EDITOR: | May 23rd, 2019 | 7 Comments

Pending Section 232 Investigation examines how Americans are playing Russian roulette with their uranium and nuclear fuel supply

| May 23, 2019 | 7 Comments
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Just imagine for a second what happens if your electricity is shut down. The US is currently very dependent on Russia (38.3%), Netherlands (25.9%), Germany (16.5%), UK (14.5%), and China (3.5%) for enriched uranium imports. Another 17% of natural uranium imports come from Russian allies, Kazakhstan and Uzbekistan, numbers expected to increase in the coming years as production in the US, Canada, and Australia drops. That uranium is powering 20% of US energy via nuclear plants. So if Russia and China suddenly decide to stop selling uranium to the US then there could well be a major problem.

Uranium is always a hot topic, especially when it comes to nuclear energy and what will be the outcome of the pending Section 232 investigation. The Section 232 petition submitted by Energy Fuels and Ur-Energy requests the US Government to set a quota to limit imports of uranium into the U.S., thereby reserving 25% of the U.S. nuclear market for U.S. uranium production. In 2019, less than 1% of U.S. reactor uranium requirements will be produced domestically.

On April 14, 2019, the US Department of Commerce (DOC) submitted to the White House the results of an investigation into the effects of uranium imports on US national security. From that date, US President Donald Trump has up to 90 days to decide whether to act on the DOC’s findings and recommendations. The investigation, under Section 232 of the Trade Expansion Act, was triggered by the filing in January 2018 of Petition 232 by uranium mining companies Energy Fuels Inc and Ur-Energy.

Energy Fuels stated: “The topic that’s on everybody’s lips at the moment, Petition 232, is an application for unfair practices against foreign jurisdictions. The whole idea of the Section 232 investigation from a global perspective is to even the playing field and make sure US national security and energy security is not compromised by being overly dependent on geopolitical foes for uranium and nuclear fuel.”

The loss of a viable US uranium mining industry would have a significant impact on the country’s national, energy and economic security and impeding its ability to sustain an independent nuclear fuel cycle.

Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR) and Ur-Energy are both saying they have not seen the Department of Commerce report as it has remained classified; however, they do believe the facts are clear. The once robust American uranium mining industry is disappearing because a flood of State-subsidized imports that has made fair competition impossible.

Being a matter of national security US President Trump has broad power to make a decision.

Potential outcomes for Petition 232 due by 13 July 2019

Many potential outcomes are seen as possible:

  • A decision may be delayed.
  • President Trump may follow the recommendations of the US Department of Commerce (DOC).
  • President Trump may not follow the recommendations or may come up with his own ideas.

Energy Fuels is taking the approach of, let’s just see what happens. The world uranium market is seeing less activity, because the US is the world’s largest buyer of uranium annually. With the whole uranium energy supply chain affected it is possible that the White House could come back with something much broader than what was initially petitioned for.

Given what has been seen to date, many believe the facts support President Trump deciding to support the US uranium industry, both from an economic and national security point of view.

Clearly, the US is very vulnerable as 20% of the country’s electricity comes from nuclear and they are currently reliant on importing almost all of their uranium feedstock. The domestic industry in 2019 is expected to produce less than 1 percent of the U.S uranium’s utilities needs. The rest will come from other countries and increasingly from US adversaries, like Russia, China and their allies, while at the same time production from US allies, like Canada and Australia, is plummeting.

It is the uneven playing field that is contributing to uranium mining companies in other countries like Canada and Australia to suffer because of state-owned and  state-subsidized production elsewhere. Only one mine still operates today in Canada and production in Australia is declining.

Right now it seems like a waiting game for the decision by July 13. If Energy Fuels is correct that broad-based changes in the US nuclear sector are required, the Company and other US producers stand to benefit – perhaps significantly.

Energy Fuels Inc.’s White Mesa Mill is the only conventional uranium (and vanadium) mill operating in the U.S. today and has a licensed capacity of over 8 million pounds of U3O8 per year. The Company also has two low-cost ISR facilities with a combined capacity of 3.5 million lbs. of U3O per year; Nichols Ranch is in production, and Alta Mesa is on standby. The Company has a market cap of C$ 333.8 million.


Matthew Bohlsen

Editor:

Matthew Bohlsen holds a Graduate Diploma in Applied Finance and Investment (similar to CFA), and a Graduate Diploma in Financial Planning. He has 30 years ... <Read more about Matthew Bohlsen>


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Comments

  • Tracy

    You nailed the critical issue here Matt — “the US is very vulnerable as 20% of the country’s electricity comes from nuclear and they are currently reliant on importing almost all of their uranium feedstock. The domestic industry in 2019 is expected to produce less than 1 percent of the U.S uranium’s utilities needs.” —- we need NA based uranium. Add my name to the petition.

    May 23, 2019 - 2:13 PM

  • Sam Markham

    Well written Matt, really highlights the potential profitability of domestic U.S uranium. Will be interesting to see how all the players will continue to play should 232 resolve favorably.

    May 23, 2019 - 3:02 PM

  • Jeff D

    Should note that the actual total proportion of Russian controlled uranium should include that from Kazakstan and Uzbekistan and therefore be shown as higher and same for total state sponsored.

    An amazing fact. Putin has turned off the NAT gas spigot before on his foes. Do not think we want to be in that position

    May 23, 2019 - 3:34 PM

  • Art

    China is building so many new nuclear power plants that they will need all of the uranium they can get their hands on. I suspect that most of the eastern bloc uranium will go their way. We need to be prepared to provide as much of our own uranium as possible, IMHO.

    May 26, 2019 - 12:05 AM

    • Tracy Weslosky

      Good point Art. I believe that this will be the year that investors recognize the uranium market again.

      May 27, 2019 - 9:16 AM

  • Roger Buckley

    So why doesn’t the U.S. just start buying strictly from Canada, the only reason that the Canadian U producers (specifically Cameco) are currently running only one mine is the simple fact that there is an oversupply of U in the world market today and its not worth operating its other mines. If the argument is that “national security” is at hand then stop buying from Russia and start buying from Canada, problem solved. Cameco would then be back into full production and back to producing its normal 20 million lbs/yr like they were doing up until a year ago.

    June 5, 2019 - 10:42 PM

  • Jeff D.

    No, it is not an oversupply, it is dumping by the state sponsored entities and the Kazaks who have devalued their currency, taking in dollars for payment and paying their expenses in Tenge. Obviously anti competitive. So much so that Cameco is purchasing Kazak product at spot and selling into their contracts. Cameco’s deposits are, by most reports, 40 times the grade of the Kazaks, and they still cant afford to mine.

    The remaining duration of long term contracts is the only reason that any product is still coming from Canada or Australia. If this continues, Russian influenced supply will capture larger and larger share. In case you have not heard, Putin already threatened to restrict uranium exports in the event the US engages in trade sanctions against Russia. We also do not have fully American owned enrichment, although one company is in development. Besides, why should we be entirely dependent on foreign sources whether friends or foes? This does not make sense. If we do not start now, in a few years there will be no domestic supply of this very important substance.

    Thanks

    June 5, 2019 - 11:53 PM

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