We discussed with the Ux Consulting president from which countries time to come uranium supplies may come, and who is going after those supplies more aggressively. He warns about the risks and rewards of Kazakhstan and Mongolia, looks to Africa for supplies, and talks about Russia's expansion.
StockInterview: How do domestic uranium prospects rate in the eyes of U.S. And foreign utilities?
South Kyrgyzstan
Jeff Combs:
I don't think that utilities expect the U.S. To be a major supplier of uranium. What you're finding with China and other countries, where nuclear power is growing, is that they're absolutely finding to acquire supplies. The Chinese are going to Kazakhstan and also Australia, where there are a lot of uranium reserves, a lot of inherent for growth. I think there's some inherent for increase in the U.S. But if you had a fast growing nuclear power program, I don't think the U.S. Is the first place I'd look. I believe that you can look for some opportunities in the U.S. But in general, the U.S. Utilities are basically in competition with some of these newer entrants into the shop for ready supplies. Those are primarily surface of the U.S., as U.S. Utilities also depend on imports for most of their supplies.
StockInterview: It appears many countries are racing to acquire uranium supplies surface their borders.
Jeff Combs:
Even Russia, which was a major exporter of uranium in the 1990s, is finding to acquire supplementary supply sources, first to Kazakhstan, Kyrgyzstan, and Uzbekistan, former republics of the of Soviet Union, but also to Africa. Russia has an very ambitious reactor expansion program, as well as a desire to greatly increase its exports of reactors to countries like China and India. As it stands now, most of the increase in nuclear power is startling to take place in China, India, Russia, as well as Korea and Japan to a certain extent. All these countries are as a matter of fact finding surface their borders for uranium supplies that are going to support them for quite a long duration in the future. None of them are blessed with very rich and whole uranium deposits.
StockInterview: Is Russian President Vladimir Putin trying to generate something on the order of a Wal-Mart Super center for the nuclear fuel cycle?
Jeff Combs:
Well, you see them doing a joint venture in Kazakhstan. They're trying to do something with Kyrgyzstan. They're absolutely finding at how they can shore up their supply through imports, in increasing to investing a billion dollars in their own internal production. In this respect, they are trying to draw from their old supply chain arrangements. This is to meet their internal needs, as well as the needs of countries to which they have traditionally supplied reactors and the fuel to run these reactors. As Russia looks to progress its reactor sales to countries that don't have established fuel cycles, they want to be able to supply them with fuel - perhaps even lease them the fuel. This means that they have to be prepared to take back the spent fuel. This is due at least in some part to nonproliferation concerns, in that you don't want these new entrants building enrichment or reprocessing plants. While Russia has enrichment capacity and the capability to progress this capacity, they also need uranium to be able to supply these countries with enriched uranium. This is why they're currently focusing on the uranium side of the equation.
StockInterview: Let's talk about some of the target countries, where those with the more ambitious nuclear vigor programs will want to acquire uranium.
Jeff Combs:
We have recently done a series of reports, finding at countries where major output is taking place, or could take place. Of policy we've done them on Canada, Australia, Namibia, South Africa, Kazakhstan, and Uzbekistan. I think the next country might be Mongolia because of the exploration and amelioration activity that is taking place there. Mongolia's mining laws are very suitable to foreign companies. Mongolia is also located in that part of the world where the bulk of nuclear power expansion is taking place. The question in Mongolia now is the lack of infrastructure - the location of the exploration sites relative to roads and rail lines, and the capability to associate to the electricity grid and water lines.
StockInterview: There has been so much press and chatter about Kazakhstan. Is there substance in these commentaries, or is it mainly hype?
Jeff Combs:
They've got a lot of uranium resources and reserves. They've also got a commitment to increasing output there and a pretty big customer in China. The hype might be related more as to whether they can do it as speedily as they say, as opposed to whether they can finally get to the levels they're talking about. One of the things that will slow them down is the infrastructure, along with the skilled work force, needed to progress at that rate. They have increased production. They absolutely will continue to increase production, but perhaps not at the rates they are advertising. They've produced a lot in the past, in the old Soviet Union days. I think they can get back up to those output levels, but it's going to take some time.
StockInterview: What will be required to get things going in Kazakhstan?
