Kazakhstan is not only increasing its mine production, but moving to develop fuel fabrication facilities in an effort to move from mining to the higher value-added production of nuclear fuel fabrication.
Kazakhstan's nuclear fuel issue will be of keen interest in Moscow, as it is currently a world leader in the technology. Despite its technological mastery, unlike its dominant position in the world's oil and natural gas market, Russia's footprint in the global uranium market remains relatively small. Russian state holding company Atomprom is the world's seventh-largest holder of uranium ore reserves, the third-largest producer of nuclear fuel but only the world's fifth-largest miner of uranium. Current Russian production is only 3,000 metric tons of uranium ore out of an annual requirement of 18,000 metric tons.
Russia's oldest operational nuclear power facility, Novovoronezh-3, came online in 1971. The Russian Federation now operates 10 nuclear power plants with a total of 31 reaktor bol'shoi moshchnosti kanalnii reactor units, which supply approximately 16 percent of Russia's energy needs. Except for the Bilbino Nuclear Power Plant in eastern Siberia, the other nine complexes are all located in European Russia. Putin's administration is committed to expanding Russia's nuclear energy use, noting in his 2007 annual address, "Over the entire Soviet period, 30 nuclear power plant units were built, but we plan to build 26 such units over the next 12 years, and to do so using the most advanced technology available.
As with its oil industry, Kazakhstan has actively courted foreign investment for its mining operations. Kazakhstan has signed multiple contracts, including technology transfer agreements, with companies from Canada, Japan, France, and China. The world's leading producer of uranium oxide, Canada's Cameco, has a 60-percent share in Kazakhstan's Inkai uranium mining operation, while the state atomic energy agency, Kazatomprom, the world's fourth-largest producer, also has a stake in Inkai. Nor is the investment one way; Kazatomprom, flush with cash, has proposed purchasing a 10-percent stake in the U.S. company Westinghouse Electric.
While the price of uranium in the last several years has been volatile, the overall trend of the last decade has been strongly upwards. In 2001 a pound of uranium sold for between $5 and $10. Current prices in the spot uranium market have trended between $40 and $50 all year after having soared to $140 along with oil in 2007. The 2007 price resulted from the end of Russian dumping, surging apparent increases in demand plus massive liquidity via hedge funds and participation certificates, plus, combining with the difficulty of valuing uranium stocks. Despite these variables, given the projected construction and demand of NPP plants worldwide over the next decade, even a cashiered Wall Street analyst might be able to conclude that the price trend is likely to be upwards.
Rio Tinto's listed uranium subsidiary, Energy Resources of Australia CEO Rob Atkinson, recently commented in The Australian that current relatively low uranium spot market prices combined the effects of the global recession are hampering mine development in a number of countries, setting the scene for a future uranium shortage, noting, "Given production issues that are going on across the world and the (longer-term) demand from power stations, spot prices seem a bit out of kilter at the moment. Atkinson's comments echoed an earlier report, as the Royal Bank of Canada Capital Markets noted in a study, "Investing in Uranium Companies," that a supply gap will exist in uranium after 2013. As NPPs are licensed to run for 40 years, with many re-licensed for another 20 years, new NPPs will not be replacing existing plants, but only adding to demand.
Kazakhstan's nuclear policies have won it plaudits in the international community, beginning when it voluntarily relinquished its Soviet-era nuclear arsenal. Now the IAEA is considering Kazakhstan's proposal to host a nuclear fuel bank on its territory, a gesture that might yet cut the international Gordian knot of Iran's civilian nuclear program.
In short, Kazakhstan is fast becoming a major player on the world nuclear stage, even in the diplomatic sphere and its potential to increase its share of the world's uranium market is a certain bet over the next few years, as it has its influence in the global oil market. Its government's relative stability and investor friendly climate are added pluses, but for those Wall Street Masters of the Universe disinclined to deal with President Nazarbayev's regime, there are always profits to be made in Namibia and Niger.
And, of course, China, Japan, South Korea and India are only too willing to pick up the slack.
This article was written by John C.K. Daly of OilPrice.com who focus on Fossil Fuels, Alternative Energy, Metals, http://www.oilprice.com" target="new">Oil Prices and Geopolitics. To find out more visit their website at: http://www.oilprice.com
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