Uranium trust pits ambitious investors against nuclear power industry

A Canadian investment fund almost singlehandedly launched uranium spot prices into orbit with a buying spree that has put the nuclear power industry on alert.

The spot uranium price for deliveries this month leapt 30.8% over 30 days to $39.75/lb as of 1 p.m. on Sept. 7 — a steep rise for a commodity market that previously saw years of sagging prices, according to data from S&P Global Platts. Market analysts credited Sprott Asset Management LP, a uranium trust formed in July to buy up low-cost uranium on the spot market and hold it for the long-term, for jolting the market with a wave of purchases.

The nuclear power industry, which largely buys fuel on long-term contracts, is not panicking as it can absorb even a one-third increase in price, but the industry is wary that the fund could continue to push up fuel costs.

For Sprott, this is all part of the plan.

"We're just a conduit for investors to express their view, right?" Sprott CEO John Ciampaglia told S&P Global Market Intelligence. "Our job is [to] go out and buy more pounds. If that has a knock-on effect on the price, then I guess indirectly we've got that influence on price discovery."



Big fish, small pond

The thesis Sprott provided to investors was simple: If they were given funding, they would purchase material out of a spot market that was flooded with excess supply following the 2011 nuclear disaster at Fukushima Daiichi in Japan.

Between Sept. 2 and Sept. 7, the trust acquired more than 3 million pounds of uranium on the spot market. As of Sept. 7, the trust held 24 million pounds at a market value of more than US$1 billion.

Sprott's Ciampaglia said the investment outfit learned the power of a single market catalyst during the "meme stock" boom earlier in the year. Retail investors made a coordinated purchase of stock in game seller GameStop and sent the stock price soaring despite no change in the fundamentals of the stock. A silver trust held by Sprott benefited when retail investors moved from specific equities to silver-focused market offerings.

The relatively small size of the uranium market could mean an unpredictable level of explosivity if the investor audience broadened, Ciampaglia said.

"You just can't predict how explosive it could be," Ciampaglia said.

The uranium trust benefited from market conditions improving in nuclear energy, as the world moves toward lower carbon energy sources, said Scott Melbye, executive vice president of U.S.-based miner Uranium Energy Corp. However the "correlation" between the trust's buying activity and the rising price is undeniable, Melbye said.

"Sprott coming in has really been the tipping point. It's been very significant."

Nuclear power is watching

After the Fukushima disaster, nuclear power plant operators experienced lower contracting prices. That trend lasted until the coronavirus pandemic knocked major sources of uranium offline, creating a supply shock that drove up prices and incentivized new investment in the space, though that upward trend calmed when the Sprott uranium trust arrived in July.

Power companies with nuclear reactors said they are not worried about price increases resulting from the trust's buying activity — at least not yet.

The fuel cost associated with nuclear energy is far lower than for coal and natural gas generators, so nuclear plants are "relatively insensitive" to a "bump in the spot price," American Nuclear Society president Steve Nesbit told S&P Global Market Intelligence. For nuclear utilities to feel the pain, prices would need to be an "order of magnitude" larger, even twice as high, Nesbit said.

"It takes a while for it to sink in," Nesbit said.

Utilities are monitoring buying activity by the trust, but "it's nothing that's worrying them at this point," Nima Ashkeboussi, senior director of fuel and radiation safety programs at the Nuclear Energy Institute, said.

"Their views [of Sprott] are still forming. They're watching it very closely," Ashkeboussi said.

Analysts see hard times ahead

Ciampaglia said the fund hoped to drive up the price of uranium, but high nuclear fuel costs in the long run could hurt nuclear power's competitiveness against cheaper forms of renewable power. And the industry already faces a declining market for its product going forward: Nuclear power capacity is expected to shrink by more than 20 GW through 2050, according to the U.S. Energy Information Administration.



The entire global nuclear sector could be constrained from future growth, Morningstar analyst Travis Miller said. While nuclear fuel typically makes up a relatively small percentage of utilities' operational costs, a long-term shift in uranium producers' favor could create an issue for any company looking to expand its nuclear fleet, especially in the face of falling renewable power costs.

