#1 Spot Uranium Buyer Reveals Surprising Truths

Introduction

In this section, Pat welcomes the guest and introduces him. They discuss his background and how he got into uranium.

Background and Interest in Energy

• The guest has lived in various countries such as Switzerland, Australia, France, Germany, England, Norway, South Africa, and now Boston.

• He works for a Dutch commodity merchant that deals mostly with nuclear fuel but is currently expanding into battery metals as well.

• Before this job, he worked at Chemical for over a decade mostly marketing in Europe and some other trading because they also have a bit of a trading desk.

• The guest's father was an energy engineer who worked at the Oscarsham Power Station nuclear power station. His father's work inspired his interest in energy.

Getting Into Uranium

• The guest started out trading electricity out of college. He has always been interested in energy due to his father's influence.

• The host asks if there is a lot of uranium available on the spot market now or if it is dry. The guest responds that there is some available but not as much as there was about a year and a half ago.

Current State of the Uranium Market

In this section, the guest discusses the current state of the uranium market.

Spot Market Activity

• Off-take agreements from mines tend to replenish their inventories when there is not much activity in the spot market.

• There have been transactions early this year where spot all bought about 2 million pounds.

• A wide variety of utilities are buying uranium, which is a healthy sign for the market.

Shortage of Uranium

• The purchasing activity has not been as intense over the last six months.

• Producers who are short have openly said that they need to buy themselves.

Conclusion

In this section, Pat thanks the guest and concludes the interview.

Final Thoughts

• The guest believes that uranium is an interesting commodity to invest in due to its unique properties and potential for growth.

• Pat thanks the guest for coming on the show.

Uranium Market Conditions

The speaker discusses the current state of the uranium market and why it has been flat since Autumn last year. They also discuss the absence of financial players in the market and why investors seem to be cash-heavy.

Factors Affecting Uranium Market

• Financial players have been absent from the market, which is a major factor for its flatness.

• Investors are cash-heavy and reluctant to invest due to shaky general markets.

• General macro-market conditions are not specific to uranium; however, uranium is doing better than ever.

• The general outlook for nuclear energy has never looked any better.

Positive News on Nuclear Energy

• There is news almost every day about expanding nuclear programs, mothballing power stations, or extending their life for 10-20 years.

• These pieces of news are happening globally and indicate a positive outlook for nuclear energy.

Professional Buyers' Reluctance

• It's unclear why professional buyers are not buying more uranium despite its healthy price around $50 per pound.

• Investors should look at fundamentals such as how much uranium will be needed, how much will come online, and at what price it will be produced.

Fuel Cycle Process

The speaker explains the fuel cycle process that utilities follow when purchasing uranium. They start with designing fuel bundles before moving down the chain to buy enriched uranium.

Fuel Cycle Process

• Utilities start by designing fuel bundles based on specifications for future cycles.

• Once they know what they need, they design fuel elements and determine how much enriched uranium they will need.

• They then buy enrichment services, conversion, and finally uranium.

• Russia's invasion of Ukraine caused a rush to enrichers and converters last year as they are the first place on the fuel chain where buyers need to focus.

Uranium Spot Market Overview

This section provides an overview of the uranium spot market, including how it operates and where the material comes from.

Uranium Sources in the Spot Market

• Most of the uranium available in the spot market comes from intermediaries who have off-take contracts with producers.

• Large producers like Cameco and Kazatomprom tend to sell less into the spot market and instead have long-term contracts with utilities for multiple years.

• Some producers, like BHP, are more "dig and deliver" and will sell directly into the spot market through agreements with intermediaries.

• Material also comes from countries like Uzbekistan, which has a large production but mainly sells to Japanese trading houses.

Trading in the Uranium Spot Market

• The uranium spot market is primarily conducted through phone calls, emails, and face-to-face meetings at conferences.

• The market is small enough that there are only a few major players who actively sell material.

• There are brokers available for those who want to remain anonymous while trading.

• Over the last 18 months, Spot Test has been the largest buyer in the spot market.

Long-Term Contracts vs. Spot Market

• Most utilities work through long-term bilateral contracts negotiated with producers for their uranium needs.

• The fresh uranium that comes into the spot market is only about 15-20% of what's being bought by utilities.

• Some companies, like Cameco, maintain a presence in the spot market to stay familiar with prices since many long-term contracts are tied to the market index.

Market Exhaustion

• The uranium spot market is not exhausted and material can still be found.

Understanding the Uranium Market

In this section, the speaker discusses how they changed their attitude towards buying uranium and waiting for the market to stabilize. They also talk about the difficulty in understanding the term market and how it has changed in the past six months.

Changes in Attitude

• Changed their attitude towards buying uranium and decided to wait for the market to stabilize.

• Decided to sit on some money for a while and be more opportunistic in picking up uranium.

Understanding the Term Market

• The spot market is opaque, and it's virtually impossible to know what's going on in the term market.

• Price reporters publish prices once a month, but there's little information available beyond that.

• As technical advisors, they tell Sprott what's going on because they are involved with long-term contracts with utilities and producers.

• Things have changed in the term market as it has shifted from being a buyer's market to a seller's market due to electrification.

Changes in Term Market

• There is a rebirth of nuclear energy due to incentives for nuclear projects, green taxonomy policies, and inflation reduction acts.

• Every single nuclear operator in the US is looking at new builds right now.

• The power has shifted from buyers to sellers due to increased demand for uranium products caused by concerns over Russian delivery after Ukraine invasion.

• Flexibility on contract calls up producers when there are concerns over supply.

Uranium Market Insights

The physical market for uranium is holding up, but the spot market and uranium miners have been hammered. There is no fundamental reason for this, and it's unclear why this is happening.

