Uranium prices had remained low for over a decade following Japan’s Fukushima Daiichi nuclear power plant accident in 2011, which sparked a sharp decline in the demand for nuclear energy.
However, over the past few months, we have witnessed a rapid turn of fortunes in the price of uranium over a short period. Uranium is trading at $50/lb, a 170% increase in less than 36 months. So, what is driving this price increase, and what does it mean for our country?
What is Driving the Uranium Surge
The uranium spot price increase has been driven by institutional investors, most notably Sprott Physical Uranium Trust (SPUT). SPUT is a closed-ended trust created to invest and substantially hold all its assets in physical uranium. SPUT, the world’s largest physical uranium fund, has been on a buying spree since it was launched in July 2021. It reportedly holds 50.4 million pounds of U3O8 as of March 2022, which has risen 13.8% from February figures.
Due to the ongoing crisis between Russia and Ukraine, there is widespread panic in Western Europe for the security of the energy supply. Europe heavily relies on gas supply from Russia, and because of this market disruption, countries are now scrambling for alternative energy sources. Obvious capacity limitations on renewables combined with mounting pressure to reduce carbon emissions from fossil fuels put nuclear energy back in the race for clean energy.
Unbeknown to many, Namibia was the 3nd largest uranium producer in 2022, superseded only by Kazakhstan. Russia and Ukraine follow closely and are among the top 10 leading uranium producers. The rising instability in the eastern region has exerted additional pressure on the uranium supply, accelerating further price increases.
Whether these prices can be sustained remains a debate, but the following should be considered in demystifying the role of uranium.
Nuclear energy still has the highest energy capacity factor of 92.5%, followed by geothermal energy at 74.3%, while solar energy has the lowest capacity factor at 24.9%. This makes nuclear energy the most viable carbon-free base load globally.
Nuclear fission produces no carbon emissions during power generation, while coal produces carbon dioxide. Additionally, 20,000kg of coal would be required for each kilogram of uranium to produce the equivalent amount of energy. This is relevant as the world and Namibia gears towards clean and carbon-neutral energy.
Radioactive waste is negligible in comparison to the enormous amount of energy produced. Assuming Namibia’s demand stands at 600 MW, an equivalent-size nuclear plant would only produce 15 tonnes of High-Level Radioactive Waste (HLW), whilst an equivalent coal plant will produce 6 million tonnes of Carbon Dioxide.
Lastly, the Levelised Cost of Electricity (LCOE) analysis shows significant variability in comparing solar or nuclear-generated electricity costs. The costs differ depending on the entity or institution doing the estimation. The International Energy Agency (IEA), Intergovernmental Panel on Climate Change (IPCC) & National Environment Agency (NEA) closely estimate the cost to be about US$88/MWh for solar and US$63/MWh for nuclear. These figures indicate that nuclear energy is still competitive when compared to solar.
The World Nuclear Organization reports that roughly 440 nuclear power reactors with a combined capacity of approximately 390 Gigawatts are now operational in 32 nations, with an additional 55 reactors under development in 19 countries.
What Does This Price Increase Mean for Namibia?
Namibia is the third-largest producer of uranium but also holds the 7th largest resource. Rossing Uranium & Swakop Uranium are Namibia’s main producers, accounting for 6,784 tonnes of Uranium production in 2021.
A 200% increase in spot price means mining companies can gain increased revenue, and the government can collect increased royalties.
Although most mines hedge their uranium production through long-term supply contracts with fixed prices, there is a clear benefit and opportunity to sell surplus production at a spot price.
Namibia has two uranium mines closed or placed on care and maintenance due to the previously low prices. In addition, three other uranium projects have halted exploration and feasibility studies due to the fall of uranium prices between 2011-2019.
Increased uranium demand and rising uranium prices would undoubtedly motivate Namibian miners to reopen mines that have otherwise been placed on care and maintenance. These mines can close a 40-million-pound production gap between present mine output and utility demand.
Increased uranium spot prices will also drive additional investment in uranium exploration to identify additional production potential in the vast resource base in the Erongo region.
Potential Mines and Their Impact
Langer Heinrich Uranium was placed on care and maintenance in 2018 due to the low Uranium prices. At its peak, Langer Heinrich employed around 500 permanent employees and produced 2,000 tonnes of uranium annually. Due to improved uranium prices, Paladin Energy has secured funding to restart Langer Heinrich by 2023, with a LoM (Life of Mine) of 17 years.
Bannerman Resources’ Etango project could become the second biggest Uranium Mine after Swakop Uranium due to its large shallow resource base. Bannerman will complete the bankable feasibility of its scaled-down Etango-8 project in September 2022 and could signal the construction and start of the mine.
Norasa’s Valencia Mine completed a definitive feasibility study in 2015 and has enabled the declaration of proven and probable reserves that can sustain an 11 Mt/ year processing plant and a 15-year life of mine. Norasa is seeking strategic partners to develop this project which should be eminent given the current uranium prices.
Deep Yellow’s Reptile project at its Tumas and Tubas deposits is still largely in the exploration phase, apart from the Tumas Deposit, which was approved to proceed to the definitive feasibility study. Tumas is estimated to have a life of mine of 11 years to exploit its 104 Mlb Uranium resource base.
The above projects all have the potential to transform the entire Erongo region into an industrial hub. In the same light, they have the potential to jump-start the economy with much-needed jobs in the shortest time.
These projects combined can absorb at least 3,000 jobs within the next three years should the current Uranium prices be maintained. The infrastructure & skills in Namibia are fully developed for all the projects to be constructed, developed and operated by Namibians.
What Should be Done?
With this much potential to be developed in the uranium subsector, policymakers must take an intentional and proactive position to actively advocate for uranium at all relevant local and international platforms.
Uranium has long been neglected despite its relevance in a carbon-free or green energy future. Green hydrogen has been exclusively singled out as a national strategy for energy transition, but the conversation should be expanded to include the exploitation of uranium, a significant clean energy source.
Namibia stands to benefit greatly from the eminent uranium boom. It thus must be unequivocal in its quest to promote Namibia as a preferred source and producer of uranium. The policy should be adopted to fast-track the exploitation of these resources to attract foreign direct investment and create much-needed jobs in the mining industry.
About the Authors:
Tomas Aipanda is a mining engineer with over eleven years of industry experience. He works for Swakop Uranium Mine and is keenly interested in Mineral Policy.
Festus Nampweya is a mining engineer deeply interested in energy and mineral economics. He also works for Swakop Uranium Mine.
They are both members of SAIMM (South African Institute of Mining and Metallurgy) and ECN (Engineering Council of Namibia). They can be contacted at tom.aipanda@gmail.com / fpandeni@gmail.com
