Canadian uranium for 8/7/10

Cameco heads overseas for growth

This blog post is an edited version of a column published in Fuel Cycle Week, V9:N387, July 29, 2010, by International Nuclear Associates, Washington, DC.

Canada's largest uranium producer has some new customers overseas. In June Cameco (TSE:CCO) announced a series of deals with China, India, and Kazakhstan. At the top of the list Cameco said June 24 it is pursuing long-term cooperation opportunities with several Chinese state-owned nuclear power corporations to supply uranium for the country's growing fleet of nuclear power plants. Gord Struthers, a spokesman for Cameco, told FCW the company plans to sell 23 million pounds of uranium to China over the next ten years.

The long-term deals represent a change in the way Chinese nuclear power companies do business. The deals may also indicate the country is stockpiling uranium against expected future price increases and for overall energy security. China is expected to purchase 5,000 metric tons of uranium in 2010 which is more than twice the 2,000 tonnes will use for its existing reactor fleet.

Cameco's deals in the three countries come at the time when the price of uranium continues to be flat-lined at about $41/lb. RBC Dominion Securities said in a recent report that uranium producers show no sign of slacking off on production despite the stubborn low price. There was no significant price movement as a result of the announcement of Cameco's deals with China and India.

China deals

Terms and conditions of the deals have not been set with several state-owned nuclear power corporations. Cameco CEO Jerry Grandy said in a statement the current agreements are a "nonbinding framework."

He added that negotiations are underway to set up long-term purchase agreements. The intent, Grandy said is "to benefit from China's vigorous reactor construction program."

Chinese state-owned corporations involved in the negotiations include China Guangdong Nuclear Power Corp (CGNPC), China Nuclear Energy Industry Corp (CNEIC), and China National Nuclear Corp. (CNNC), a subsidiary of CNEIC, which has a stake in four operating reactors and a number of new projects which are or which will soon be under construction.

The interlocking nature of China's civilian nuclear energy industry suggests that a domestic exchange of uranium could develop depending on which reactors come online first. First fuel loads for new reactors will spike demand for uranium in China.

Demand for uranium in China will increase rapidly as the nation is the world's biggest developer of nuclear power plants. It plans to build from its current capacity of 9 GWe to 70 GWe in the next several decades.

India Deals

Cameco is developing long-term sales agreements to sell uranium to India. Cameco inked its second major international long-term uranium sales agreement in less than a month. The deal with India was signed off by Canadian and Indian government's officials during the G20 Summit held in Toronto June 27. However, Cameco spokesman Gord Struthers told FCW it is too early to estimate how much volume will be sold to India. "There are no firm arrangements yet," he said.

In a statement released in India to the Hindu, one of that country's largest circulation newspaper, Cameco spokesman Rob Gereghty said Cameco is planning to participate with Indian partners in all aspects of the front end of the nuclear fuel cycle, "from exploration to fabrication."

Left unsaid is whether Cameco would enter the uranium enrichment business. The two years ago the firm took a 24%, $125 million stake in GE-Hitachi's laser enrichment process, but commercial operations of the new technology are still several years in the future. Cameco spokesman Murray Lyons told FCW "it is too early to pull that string [enrichment] on the India deal." He added the ministerial agreement must now be ratified by both parliaments in Canada and India before details are worked out in the form of commercial contracts.

Cameco told FCW the planned expansion of nuclear capacity in India is second only to China's in its scale and holds great opportunity for uranium fuel suppliers.

India now has 4 GWE of nuclear capacity and consumes about 2 million pounds U3O8 annually. Canada’s market success with India comes at Australia’s lose. That country has refused to sell uranium to India citing nonproliferation concerns.

The Toronto Globe & Mail reported June 25 India is less likely to use the uranium for weapons. The newspaper said experts feel the country is more interested in building its economy than its arsenals.

India has announced plans to increase its nuclear generating capacity to a range of 21-29 GWe by 2020. The removal of restrictions on nuclear trade with India would provide an additional market ranging from 7 to 9 million pounds U3O8 by 2020.

