Uranium can supply energy for the world’s electricity with less greenhouse effect than virtually any other energy source.
As the largest clean energy source, the development of nuclear power can ensure that the future generation’s energy demands are met effectively and efficiently. The strong long-term demand for uranium can be attributed to the energy needs of emerging countries in Asia, particularly China and India, that seek cleaner alternatives to fossil fuels. According to the International Atomic Energy Agency in 2010, nuclear power generated approximately 14% of all global electricity from reactors in 30 different countries. As of November 1, 2016, there were 444 operational nuclear reactors with another 571 under construction or being planned.
Namibia as a Uranium Producer
Namibia has been a significant producer of uranium for nearly 40 years since Rio Tinto’s Rössing mine commenced operations in 1976 and was later joined joined by Paladin’s Langer Heinrich deposit. In 2015, Namibia was the fifth largest producer in the world, surpassed by Kazakhstan, Canada, and Australia. The Namibian Government is very supportive of the growth of its nuclear industry and would like to play a major role in the future supply of U3O8, but more importantly, meeting the growing worldwide requirements.
Most of the countries that use nuclear-generated electricity do not have sufficient domestic uranium supply to fuel their reactors and therefore they secure the majority of their required uranium supply by entering into medium-term and long-term contracts with foreign uranium producers and other suppliers. Remaining supplies are secured through spot purchases of uranium.
The long-term contract price for uranium is reported on a monthly basis by Ux Consulting.
To diversify market risks, producers and utility customers often maintain a mix of contract terms and pricing mechanisms in their contract portfolios. Buyers are often willing to pay a premium in long-term contracts, compared to spot prices, because they can achieve secure supply at prices that are more predictable.
It is Forsys’ view that the underlying fundamentals and growth expectations of the uranium industry remain sound because of nuclear power’s clean base load generating capacity. The left graph below was released By Salman Partners Inc. in September 2015 and forecasts a significant shortfall in supply as we head towards the end of this decade and the right graph is the Tradelink and Broker forecast.