Uranium Stocks

The four stages of the nuclear fuel cycle

Uranium equities are not a single trade. The fuel cycle has four stages, each with different economics, different barriers to entry and different exposure to the same underlying demand.

Mining produces uranium oxide concentrate, the yellowcake that leaves the mine site. Deposits vary enormously in grade, and the highest grade deposits in the world sit in a small number of basins where a single tonne of ore can contain more uranium than a hundred tonnes elsewhere. Extraction is either conventional underground or open pit mining, or in situ recovery, which dissolves uranium underground and pumps the solution to surface. In situ recovery carries far lower capital cost and can be restarted relatively quickly when prices justify it, which makes it the swing supply of the industry.

Conversion turns the concentrate into uranium hexafluoride, the gaseous form required for the next stage. There are very few conversion facilities in the world, and the step is a genuine bottleneck: conversion capacity has repeatedly proved tighter than mining capacity.

Enrichment raises the proportion of the fissile isotope from its natural level to the level a reactor requires, using centrifuge cascades. Enrichment is the most technically restricted stage, subject to non proliferation controls, and the one where a small number of national and commercial operators hold effectively all capacity. Advanced reactor designs require higher enrichment than the conventional fleet, and the capacity to supply that grade is scarcer still.

Fabrication converts enriched material into the fuel assemblies loaded into a reactor, built to each reactor design's specification.

Demand comes from the operating reactor fleet, from life extensions of existing plants, and from new construction. It is unusually predictable, because a reactor consumes fuel on a fixed refuelling schedule regardless of the electricity price. Utilities buy primarily through long term contracts negotiated years in advance rather than on the spot market, so the reported spot price and the price producers actually realise can diverge for extended periods. Supply is slower to respond than demand: bringing a mine from discovery to production takes many years, and restarting a mothballed operation takes longer than the market usually expects.

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