Competition for India’s fuel needs

Mindful of the differences between Canadian and Indian cultures, Cameco last year hired Chaitanyamoy Ganguly, a senior Indian nuclear fuel cycle executive with IAEA experience, to head its new office in Hyderabad. Another reason for hiring seasoned managers from India's nuclear industry is that Cameco is up against stiff international competition for India's nuclear fuel business.

The primary actors are state-owned corporations with Areva from France and TVEL from Russia which signed long-term agreements with India to supply fuel for reactors. Like China, India is pursuing an aggressive program to build new reactors taking the nation's capacity from 4 GWe to 20 GWe in the next two decades.

Russia has a December 2009 deal to build four new reactors for 4.8 GWe. Areva has a deal to build two and as many as six 1.6 Gwe reactors. Both deals come with 60-year commitments for nuclear fuel to run the new plants.

Kazakhstan deal

Cameco announced June 4 that is planning to build a uranium conversion plant in Kazakhstan. COO Bob Steane said at an energy conference held in Almaty June 4 work is underway on a feasibility study for a 12,000 ton/year plant. Some of the issues for the plant will include reliability of the supply chain for fluorine and transportation logistics in general. Kazakhstan's uranium industry suffered setbacks in production in the past because it could not procure sufficient quantities of sulfuric acid for its ISR mines.

Investments in future Canadian production are up

Two Canadian uranium juniors with stock prices in a better place than most of the competition announced new infusions of capital this month. Also, Areva achieved a 50% earn-in on its investment in Waseco's Labrador property.

Kivalliq - Kivalliq Energy Corp. (CVE:KIV) raised $6.2 million in a private placement for work on its Lac Cinquante uranium mine in the Nunavet province. Tony Reda, the firm's investor relations spokesman, told FCW the money comes in part from Lumina Capital and "high net-worth investors." Lumina will take a 19.6% stake in the firm as a result of its investment. The investors may take a controlling interest in the property, e.g., more than 20%, following a stockholder vote later this year.

Asked to account for the firm's ability to attract capital despite uranium's stubborn low price, Reda said investors will come for "high caliber projects with good potential." Also, Kivalliq is reportedly the first uranium miner to sign an agreement with the Inuit of Nunavut to explore for uranium on Inuit owned land in the territory.

It's too early to tell how exactly high quality the project will be Reda said. The firm has over 200 occurrences to follow-up. Covering 225,000 acres, the Angilak Project is Kivalliq’s core asset. It was consolidated from previously fragmented land positions developed in the 1970s and remained unexplored for the next three decades. Historic estimates place the resource at 20 million pounds U3O8. At this month's uranium price of $41/lb, it would be worth $820 million.

At mid-day July 27, market trading for Kivalliq Energy stock was at $0.34/share against a 52-week range of $0.11-0.55.

Fission – Fission Energy (CVE:FIS) has moved closer to selling its Waterbury Lake property to be developed as a producing mine. After three years and $15 million of investment by Korea's KEPCO, Fission is now putting its own money into the project.

Bob Hemmerling, investors relations spokesman for the firm, told FCW, Fission will spend $10 million a year for the next three years to fully explore the property. He said the firm expects to sell its 50% interest in it once exploration is complete.

"KEPCO doesn't have an offtake agreement with us," Hemmerling said. "We expect to sell the property to someone else to develop it."

At mid-day July 27, market trading put Fission (CVE:FIS) at $0.070/share against a 52-week range of $0.15-$1.20.

Waseco - Areva Resources has completed a $2 million 50% earn-in as part of its joint venture with Waseco (CVE:WRI) for that firm's Quebec Labrador Trough uranium properties. Waseco President Richard Williams told FCW the 330 sq km property has five showings and more survey work is needed to identify key prospects for drilling. Williams said the area was surveyed in the 1970s by several firms including Shell and Imperial Oil, but no mining ever took place. Despite a 250 page report full of findings, Williams said, "we're still in a broad brush effort."

