Why Nuclear (And Uranium) Is Heating Up Again

Small Modular Reactors (SMRs) are gaining traction as a promising solution for the future of nuclear power. These compact and scalable nuclear reactors offer several advantages over traditional large-scale nuclear power plants, including lower costs and better safety. But they could also have an impact on the uranium market.

In this article, we'll look at why SMRs could lead to a nuclear renaissance and its potential impact on uranium prices.

The nuclear industry is trending toward smaller, more compact reactor designs, known as Small Modular Reactors (SMRs). These reactors typically generate less than 300MW, significantly less than traditional large-scale nuclear reactors generating upwards of 1,000MW. But they offer numerous advantages over their peers.

Traditional nuclear reactors must be built on-site, creating logistical challenges and other headaches. However, smaller SMRs are typically manufactured in a factory and transported to a site, reducing construction costs and shortening timelines. And they can be deployed to remote or developing sites where large-scale infrastructure is not available.

Another advantage of SMRs is their modularity, enabling customers to scale up or down depending on energy demand. For example, a small city may be too small for a traditional nuclear reactor, but a SMR could offer the perfect amount of energy. As a result, a city may find it cost-effective to invest in an SMR to offset coal or complement other renewables.

Chernobyl's meltdown is responsible for much of the apprehension surrounding nuclear power. In 1986, a combination of design flaws and operator error during a routine safety test led to a meltdown that contaminated thousands of square kilometers of land and affected millions of people, making it the worst nuclear disaster in history.

SMRs rely on natural processes rather than active coolants to maintain safety. For example, NuScale's SMR doesn't require any pumps, external power, or external water. Instead, its small size and large surface area-to-volume ratio, sitting in a super seismic-resistant heat sink below ground, enable natural processes to cool it indefinitely.

Similarly, TerraPower's Natrium design uses liquid sodium as a cooling agent rather than water. Since it has a higher boiling point and can absorb more heat than water, high pressure doesn't build up within the reactor. Moreover, Natrium plants don't require external energy to operate their cooling systems, eliminating most meltdown risks.

Traditional nuclear reactors and SMRs both rely on uranium for nuclear fission. The fissile isotope of uranium, U-235, is especially well-suited for nuclear reactors because it has a low critical mass, meaning that a relatively small amount of the isotope is required to sustain a chain reactor. Additionally, uranium is easy to enrich.

In 2020, the mine supply of uranium only covered about 74% of reactor requirements with the shortfall covered by government stockpiles. As SMRs become more prolific, uranium demand could increase and widen the gap between supply and demand. As a result, uranium prices could increase over the coming years to encourage new supply.

Where Is the Uranium?

The good news is that several companies are working to increase the supply of uranium. In particular, the Athabasca Basin in northern Saskatchewan is a hotbed of uranium mine development. The Basin hosts the world’s largest deposits of high grade uranium, with grades up to 20% uranium. For reference, mines around the world are working with uranium ore in the 0.10 - 0.20% range. The Basin currently accounts for about 13% of the world’s supply, and there are several companies in the process of developing new uranium prospects in the area to expand on the current production .

For instance, Stallion Discoveries Corp. (TSX-V: STUD) (OTCQB: STLNF) recently acquired Hathor Exploration and U92 Exploration, adding 23 mineral claims covering nearly 80,000 hectares in the Athabasca Basin to the company’s existing land package. Stallion’s claims are focused around past- and current-producing mines. Its neighbors include the McArthur River Uranium Mine (known as the world’s largest high grade uranium deposit), and the decommissioned Cluff Lake Mine. 

Orano Canada and Cameco (TSX: CCO; NYSE: CCJ) are two of the largest uranium mining companies in the world and are very active in the Athabasca Basin. While they are busy operating mines and pushing late-stage projects over the line, junior miners like Stallion Discoveries look to explore, develop, and define additional untapped uranium resources in the region to meet the ever-increasing levels of demand. With all of their existing infrastructure and expertise in place, the majors often buy out or partner with the juniors once the resource is defined to make the mine a reality.

If a junior like Stallion, with a market cap in the US$16 million range, is able to prove the uranium resource, the exit with the major can be quite lucrative. In fact, Stallion Discoveries’ advisor and significant shareholder Stephen Stanley guided his original version of Hathor Exploration through just such a deal, selling a uranium resource of 58 million pounds in the Athabasca Basin in 2012 to Rio Tinto for $642 million. He and the Stallion Discoveries team are looking to replicate that kind of success with their current claims in the region.

Click here to see Stallion Discoveries CEO Drew Zimmerman talk about the company's strategy in the Athabasca Basin uranium mining region.

The development and deployment of SMRs will play a significant role in shaping the future of the nuclear industry and the demand for uranium. Investors in both the nuclear energy space and the uranium mining space may want to keep an eye on these trends over the coming quarters as pilot projects start to go online for SMRs. 

As these projects take hold, already rising uranium prices will likely increase even more. In the last five years, uranium has appreciated about 131%, and 383% over the last 20 years. The increasing price and need for more sources are already turning investors’ and miners’ attention to areas like the Athabasca Basin, where the world’s richest uranium deposits reside in a friendly and productive mining environment. Identifying and developing these resources may be the key to a safe, environmentally friendly nuclear energy future.