REPLACING RUSSIAN FUEL | COVER STORY


The Russian invasion has shaken the market at a time when it was already changing. Even before that event there was “an unprecedented global realignment occurring in the global nuclear fuel cycle”


pressures such as covid and inflation, which are interrupting flow of goods and services in the uranium market and increasing costs. Kazatomprom similarly noted that expanding the supply


side was a process that takes a year or more, but in a market statement at the end of June, it highlighted one source of extra capacity. It described plans approved by Boss Energy to restart development at the Honeymoon project in South Australia as “a notable supply-side highlight”. Boss raised A$125m (US$87m) earlier this year to fund the restart. It expects Honeymoon to resume production late next year and ramp up to steady-state production of some 2.45 million pounds of U3


O8 per year


within three years. The pressure on uranium supplies has also attracted


the interest of commodities traders who are purchasing significant volumes of uranium and sequestering it. Two have been active in the spot market: Yellowcake PLC was set up in 2018 “to provide investors with exposure to the uranium commodity at a time when the supply/demand fundamentals strongly suggested a resurgence in uranium prices”. It holds physical uranium oxide in storage accounts at Cameco’s Port Hope/Blind River facility in Ontario, Canada, and in Orano Cycle’s Malvési/Tricastin storage facility in France. Meanwhile, precious metal and real asset investment company Sprott also launched a trust in 2021 to buy and hold physical uranium oxide, alongside its other trusts focusing on precious metals. Both Sprott and Yellowcake have been acquiring uranium on the assumption that its value will increase. These new players have helped create volatility


in uranium spot prices and so has Russia’s action: Kazatomprom said market participants’ concerns about security of supply in light of the Russia-Ukraine conflict drove up the spot price initially. Prices drifted downwards until June, when concerns about delays in a Russian delivery from St. Petersburg pushed the average spot price back up. The companies say little of that volatility will pass


through to contracts. Both Orano and Cameco stressed that they have little exposure to spot prices, as instead they are focusing on long-term contracts. Kazatomprom said its contract portfolio pricing “correlates closely to uranium spot prices” but time lags between contract and delivery, as well as elements of long-term pricing in the contracts, meant it achieved prices below current spot market levels. Orano’s Knoche also noted that “some clients have several years of fissile material stored.“


Two organisations Uranium companies are more concerned about the delivery of uranium than about volumes of supply.


Kazatomprom said, “transportation challenges were highlighted throughout the first half of 2022 due to many nations’ and companies’ efforts to reduce transactions with and decrease reliance on Russia, in light of Russia’s actions in Ukraine.” It noted that Canada’s revision to its Special Economic Measures on Russia resulted in shipping delays for a Russian enriched uranium product (EUP) delivery that was destined for the United States. The modified Canadian rules “could be interpreted to mean the Canadian company CIS Navigation and its carrier, Atlantic Ro-Ro Carriers, would be unable to transport Russian EUP from the port of St Petersburg to three American utilities aboard its Canadian-owned vessel.” That shipment won temporary exemption from the new rules and Kazatomprom believes the exemption will be in place for a year. The new Canadian rules would not affect Kazatomprom’s deliveries of uranium oxide, the company said. But it added that “a significant proportion of the company’s products are exported on a well-established primary route through Russia to the Port of St. Petersburg, which presents a specific set of risks associated with transit through the territory of Russia, shipping insurance, and the delivery of cargo by sea vessels.” The company said it shipped its second quarter volumes via St Petersburg without any disruptions or logistical/insurance-related issues but it is monitoring the growing list of sanctions on Russia and their potential impact. Kazatomprom highlighted a Trans-Caspian route, “which


has been successfully used as an alternative route since 2018,” to mitigate the risk of the primary route being unavailable. It is reinforcing transit agreements with authorities along that alternate route. It said it already has received approval to ship 3500 tonnes of uranium and has applied for an increase in order to accommodate more. Kazatomprom stressed that its product “remains of Kazakh origin through to its arrival at a western conversion facility”. Gitsel also highlighted the risk of Russia imposing export


constraints and said there was uncertainty over potential shipments of uranium through Black Sea ports, which could affect shipments from central Asia. He said that “while it is still technically possible to ship through Russia, due to insurance and other issues we have decided to delay a shipment from Inkai in Kazakhstan and work with our partner to establish an alternate shipping route. This could take a long time, but we will mitigate with inventory, purchase commitments and loans.” Comeco is a joint venture partner at Inkai mine with a 40% stake. In response to the invasion, Comeco said it is “already


seeing companies pivot their procurement strategies to more carefully weigh the origin risk” and in the long term that was likely to remain a concern for companies which were under scrutiny over ESG governance. U


Above: Robust Westinghouse


Fuel Assembly (RWFA) is designed for the VVER-1000


www.neimagazine.com | September 2022 | 19


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