If uranium prices continue to rise, that puts nuclear power at a competitive disadvantage to other carbon-free sources of energy, Miller said.

"There's a delicate balance here because in the long-run more supply should lead to lower, more stable prices," Miller added. "But in the short-run, higher prices to bring on that supply is going to be a headwind."

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.

Diane Francis: Trudeau's multi-million dollar nuclear deal called out by non-proliferation experts

Scientists fear that the technology used to extract plutonium from spent fuel could be used to make nuclear bombs

Author of the article: Diane Francis
Publishing date: August 13, 2021 

Ottawa has approved and subsidized a project in which a small reactor is run off "recycled" nuclear waste from New Brunswick’s closed Point Lepreau plant. 

PHOTO BY GETTY IMAGES

In May, the Geneva-based International Campaign to Abolish Nuclear Weapons (ICAN) called out Prime Minister Justin Trudeau’s government over a deal he has approved and funded that critics say will undermine the goal of nuclear non-proliferation, according to an article published in the Hill Times and recently republished in the Bulletin of the Atomic Scientists.

The article describes how prominent scientists are concerned about the Government of Canada approving a project, and subsidizing it to the tune of $50.5 million, that’s being developed by a startup called Moltex Energy.

Moltex Energy was selected by NB Power and the Government of New Brunswick to develop its new reactor technology and locate it at the Point Lepreau nuclear plant site by the early 2030s. Moltex is one of several companies that are promoting small, “next generation” nuclear reactors to replace fossil fuels in the production of electricity.

Moltex, a privately owned company that is based in the United Kingdom and has offices in Saint John, N.B., says it will “recycle nuclear waste” from New Brunswick’s closed Point Lepreau nuclear plant for use in its small-scale nuclear reactor. Federal funding and approval was announced on March 18 by Dominic LeBlanc, a New Brunswick MP who serves as minister of intergovernmental affairs.

The scientists dispute the claim that this is “recycling” and are concerned because the technology Moltex wants to use to extract plutonium, a key ingredient in nuclear weapons, from spent fuel could be used by other countries to make nuclear bombs. Decades ago, the U.S. and many of its allies, including Canada, took action to prevent this type of reprocessing from taking place.

“The idea is to use the plutonium as fuel for a new nuclear reactor, still in the design stage. If the project is successful, the entire package could be replicated and sold to other countries if the Government of Canada approves the sale,” reads the article.

On May 25, nine high-level American non-proliferation experts sent an open letter to Trudeau expressing concern that by “backing spent-fuel reprocessing and plutonium extraction, the Government of Canada will undermine the global nuclear weapons non-proliferation regime that Canada has done so much to strengthen.”

The signatories to the letter include senior White House appointees and other government advisers who worked under six U.S. presidents and who hold professorships at the Harvard Kennedy School, Princeton University and other eminent institutions.

The issue of nuclear proliferation dates back to 1974, when Canada got a black eye after India tested its first nuclear weapon using plutonium that was largely extracted using the CIRUS reactor, which was supplied by Canada for peaceful uses. Shortly after, other countries attempted to repurpose plutonium from reactors and were stopped — except for Pakistan, which, like India, succeeded in creating atomic weapons.

The Hill Times pointed out that, “To this day, South Korea is not allowed to extract plutonium from used nuclear fuel on its own territory — a long-lasting political legacy of the 1974 Indian explosion and its aftermath — due to proliferation concerns.”

The letter to Trudeau concluded: “Before Canada makes any further commitments in support of reprocessing, we urge you to convene high-level reviews of both the non-proliferation and environmental implications of Moltex’s reprocessing proposal including international experts. We believe such reviews will find reprocessing to be counterproductive on both fronts.”

The scientists’ letter has not yet been answered by the government. However, Canadians deserve to be fully briefed on all this and its implications. They deserve to know who owns Moltex, what the risks are to non-proliferation and why taxpayers are sinking millions of dollars into a project that’s morally questionable and potentially hazardous.

Read and sign up for Diane Francis’ newsletter on America at dianefrancis.substack.com.

Canada’s nuclear future brightens

Although the Canadian and US nuclear industries have shared origins in World War II, their paths soon diverged.

