Towards the end of May some rumors began circulating that TEPCO – Japan’s largest energy company (by power generation) – was going to apply for early restarts of its reactor fleet.  The rumors led to a massive surge in share price as investors poured money into the company.

Putting aside the question of when TEPCO will apply for restart permission (four other Japanese power companies have announced applications for early restarts), the TEPCO share surge is an indication of what will happen when Japan reactivates its reactor fleet.  Why?  Because Fukushima resulted in a temporary reduction in perceived value for stocks related to nuclear energy – including uranium. Note that I say temporary and perceived value. The reality is that nuclear energy is growing.

There’s a lot I could say about why nuclear energy is growing: countries are becoming increasingly focused on the securing their long term energy supplies; there is an imperative to reduce carbon emissions; renewables like solar and wind power are limited by electricity storage technology and low base-load power.  However, what really matters are the hard facts of supply and demand.

Demand: There’s an increase in demand headed our way. Worldwide there are currently 222 reactors either already under construction or planned, with a further 319 reactors on top of this number in the proposal stage (WNA, 3/5/15).  Basically there’s a nuclear construction boom underway.

Supply: There’s a supply crunch coming. For many years mining production has been supplemented by secondary sources of uranium because production hasn’t been able to keep up. The largest of these secondary sources has been the HEU agreement. Sometimes known as the megatons to megawatts program, the HEU agreement involves Russian down-blending nuclear warheads and selling the uranium as fuel to the US power companies. The HEU agreement expires this year and Russia is not expected to renew it which is going to leave a big gap.

The fundamentals of the sector are strong and growing. It’s only a matter of time before market perception catches up.

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Ted O’Connor, Azincourt Uranium CEO


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