Busted Uranium Market Gears Up For Potential Boom

Sep 8, 2017

Tan boxes house injection and recovery wells at the ISR mining operation Nichols Ranch in northeaster Wyoming.
Credit Madelyn Beck/Inside Energy

  

The U.S. used to be the world’s number one uranium producer, and most of it came from Wyoming. But since the 1980s, production has fallen off a cliff. Prices are at rock bottom. That may be about to change — uranium’s biggest customer is the nuclear energy industry. In coming years, hundreds of new nuclear reactors are planned for China and India. Uranium companies in the U.S. are hoping to gear up for a boom.

Elements of the Market

Uranium is a silvery white metal that’s heavy. Very heavy. In fact, its one of the heaviest elements on earth, with one cup of uranium weighing nearly 10 pounds.

The base metal doesn’t have the best reputation. People remember incidents like those at Three Mile Island and Chernobyl.

While those incidents are extremely rare, they can be extremely dangerous and have a huge impact on the uranium market. Every time there’s a nuclear accident, nuclear energy goes out of favor. Plants are shut down, often causing a uranium glut and prices to drop.

Uranium’s latest price melt-down followed the accident in 2011 at the Fukushima nuclear plant in Japan. In the aftermath, Japan powered down 54 nuclear reactors and sold off already purchased uranium onto the world market, driving prices into the floor.

“U.S. uranium production is at a level we haven’t seen in decades,” Scott Melbye, executive vice president of Uranium Energy Corp., said at the Global Uranium Symposium.

The symposium was in Casper, Wyo., from Aug. 21 to Aug. 25. It hosted uranium industry heads from around the world who have been grappling with low prices of about $20 a pound, down 70 percent from where they were in early 2011.

“We’ve got to hunker down and survive in what is a very difficult, one of the most difficult market conditions I’ve seen in my career,” Melbye told them. “But if we can position ourselves to be ready to respond when prices turn, I think It’ll be very good news for everyone in this room and for US energy security, and good for the nation.”

Most of these uranium industry leaders are anticipating prices will indeed turn. 

China and India combined are building 26 reactors and plan to build nearly 250 more in the coming years, according to the World Nuclear Association. That means demand for uranium could be ramping up.  

Add to that support from the Trump administration for a revived nuclear industry in this country.

“One thing that we can say is positive is the new Trump administration: whether you love Trump or you hate him, he’s undeniably good for nuclear power and good for domestic uranium,” Melbye said.

Wyoming leaders took to the symposium stage, too, touting how much nuclear energy can do for the world, the nation and the state, which has been struggling after a few rough years in coal, oil and gas production.

Wyoming Gov. Matt Mead addresses a crowd of uranium industry leaders during the 2017 Global Uranium Symposium in Casper, Wyo.
Credit Madelyn Beck/Inside Energy

“We need to do better as a country.” Wyo. Gov. Matt Mead told the crowd. “We want the industry as a whole, globally, to do well. And that’s partially a recognition of there should be a great future for nuclear power.”

So industry analysts are reading the uranium tea leaves. In financial filings, one uranium company noted predictions that prices, now in the twenties per pound, may go as high as 80 in the next 5 years.

Wyoming’s smaller, low-cost uranium operations will have an edge when that happens.

“Well, I think clearly we’ll be leading U.S. production,” Melbye said. “Wyoming has a core of producers already in place … So you know, you have the ability to increase pretty dramatically.”

On the Mine

It’s an hour and a half drive from Casper to the Nichols Ranch mine.

“I feel like this is the third time I’ve gone through a business cycle where we’re always on, scraping by with our nails to stay alive,” William Goranson said on the way.

Credit Madelyn Beck/Inside Energy

Goranson is the Executive Vice President of ISR operations for Energy Fuels Inc. ISR stands for “in situ recovery,” which is the main way companies mine uranium in Wyoming and the U.S. nowadays.

Driving out to the mine site, I could tell that this was not an ordinary way of mining. There were hundreds of tan boxes, each about hip-high and a few feet thick with a little hatch in front. Each one holds either an injection or recovery well.

A mixture of water, CO2, baking soda and oxygen is pumped underground through the injection wells. The solution essentially dissolves uranium that’s binding to rock and sand. Then, that water is pumped back up through recovery wells and, through a series of steps, the uranium is separated out.

“Simple isn’t it?” asked Hilton Ballinger, an operations supervisor at the mine.

Nichols Ranch Manager Bernard Bonifs reaches into one of the hundreds of tan boxes dotting the landscape at the uranium mine. They keep injection and recovery wells insulated during Wyoming’s harsh winters.
Credit Madelyn Beck/Inside Energy

The mine has seen better days. In the last year and a half, it went from 55 workers to only 31. But, everyone seems hopeful that the tide is turning and that prices will come back. The mine is idling, still producing some uranium and waiting to ramp up production when prices improve.

Goranson said within six months, Energy Fuels could set up a whole new section of wells.

“Won’t be at double, but we’ll be building capacity into double production.”

Wyoming Mines

Energy Fuels isn’t the only company setting up in Wyoming while the markets are down and the properties are cheap. At least four other companies are also buying up or shaping up plots in the state.

This includes Scott Melbye’s company, Uranium Energy Corp. They just purchased a mine in northeast Wyoming. He says the mine already has its license and permits, and he has, “One foot on the brake and one foot on the gas.”

He said for now, his company is just sitting on the assets, waiting for the market tide to turn.

“And, I think we’re setting up for that,” he said. “It’s inevitable. I don’t know if its imminent, but it is inevitable.”

The uranium industry still has a rocky road ahead. Experts and industry veterans estimated that uranium prices will start to really come back between 2020 and 2025. That’s a long time to be uncertain.

But a price hike, if it comes, could mean not only a boost to producers, but to U.S. energy security. Nuclear energy accounts for 20 percent of the nation’s electricity. Even so, right now nearly 80 percent of the uranium needed for those plants comes from other countries like Russia, Canada, and Kazakhstan.

So, while the U.S. produces so little uranium, it still needs to feed its 99 nuclear reactors, the most reactors of any country. As U.S. producers eye China and India, they hope the growth elsewhere will be bringing prices and production back to the U.S.

What’s Next?

  • Check out the dramatic history of uranium mining in Wyoming here.
  • Strangely, Warren Buffett has gotten involved with a uranium bank in Kazakhstan.
  • If you want to go in real deep, read Uranium Investing News’ interview with Scott Melbye.