David Kramer

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Physics Today 74, 1, 23 (2021); https://doi.org/10.1063/PT.3.4653

On a windswept field near the shores of Lake Ontario in mid-November, Canadian politicians and nuclear industry executives gathered to announce plans to build the country’s first new nuclear reactor since the early 1990s. A month earlier US Department of Energy Secretary Dan Brouillette and Romania’s Minister of Economy, Energy, and Business Environment Virgil Popescu signed an $8 billion agreement in Washington, DC, that paves the way for the construction of two new Canadian-origin reactors at a nuclear power plant on the Black Sea. Two Canadian reactors are already located there.

The two events highlight differences between the Canadian nuclear industry and its counterpart in the US. As competitive pressures have forced the closure of nuclear power stations and threaten many others south of the border, Canadians are in the midst of major refurbishments to extend the lives of a dozen reactors; another has already been updated. Six other aging reactors are due to be shut down by 2025, and it’s likely that some new nuclear plants will eventually replace them.

Canada’s 19 operating power reactors all have a markedly different design from the light-water reactors (LWRs) that predominate in the US and around the world. Known as CANDUs (Canadian deuterium uranium), they employ heavy water (deuterium oxide) as the neutron moderator and coolant. Should current plans proceed, however, the next Canadian reactor will be of a new type altogether.

Ontario Power Generation (OPG), the provincial government utility that owns the province’s 18 reactors, is to select one of three competing designs for a single small modular reactor (SMR) to be built at its Darlington Nuclear Generating Station roughly 80 kilometers east of Toronto. GE Hitachi Nuclear Energy, X-Energy, and Terrestrial Energy are finalists in the competition, said Ken Hartwick, OPG’s president and CEO. The target date for startup is 2028.

A rendering of a small modular reactor design from SNC-Lavalin. The heavy-water-moderated reactor would produce 300 MW of electricity.

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Additional SMR orders from Saskatchewan, New Brunswick, and Alberta will follow, predicted Greg Rickford, Ontario’s minister of energy, northern development, and mines and of indigenous affairs. In a December 2019 memorandum of understanding, the four provinces agreed to cooperate on advancing development and deployment of SMRs.

Nuclear power in Canada has always been centered in Ontario, the most populous and industrialized of the 13 provinces and territories. Roughly 60% of the electricity consumed in the province is from nuclear. The only CANDU outside Ontario supplies about one-third of New Brunswick’s electricity. British Columbia, Manitoba, and Quebec have abundant hydroelectric resources, and Quebec, which exports power, closed its only CANDU in 2012, electing to forgo the expense of refurbishment. Alberta, Saskatchewan, and the maritime provinces are more sparsely populated and rely mainly on fossil fuels.

Heavy and light water

Canada’s nuclear program dates to World War II, when the UK relocated its atomic bomb program from Cambridge University to its North American dominion. In Montreal and later at Chalk River Laboratories, about 180 kilometers upstream of Ottawa, British and Canadian scientists were focused on developing a heavy-water-moderated reactor to produce plutonium for the Manhattan Project. The British had brought along a large quantity of heavy water that had been smuggled out of occupied France. The Zero Energy Experimental Pile (ZEEP) at Chalk River, the first operating nuclear reactor outside the US, was a heavy-water design.

Ultimately, the US nuclear bomb development program chose graphite to be the neutron moderator for the reactors that made the plutonium for the Nagasaki bomb. But Canada’s National Research Experimental (NRX) reactor, the successor to ZEEP, was the basis for the heavy-water plutonium and tritium production reactors at DOE’s Savannah River Site, says historian Robert Bothwell, author of Nucleus: The History of Atomic Energy of Canada Limited (1988).

Some of the R&D in support of Hyman Rickover’s nuclear propulsion program for the US Navy was done at the NRX, although the navy chose light water as the moderator and coolant for submarine reactors. President Jimmy Carter, who was then a navy lieutenant, was assigned to assist the cleanup of a 1952 partial meltdown of the NRX, the world’s first major nuclear accident.