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Nuclear news roundup for August 5, 2010

House Committee pursues nuclear R&D

A bipartisan bill developed by the House Committee on Science & Technology would advance nuclear energy research & development on multiple fronts. The bill, H.R. 5866, covers small modular reactors (SMRs), key elements of the nuclear fuel cycle including reprocessing, and advanced reactor concepts. 

Authored by Committee Chairman Bart Gordon (D-Tenn.) and co-sponsored by Ranking Minority Member Ralph Hall (R-Texas), the bill’s objective is to move state-of-the-art technologies from the laboratory and make them available for commercial application. 

The Nuclear Energy Institute (NEI) said in a statement it endorsed the legislation. It noted that small modular nuclear reactors, which are a focus of the bill, are a technology that show a lot of promise. The nuclear industry trade group also emphasized the bill’s support for R&D on the back end of the nuclear fuel cycle.

“We are heartened to see that the bill increases funding for comprehensive used fuel management that will further our ability to take advantage of the recycling potential of the considerable reusable material in each fuel rod while enhancing proliferation resistant technologies.”

The bill calls for about $400 million in new spending a year for 2011-2013.  Assuming the bill passes, it still would have to compete with other discretionary funding priorities in a time of record federal deficits.  As of July 28, the bill was pending approval with the full committee. 

DOE awards graduate fellowships

U.S. Energy Secretary Steven Chu announced Aug 4 that 150 students have been selected to receive graduate fellowship awards as part of a new Department of Energy Graduate Fellowship program. 

Each graduate fellow will be provided with tuition, living expenses, and research support for three years to academic institutions across the country.  The new fellowship program is designed to strengthen the nation’s scientific workforce by providing support to young students during the formative years of their research.

Each fellow will be provided $50,500 per year for up to three years to support tuition, living expenses, research materials and travel to research conferences or to Department of Energy scientific user facilities.  Support comes in part from $12.5 million from the American Recovery and Reinvestment Act.

Czech Republic wary about energy security

The Wall Street Journal reports July 31 that the Czech Republic’s top  diplomat warned the nation should worry about not becoming too reliant on the Russians for energy.  Foreign Minister Karel Schwarzenberg told the newspaper in an interview that since Russia is the nation’s primary source of natural gas that it should think twice about also buying nuclear reactors from that country.

Bloomberg wire service reports July 30 that Czech Prime Minister Petr Necas said the choice of a vendor for new reactors will be influenced by the need for energy security.

“The extension of Temelin and Dukovany is not a private company project,” the 45-year-old prime minister said July 29 during an interview at his office in Prague. “It’s a strategic move for the Czech Republic, and the country’s strategic interests will play a big role.”

The Czech utility CEZ.AS has a RFP out for a $26 billion project to build a total of five new reactors – two at a current power station (Temelin) and as many as three more at one (Dukovany) or more additional sites.  Competitors for the deal include Westinghouse, Areva, and Russia’s Atomstroyexport.

Ottawa digs in its heels over Point Lepreau costs

Customer satisfaction measures for AECL don’t appear to be high in the list of the government of Prime Minister Steven Harper.  CBC News reports that Harper’s government is “holding firm” that it will not pay for cost overruns at the AECL $1.4 billion refurbishment of the 640 MW Point Lepreau reactor.  AECL has blown another deadline, which was that it would complete the work by October. Now it is refusing to say when it will be done.

CBC reports that New Brunswick Energy Minister Jack Keir wrote to federal Natural Resources Minister Christian Paradis criticizing AECL's communication with the province over the delayed nuclear construction project. Clearly, customer communication between the province and AECL is in the ditch.  Keir called AECL’s communication with the province “dysfunctional,” and objected strenuously to the government’s position on not paying for the extra costs.

Canada’s Natural Resources Minister Christian Pardis told CBC the government will only pay its contractual obligations and that the increased costs caused by the technical complexity of the project will have to be paid by the utility.

Dale Coffin, a spokesman for AECL, defending the slow pace of the work saying it has to last for 30 years.

"In the nuclear business there is no room for trial and error. We need to get it right the first time, and we are doing just that."

AECL had hoped the refurbishment of the CANDU-6 reactor would be a model that would lead to getting business from other utilities. 