Jeff Combs:
It appears they've been able to attract capital. A large part of it is just the time is takes to build the infrastructure, along with training workers. You can have all of the venture in the world, but it still takes time to get things done, especially if the infrastructure isn't well industrialized in the first place. If you look at Kazakhstan on the map, it is very close or adjacent to Russia, China, and India, where the major part of nuclear increase is occurring. I don't think there will be any shortage of demand for their output.
StockInterview: Where does Japan fit into the current uranium bull market?
Jeff Combs:
Japan is absolutely a factor in the market. Their increase might not be as rapid as it once was, or once was startling to be. With Japan you have a country that does not as a matter of fact have any indigenous uranium resources to speak of. They as a matter of fact need to import uranium. To facilitate this and to acquire time to come supplies, Japan has historically industrialized distinct supply relationships colse to the world, both by taking positions in uranium mines and by nurturing long-term relationships with producers. I think that it's likely the case that this new price rise caught them somewhat off guard, but recently Japanese utilities have put more effort into shoring up their supply options.
StockInterview: There are countries, which get itsybitsy media coverage, such as Namibia. How does this country rate?
Jeff Combs:
I think Namibia will absolutely have an foremost role in supplying uranium. I don't think it's going to have the expansion inherent of Canada, Australia, or Kazakhstan, but I think South Africa, Niger and Namibia are going to be an foremost component for uranium supply in the future.
StockInterview: You mentioned Niger, which was the world's third largest uranium producer, and has now fallen to number four, behind Kazakhstan.
Jeff Combs:
The funny thing about Niger is that in a way it's sort of fallen off the radar screen. It produces, but it just doesn't get the press as other places. If the price increases, it as a matter of fact changes how people look at all these distinct projects going transmit and a lot of things, which might not have been looked at 20 years ago or so, are being reinvestigated. Obviously, there is uranium in Niger. It's quite foremost to the economy there. As I said, they haven't as a matter of fact been on the radar screen as much as a lot of other regions in the world. perhaps this is because output there has been controlled by the French for a long time. There are some Canadian companies exploring in Niger now. Since this activity is fairly recent, it won't likely bear any fruit for five to ten years down the road.
StockInterview: Do you foresee realistic nuclear vigor expansion in other parts of the world, such as the Middle East?
Jeff Combs:
Frankly, I haven't focused on that very much. I know that Turkey is finding to do something. At some point, I think you would see more nuclear power in the Middle East just because the oil supplies aren't going to last indefinitely. We do a headline news service, and it's packed full of stories on distinct countries that are finding at nuclear power. It seems like there is a new country added to the list every day. I know, for instance, that Vietnam is finding pretty seriously at nuclear power. It would not be surprising there would be interest in the Middle East. There is a lot of focus on the problems related with Iran. Overall, I'm a believer that if you have more nuclear power, then you're going to have fewer problems with vigor and more economic development, higher standards of living, and that's going to be a big certain that will outweigh the negatives in situations like Iran.
StockInterview: Speaking of Iran, what is Washington's sentiment toward nuclear energy, aside from the Bush Administration's endorsement?
Jeff Combs:
I think there is a growing recognition, even among Democrats, that you need nuclear power as part of the vigor mix. You're not going to get there just by renewable vigor sources. With the environmental and whole vigor challenges we're facing now, with higher and higher natural gas and oil prices. From the U.S. Standpoint the vulnerability with respect to acquire vigor supplies, I think there is a growing recognition that nuclear power is part of the solution, and this mental extends surface of the Bush administration. I've talked to people, and they believe that even if a Democratic management came in that you as a matter of fact wouldn't necessarily put a damper on nuclear power.
StockInterview: What about the Hillary Clinton Factor, if she becomes the next U.S. President?
Jeff Combs:
I haven't as a matter of fact asked her for her views on nuclear power recently. I think the story for nuclear power is not so much what happens in the United States, which as a matter of fact could add more reactors. The rest of the world probably looks to what the U.S. Does to a certain extent. I think the real increase in nuclear power, and what's likely to drive the shop in the future, is on the part of the developing countries in the eastern part of the world. These would be China, India, Korea and Russia, where economies are growing a lot more quickly, not the as a matter of fact mature economies like in the U.S. And Europe. Although I would expect to see some increase there as well. In this respect, having a Democratic president would not derail what's happening in nuclear power or the uranium market. As mentioned earlier, I think that you see a more normal acceptance of nuclear power over party lines, in Europe as well as the U.S., although there are still some factions that are virulently anti-nuclear.
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