The National Research Universal (NRU) heavy-water research reactor began operating at Chalk River in 1957. In addition to developing fuels for CANDUs and conducting materials research, the NRX and NRU produced medical radioisotopes. At times the NRU supplied more than half the world’s molybdenum-99, the precursor to technetium-99m, the most widely used medical isotope. When it was permanently shut down in 2018, the NRU was the world’s oldest operating nuclear reactor. Two dedicated replacement isotope-production reactors at Chalk River, completed by a public–private partnership, were plagued by design faults and were abandoned in 2008.

The Bruce Nuclear Generating Station on Lake Huron is the largest nuclear power plant in North America. Its eight CANDU reactors produce 30% of Ontario’s electricity. Four of the reactors are in the foreground; the others are visible in the background.

BRUCE POWER

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Canada never developed nuclear weapons, but Canadian mines and uranium processing facilities played key roles in the Manhattan Project and in the postwar US nuclear arms buildup. In Port Hope, Ontario, a former radium processing plant now owned by Cameco Corp was converted during World War II to refine high-grade uranium from the Belgian Congo. Today it exports uranium hexafluoride to enrichment plants for peaceful purposes only. It also produces uranium dioxide for CANDU fuel.

The Cold War arms race fueled a boom in uranium mining at Elliot Lake in northern Ontario. Joseph Hirshhorn, whose collection of art now populates the Smithsonian museum that bears his name, made much of his fortune from Elliot Lake. When the US Atomic Energy Commission began cutting back on uranium orders in the late 1950s, the boomtown went bust. Canada is today the world’s second-largest exporter of uranium, all of which is now mined in Saskatchewan’s Athabasca River basin, whose ore has a higher grade than Elliot Lake’s.

As partner in the North American Aerospace Defense Command and a NATO member, Canada once fielded US nuclear warheads on surface-to-air missiles and aircraft, says Tim Sayle, assistant professor of history at the University of Toronto. Canada has been free of nuclear weapons since the early 1980s.

Enrichment not required

With encouragement from the government, the US Navy submarine reactor technology was adapted by US utilities for electricity production. All operating commercial reactors in the US are LWRs. But Canada continued to develop its heavy-water technology. In large part, the CANDU design stemmed from Canada’s inability to manufacture large castings for the pressure vessels that encapsulate LWR nuclear fuel assemblies, says Colin Hunt, cochair of the government and regulatory affairs committee of the Canadian Nuclear Society.

The CANDU reactor core consists of a calandria, an unpressurized vessel of heavy water with hundreds of tubes running through it to contain the nuclear fuel. Whereas LWRs must be shut down every 12–18 months to be refueled, CANDUs were designed to allow on-line refueling. The reactors remain operating as fresh fuel bundles are inserted into the tubes and the spent ones are ejected. LWR uranium fuel must be enriched to around 4% in the fissile uranium-235 isotope, but the CANDU burns naturally occurring uranium fuel containing about 0.7% 235U. That feature eliminates the need for costly enrichment plants or services. And the CANDU can burn other fuels, including thorium, plutonium, and even spent fuel from LWRs.

The first CANDU, at Douglas Point on the shores of Lake Huron, operated commercially from 1968 to 1984. Four larger CANDUs came on line at the Pickering Nuclear Generating Station near Toronto in 1971, and four more units were added there in 1983. Six remain in operation. Twelve more CANDUs were built in Ontario, eight at the Bruce Nuclear Generating Station at Douglas Point and the newest four at Darlington. Today, Bruce is the largest nuclear generating station in North America, supplying more than 30% of Ontario’s electricity.

Outside Canada, CANDUs have been installed in Argentina (1), China (2), India (2), Pakistan (1), Romania (2), and South Korea (4). Following India’s 1974 test of a nuclear weapon, Ottawa ended nuclear cooperation with New Delhi. India went on to build more than a dozen reactors of a CANDU-derived design. Canada’s assertive efforts to sell CANDUs to the UK were unsuccessful. Had the UK bought any, Bothwell says, the CANDU likely would have become a joint venture between the two nations, and the technology might have become the world’s dominant reactor model.

An uncertain future

The aging Pickering reactors, which supply about 15% of Ontario’s power, are scheduled to be permanently closed by 2025. It’s an open question what will replace them. The other major power source in Ontario, hydroelectric, has been fully tapped, says Hunt. Coal-fired generation in the province is prohibited by law, and a recently enacted federal carbon tax of Can$30 ($23) per ton of carbon dioxide, rising to Can$50 in two years, should discourage new natural-gas-fired plants.