New Brunswick power said is it paying $20 million a month in replacement fuel costs while the reactor is out of service.  Energy minister Keir and Premier Shawn Graham have said they will consider a lawsuit against the federal government to recover the cost overruns.

Horizon starts work on Wylfa

(NucNet): Initial work by reactor companies will start soon on design studies for a new nuclear power plant in North Wales, Horizon Nuclear Power said this week.

Horizon, a joint venture established in 2009 by E.ON UK and RWE Npower, said it has signed contracts with Areva and Westinghouse for site-specific studies that would prepare those companies to make commercial bids for their European Pressurized Water Reactor (EPR) and AP1000 reactors respectively.

In March 2010 Horizon said it would build its first reactor at Wylfa given the right market conditions and subject to a final investment decision. It said it would select a preferred reactor vendor around the end of the year and aims to be generating power by 2020.

Horizon chief operating officer Alan Raymant said: “We are already working with both companies in a formal procurement process regarding our preferred vendor.

“Progressing with some studies now, for both designs, will support our planning and licensing process by allowing us to develop the site specific designs, and make us a more informed buyer.”
Horizon aims to develop 6 GWe of new nuclear capacity in the UK.

China Needs To Improve Safety-Related Policies, Says IAEA Team

(NucNet): Safety-related legislation and policies should be improved for all nuclear activities in China, including radioactive waste management, a team of experts from 15 countries has concluded this week.

The team recently completed a two-week International Atomic Energy Agency
(IAEA) review of the governmental and regulatory framework for nuclear safety in China.

The team identified good practices within the system and gave advice on areas for future improvements. Its recommendations for improvement
included:

* Nuclear safety-related legislation and policies should be further
enhanced for all nuclear activities, including radioactive waste management;

* Regulatory bodies should be provided with more money and staff to keep
pace with the China’s nuclear development programme;

* Greater capability to access international experience and cooperation
should be provided;

* A comprehensive national policy and strategy for the management of
radioactive and spent fuel should be established, as well as a single agency to implement the national strategy for radioactive waste.

The team also identified a number of good practices in the Chinese nuclear industry including a high level of commitment to nuclear safety and its regulation, and the extensive use of IAEA safety standards in the development of China’s legislative framework.

The IAEA assembled the team of 22 experts at the request of Chinese authorities to conduct an Integrated Regulatory Review Service (IRRS) mission – a peer review based on the IAEA Safety Standards.

The IAEA has sent the IRRS team’s main conclusions to the Chinese government. The final report will be submitted to China by autumn 2010.

There are 12 nuclear units in commercial operation in China with a further
23 under construction.

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Will Constellation walk away from Calvert Cliffs III?

The pressure is on for the utility to make up its mind

Constellation (NYSE:CEG) has always been upfront about its “walk away” option for the Calvert Cliff's III nuclear reactor project if the Department of Energy (DOE) loan guarantee is not awarded to it. Thanks to a vote in Congress, DOE only has enough loan guarantee authority to cover one new reactor project and there are three contenders.

Now we may know why Constellation is speaking so frankly about its options. CEO Mayo Shattuck told the Baltimore Sun Aug 1 he’s “frustrated” by the delays. Is there more to it? Forbes reports that Constellation is under pressure from investors to think carefully about the future of the 1,650 MW Areva EPR.

Without citing any of the investors by name, or with a quote for attribution, Forbes writes that the delay in the loan guarantee is "great news for investors."

"While the companies desperately want to win loan guarantees, their investors are hoping the companies lose out. With energy prices low and new nuclear construction so risky and expensive, investors would rather that their companies stick to more conventional businesses."

The analysis hinges on the deal with EDF for 49% of the company. In December 2008, EDF paid $4.5 billion for the equity stake. According to Forbes, Constellation is looking at an option to sell 12 fossil fueled power plants to the French power group for an additional $2 billion. Forbes says investors would rather see Constellation put the cash from that deal in conventional new energy projects, such as gas fired plants, than pursue its expansion plans for the Calvert Cliffs nuclear power station.

