Growing Demand for Uranium
World energy production and consumption has been growing at approximately 2% per annum and most projections suggest this will continue through 2030. This growing demand for power coupled with the realisation of environmental emission concerns and overweight reliance on fossil base fuel has returned nuclear generated power to the top of the public policy agenda. Due to a 25 year depressed market for uranium where 47% of demand was filled by finite secondary sources, a significant lack of new uranium resource development has led to a growing shortfall, forecast to materially impact the market by 2010 -2012.
Currently the supply demand equation is finely balanced, with primary and secondary sources just meeting demand - the 435 operating nuclear reactors require approximately 180 MMlbs of uranium oxide equivalent, 110 MMlbs of which is supplied by primary production with the balance being made up from secondary sources. Any disruption in supply, scheduled breakdowns in new development, political trade disruptions between major players and continued participation by investment vehicles and hedge funds in the commodity could drive the market into an immediate deficit.
Uranium extraction remains the most highly regulated mining environment in the world. As a result, a new operation cannot be brought on line with the same ease as some other more common base metals. By 2030, it is suggested that global reliance on nuclear power could increase from 370 Gwe per annum to in excess of 740 Gwe, an increase of +200%. Currently there are 435 reactors in operation with 28 under construction, 64 in the planning phase and 158 proposed. Based upon current estimates global uranium demand could top 350 MMlbs within the next 20 years. Current world demand is 180 MMlbs per annum.
The Directors therefore believe that the opportunity for investment in the uranium sector will continue for the foreseeable future.