Although the province’s electricity demand isn’t growing now, it will likely increase as demand for electric vehicles and hydrogen grows, says William Fox, executive vice president for nuclear at SNC-Lavalin, an architect and engineering firm that holds the rights to CANDU technology.

Created during the Manhattan Project, the Chalk River Laboratories north of Ottawa were home to CANDU heavy-water-reactor development and several research reactors. Now known as Canadian Nuclear Laboratories, the facility is operated by a consortium of companies led by SNC-Lavalin for the federal government.

CANADIAN NUCLEAR LABORATORIES

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At the federal level, the Liberal-led government of Justin Trudeau has begun considering legislation with the aim of reducing Canada’s carbon emissions to zero by 2050. On 30 November the government announced its intention “to launch an SMR Action Plan by the end of 2020 to lay out the next steps to develop and deploy this technology.” It’s a sign that Liberal members of Parliament have recognized that nuclear power is needed if Canada hopes to meet its 2015 Paris Agreement pledge that by 2030 it will have cut greenhouse gas emissions by 30% from their 2005 levels, says John Barrett, a consultant and former Canadian ambassador to the International Atomic Energy Agency.

Increasing wind and solar energy seems an obvious option to meet Ontario’s future needs. But its leaders have soured on renewables since the previous Liberal provincial legislature’s heavy subsidization of wind energy led to enormous increases in electricity rates. From 2010 to 2016, average home electricity costs rose by 32%, despite a 10% decline in average household electricity consumption, according to Ontario’s Financial Accountability Office. The price hikes, which also caused many industrial operations to flee the province, were a major contributor to the Liberals’ historic rout in the 2018 elections. The current Progressive Conservative provincial government tore up the still-outstanding wind turbine construction contracts, says Hunt.

Importing power from neighboring provinces isn’t an option, Hunt says. Purchasing power from electricity-rich Quebec would put Ontario in competition with New England and New York State and drive up electricity rates further. Quebec’s transmission system was built to export power to the US, so new transmission lines would be required to accommodate interprovincial flow, Hunt says. A further complication is that Quebec’s electricity grid is out of phase with the rest of North America’s: The peaks and valleys of its alternating current flow are asynchronous with the rest of the continent’s. As a result, the power imported by Ontario would need to be converted to DC and then converted back to in-phase AC once across the border.

Hunt believes that no more CANDUs will be built in Canada; he sees the future belonging to SMRs. (See Physics Today, December 2018, page 26.) Though SNC-Lavalin has a large SMR design (see the figure on page 23), Fox believes that large reactors will be needed to replace the 2400 MW that Pickering’s CANDUs now supply. Because the entirety of Canada’s nuclear experience with large reactors has been with CANDUs, Fox is confident that the same technology will be chosen if new conventional-size reactors are ordered.

Smaller SMRs could be ideal for providing electricity to remote off-grid communities in the vast Canadian north. The diesel-generated power they use now is expensive, dirty, and vulnerable to cutoffs of fuel supply during severe winter weather. SMRs also would be an attractive option to provide power to remote mining operations and to produce the steam used in extracting oil from Canadian tar sands, Barrett says. Several 300-MW-sized SMRs could meet Saskatchewan’s needs, he notes.

Compared with the US, Canada has made far more progress on the disposition of nuclear waste. The federal Nuclear Waste Management Organization expects to select the location for a geological nuclear waste repository in 2023. Unlike the US, where the now-abandoned Yucca Mountain location was unsuccessfully forced on Nevada, the waste authority invited site proposals from communities; 22 were received. After each was characterized, two Ontario sites were named finalists: one in farmland about 45 kilometers east of Lake Huron and the other in the exposed rock of the Canadian Shield about 246 kilometers northwest of Thunder Bay.

Updated 4 January 2021: Manitoba, Canada, was mistakenly listed as relying mainly on fossil fuels. Most of the province’s energy is hydroelectric.

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1. © 2021 American Institute of Physics.