Can EDF swing a deal?

The dilemma for EDF is it has its eyes on another dance partner. The two-step experience EDF has in mind is a 15% stake in Areva. With its vertical integration worldwide across the entire nuclear fuel cycle, an investment in Areva may be more attractive to EDF.

If EDF faces a zero sum choice between Constellation’s U.S. coal-fired plants and a piece of Areva’s global nuclear business, which one will get the cash assuming EDF has it?

How does Constellation look in comparison? It turns out EDF took a provision against earnings in the first half of 2010 regarding the Calvert Cliffs project.

“In response to all of the new information and outlooks, EDF established a provision of [E]1,060 million . . . This provision covers the risks of impairment of the assets of CENG [Constellation Energy], the investment in Unistar and certain future costs and risks associated with the project, as EDF still intends to continue studies for development of a new reactor on the Calvert Cliffs site.”

What EDF is talking about is that when it got into the Calvert Cliffs deal two years ago, natural gas prices were going up. Now they’re headed the other way and demand for electricity in Constellation’s service area has tanked thanks to the current U.S. recession. What conditions will prevail for these and other factors five or eight years from now is an unknown. EDF has to account in the here and now for the financial risks facing the project.

EDF's income fell by nearly 50% in the first half of 2010. It is also facing a growing debt problem and has expansion plans for new nuclear projects in the U.K. If Constellation is looking hard for that $2 billion, the utility’s investors had better hope EDF has a cookie jar hidden away somewhere.

A big piece of EDF’s decision comes down to what the French government wants for EDF and Areva. Calvert Cliffs III is intended to be a show piece for Areva’s EPR in the U.S. No other U.S. utility is as far along in development of a new build with the French state-owned reactor design.

There is a web of interests involved in decisions about the future of the Maryland power station. Constellation's investors and the utility’s management will have a lot on their mind. A prudent investor will likely want to keep his options open.

Who is waiting in the wings for loan guarantees?

Backstage at the DOE playhouse the main competition over the contest for loan guarantee comes from NRG’s twin 1,350 MW ABWR reactors planned for the South Texas Project (STP). There the utility has unique financing plans waiting for the NRC license. The investors include support from Japan’s export bank and a major Japanese nuclear utility.

NRG (NYSE:NRG) CEO David Crane told the Dallas Morning News Aug 3 he is “confident” NRG will get the loan guarantee. This statement comes after the House voted down a provision last week to expand DOE’s loan authority by $9 billion.

The other two projects on DOE’s short list are Scana’s V.C. Summer Station (twin Westinghouse 1,150 MW AP100s) and Luminant’s Comanche Peak (twin Mitsubishi 1,750 MW APWRs). Neither had said much recently about their prospects. Luminant was hopeful when the additional $9 billion was approved by a House committee. Scana said in a statement the future of its project does not hang so closely on the fate of loan guarantees,

If DOE is forced to choose between Constellation and NRG for the remaining loan guarantee authority, it’s going to be a long night at the Forrestal Building.

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Solar study under a cloud

Two nuclear bloggers and the New York Times question facts and balance of a report that said solar was less expensive than nuclear.

An article on cost comparisons between solar and nuclear energy published by the New York Times has gotten feedback about making unwarranted assumptions about the cost of electricity and for being one-sided.

The feedback comes from nuclear energy bloggers Rod Adams at Atomic Insights and Dave Bradish at NEI Nuclear Notes. The New York Times appended an “editors’ note” to the online edition of the article in which they said the article did not present a balanced report of the facts.

I encourage readers to check out the critiques from Adams and Bradish which are cited below.

What the article said is that solar energy, at a subsidized rate of $0.16/kWhr is now more cost competitive than nuclear energy.

Originally published by the International Herald Tribune July 26 with a Paris dateline, Diana S. Powers, the IHT reporter, wrote:

"Solar photovoltaic systems have long been painted as a clean way to generate electricity, but expensive compared with other alternatives to oil, like nuclear power. No longer. In a “historic crossover,” the costs of solar photovoltaic systems have declined to the point where they are lower than the rising projected costs of new nuclear plants, according to a paper published this month."