Uranium Price Movement

• The physical market for uranium is holding up.

• The only thing left to move now is price.

• Despite positive news about uranium in the media, the spot market and uranium miners are down.

• It's unclear why miners have been hammered despite positive news about nuclear energy and uranium.

Chemical Company

• Chemical company has a bright future in the nuclear field.

• Chemical company has good stories such as their mega contract with Ukraine.

• Chemical company's recent purchase of Westinghouse reduces their exposure to uranium prices but increases their potential in the nuclear field.

Investment Opportunities

• The retracement of higher risk assets like uranium can be an opportunity to buy.

Commodity Merchant's Journey

The speaker talks about the journey of a commodity merchant and how they started small, built on their success, and are now looking to grow with the company. They also discuss their plans to step away from just being a merchant and start developing real assets in battery materials.

Starting Small

• Three Dutch guys started the company.

• The founders came from the mining sector and financing sector.

• The speaker joined them in 2019 along with a former colleague from chemical.

Building on Success

• The company had some fortunate contracts in place and did well in nuclear fuel business.

• Sprott came along in 2021, leading to a close relationship between the two companies.

• They plan to work together not just in uranium but potentially other materials as well.

Stepping Away From Just Being A Merchant

• They plan to build assets in battery materials, specifically looking at refineries for different metals.

• They believe that the European market is desperate for it since there aren't many assets when it comes to battery metals.

• The speaker mentions that many people have asked them to cover more of the battery methods since we will need a lot more batteries going forward.

Energy Transition and Decarbonization

The speaker discusses how energy transition is tied together with decarbonization. They talk about how creating energy somewhere doesn't matter if it's produced from coal or gas or oil.

Creating Energy Somewhere Doesn't Matter If It's Dirty

• The speaker mentions that it doesn't matter if everyone is driving an electric car if the electricity produced is dirty.

• They mention that it may even get worse since a lot of energy is needed to produce the battery, and if you're burning oil to produce electricity, you haven't really won anything.

Decarbonizing Producing Assets

• The speaker talks about how we need to decarbonize producing assets as well.

• They mention that copper and other materials come into play when it comes to traditional transmission and distribution.

• They position themselves to enable trends happening in energy transition and facilitate them in any way they can.

Nuclear Journey in Sweden

The speaker talks about Sweden's nuclear journey over the past 20 years and how it has been a front-runner in many aspects.

Sweden's Electric Grid

• Sweden had one of the best electric grids in the world with hydropower in the north, nuclear power in the south, and under bridge.

• Analysis has shown that this was one of the leading factors for a lot of Sweden's industry success because they had a very reliable electric grid.

Front-runner Country

• The speaker mentions that sometimes Sweden is a front-runner, and what they do here more countries follow slightly after.

• They talk about how Ontario is another great example of a very clean country.

Shutting Down Nuclear Power Plants in Sweden

In this section, the speaker discusses the decision to shut down nuclear power plants in Sweden and the impact it had on the electricity system.

Denmark's Influence

• Denmark played a significant role in shutting down nuclear power plants in Sweden.

• The day the plants were shut down, old coal power stations from the 50s started up in Denmark and made a lot of money.

• The speaker was frustrated by this decision and felt that something needed to be done.

Challenges Faced by Nuclear Power Plants

• The Swedish government made it difficult for nuclear power plants to operate with regulations such as the capacity tax.

• Fukushima also contributed to making nuclear power plants unprofitable due to low electricity prices caused by depressed gas prices around the world.

• Despite no one dying from the accident itself at Fukushima, European regulators required an independent cooling system for nuclear reactors which added more costs.

Rebuilding Nuclear Program

• Developers are meeting with politicians about rebuilding Sweden's nuclear program again and hiring engineers left and right.

• New rules have been introduced that allow building new nuclear reactors in new locations again.

• There is virtually no opposition to rebuilding Sweden's nuclear program.

Nuclear Energy vs Fossil Fuels

In this section, the speaker discusses why nuclear energy is a better option than fossil fuels.

Benefits of Nuclear Energy

• Nuclear energy is a better option than fossil fuels because it does not emit CO2 into the air.

• The challenge with fossil fuels is getting CO2 molecules out of the air and putting them down in the ground, which is an enormous problem that we don't have efficient machines to solve.

• Sweden had a responsible approach from day one when they embarked on their nuclear program. They had a solution for waste management even before building their first plant by setting money aside and doing research on it.

Recycling Nuclear Waste

• The speaker believes that we can cancel the problem of nuclear waste with recycling and intelligent storage.

• It might make economical sense to recycle nuclear fuel since 94% of its energy is still in the fuel box after going through the reactor.

Managing Nuclear Waste

• Visiting sites where nuclear waste is stored can be educational. The waste itself is easy to contain and handle, and there are technical solutions that work well.

• The stigma around storing nuclear waste for 100,000 years is grossly exaggerated because it's only really dangerous for a couple hundred years.

Pollution from Fossil Fuels

In this section, the speaker talks about pollution caused by fossil fuels.

Problems with Fossil Fuels

• Radon gas in most houses in Sweden has to be under a certain level. Pollution caused by fossil fuels is enormous in many mega cities of Asia.

• The UN puts numbers on how many deaths are caused by particles in the air and CO2 emissions. It's quite staggering.

Radioactivity from Coal Power Stations

• A coal power station emits more radioactivity than a nuclear power plant from the carbon 14 molecules in the CO2 released.

Managing Risks

• The catastrophic events become much bigger in our mind while the small daily risks we don't see so much even though they are bigger.

• Radiation is everywhere, and we need to remove the stigma around it because it's disproportional with reality.