 tonnes a year by 1995. As the

By Andrew McKillop

gsoassociates.com

Project Director, GSO Consulting Associates

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

© 2010 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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