The problem with the study is that it relies on economic analyses prepared by Mark Cooper, a Ph.D. sociologist who makes part of his living testifying in rate cases against nuclear energy. This is an advocacy role which goes beyond mere analysis for rate payers. The study was written by John O. Blackburn, a Professor Emeritus of economics at Duke University, in North Carolina, and Sam Cunningham, a graduate student. It is titled “Solar and Nuclear Costs — The Historic Crossover.”

Adams asks about peer review

The question Aams' asks is did anyone check the paper at Duke before the authors contacted the New York Times? In his critique of the New York Times article and the paper, Rod Adams wrote:

“The writer did not check on the academic credentials of the paper's authors, check to see if it had been peer reviewed, or question whether or not it was backed up by independent work by anyone else. She [the reporter] quite possibly did not even read the entire paper to understand the calculations used to draw the pretty graph. The editor allotted a good deal of valuable space for this poorly researched work.”

Bradish says the numbers don’t add up

In his critique of the same material, Dave Bradish wrote the numbers do not add up.

A 30% Federal tax credit and a 35% North Carolina tax credit were applied to the capital cost [of solar] to reach a net cost per kWh. How big of a difference do these make?

Before accounting for the incentives, the report derived a cost of 35 cents/kWh for solar (p. 18). After adding in the incentives, the cost of solar dropped by more than half: to 15.9 cents/kWh. If NC WARN wants to be accurate, then they should revise their thesis to read:

Thanks to state and federal incentives, solar electricity, once the most expensive of the “renewables,” has become cheaper than electricity from new nuclear plants.

But is solar now cheaper than nuclear even at the incentivized 15.9 cents/kWh? Credible sources still say no.

NY Editors wake up and smell the coffee

Apparently a lot of people contacted the New York Times about the article. An editors’ note just doesn’t appear out of nowhere. It gets published through a deliberative process that involves the reporter, the primary editor on the piece, and sometimes the management depending on the issue. So it follows that the newspaper felt an explanation was owed to its readers.

And just in case you were wondering what the New York Times thinks of their own reporting, and fact checking, here’s the full text of the editor’s note appended to the online edition of the article.

New York Times Editors' Note: August 3, 2010

“An article published July 27 in an Energy Special Report analyzed the costs of nuclear energy production. It quoted a study that found that electricity from solar photovoltaic systems could now be produced less expensively than electricity from new nuclear power plants.

In raising several questions about this issue and the economics of nuclear power, the article failed to point out, as it should have, that the study was prepared for an environmental advocacy group, which, according to its Web site, is committed to ‘‘tackling the accelerating crisis posed by climate change — along with the various risks of nuclear power.’’ The article also failed to take account of other studies that have come to contrasting conclusions, or to include in the mix of authorities quoted any who elaborated on differing analyses of the economics of energy production.

Although the article did quote extensively from the Web site of the Nuclear Energy Institute, an industry group, representatives of the institute were not given an opportunity to respond to the claims of the study. This further contributed to an imbalance in the presentation of this issue. “

Fact checking after publication is never a position an editor at any newspaper wants to find himself in. The paper defended its integrity with the note. That should be taken as a message about the credibility of the original material, the reporter's unquestioning use of it, and especially by anyone in the solar energy world who was uncritical in their thinking about accepting the findings of the study which was conducted at Duke University.

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Nuclear Energy videos for Monday August 2, 2010

A new blog feature will offer a few videos every Monday to lighten up your back to work blahs.

All videos are completely safe for work. No guarantee is made that any of the information in the videos is technically correct!

How to make a thorium-fueled nuclear reactor

Last spring I told Facebook users how to make a nuclear power source using Americium from a smoke detector and fluorine from toothpaste. That was the book. Now here's the movie.

Teen makes fusion in his garage

I'm not sure it's going to have the same draw for this teen on a Saturday night date as 'come up and see my etchings,' but in some quarters, like MIT or Cal Tech, it will definitely produce bragging rights.

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