Uranium – Newsworthy Events – February to March 2016

Rob Chang March 30, 2016

Rob Chang, Senior Analyst and Head of Metals and Mining at Cantor Fitzgerald, gives us a quick run-down of the recent newsworthy events affecting the uranium sector.

Fourth Reactor Restarted In Japan

February 26 2015

Event: Kansai Electric Power Co.’s Takahama No. 4 reactor located in the Fukui Prefecture restarted today.

Bottom line: Positive. Despite attempts to stop the Takahama reactors from restarting, which included a temporary court injunction against them, Takahama 4 joins Takahama 3 and Sendai 1 and 2 as the fourth restarted reactor post-Fukushima. This restart occurs a month after the restart of Takahama 3 and we expect the pace of restarts to quicken now that the country has gone through the process four times.

– Kansai Electric Power Co. (“KEPCO”) released a statement today indicating that that Takahama No. 4 was restarted today. Making it the fourth restarted nuclear reactor and the first top burn MOX, a mixed-oxide fuel that also contains plutonium along with uranium.

– The reactor is expected to start generating electricity on Monday, February 29 and reach full power a few days later.

– It is expected to commence selling electricity in late March after receiving final approval from the Nuclear Regulation Authority (“NRA”).KEPCO also plans to restart Takahama Nos 1 and 2. While these reactors are over 40 years old (Nos 3 and 4 are both over 30 years old) the NRA has stated that the additional safety systems installed met its standards.

– The 1 and 2 reactors will now go to public comment after which the NRA will decide whether to give final approval.

– Permission to restart from the mayor of Takahama and the governor of the Fukui Prefecture are also required. This process      was already performed for the Nos 3 and 4 reactors.

– To date, 25 of the 43 reactors in Japan have formal requests to the Nuclear Regulation Authority for inspections to restart under the new safety protocols (see table below). This list includes the four that have already restarted.

– The Ikata 3 reactor located in the Ehime Prefecture and operated by the Shikoku Electric Power Co is the next reactor that is expected to go online.

– The restart of the Takahama reactors is in line with Cantor Fitzgerald Canada Research’s forecast. In total, we expect three additional reactors to restart in 2016 for a total of five additional for the year. We expect the process to be streamlined by 2017 with an additional eight reactors restarting that year. In total we expect 37 reactors to ultimately be restarted by 2020.

Japan: Updated Status Of Restart Applications And Safety Reviews

1

Source: World Nuclear Association

European Union Says €500 Billion Needed for Nuclear Energy

March 15, 2016

Event: German newspaper Handelsblatt announced that it has seen an advance copy of an upcoming European Commission publication that recommends major investments in nuclear energy.

Bottom line: Positive. The report is a strong endorsement by the European Union in support of nuclear power. It is reported to assert that, “because of Europe’s growing electricity needs, nuclear power is unavoidable” and that investments of up to €500 Billion are necessary.

– The European Commission is recommending Europe’s utilities to invest between €450 – 500 billion by 2050 to secure energy supply across its 28 member nations.

– Pointing to Europe’s growing electricity demands, the commission states that nuclear power is “unavoidable” and that €45 – €50 billion would be needed just to maintain the current power stations.

– This recommendation is of particular interest given as Germany, a member nation, continues on its path to phase out nuclear energy by 2022. A path that Cantor Fitzgerald Canada Research does not believe is possible or on a timeline that is attainable.

– The report is expected to be released in the coming weeks. Please click the following link for the original post by the Handelsblatt

https://global.handelsblatt.com/breaking/exclusive-e-u-says-investments-of-up-to-e500-billion-needed-in-nuclear-energy

– With primary supply at the mine level below current demand levels, few new mines coming online within the next five years, the marginal long term all-in sustaining cost being about US$80/lbs., and about 15%-20% of global requirements becoming uncovered in 2017-2018, we believe uranium will need to undergo dramatic price increases to incentivize supply to meet demand.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Palisade Global Investments Ltd. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

Rob Chang has served as Cantor Fitzgerald Canada’s (and its predecessor company’s) Metals & Mining Analyst for nearly five years. In total he has over ten years of sell-side and buy-side experience covering the global mining sector specializing in uranium, precious, and base metals. His diverse experience includes working with three global equity research teams including BMO Capital Markets as well as managing $3 billion in assets as a resource-focused portfolio manager. He has visited over 30 uranium mines, projects, and processing facilities located around the world along with another 50 site visits for other commodities. Mr. Chang has a Master of Business Administration degree from the Rotman School of Management at the University of Toronto.

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