by Debra Fiakas, CFA

NuScale Power is in a new pact with South Korea’s Doosan Heavy Industries and Construction Co. to support development of NuScale’s small modular reactor (SMR).  In addition to direct investment of $40 million in NuScale, Doosan has agreed to provide parts and equipment for the innovative nuclear power reactor valued at a total of $1.2 billion.

NuScale has been working on its power reactor for several years.  The new design is based on pressurized water reactor (PWR) technology that has been used to power nuclear submarines and naval vessels.  The design uses ordinary water as a coolant rather than ‘heavy’ water used by the large nuclear reactors in currently used to generate electricity.  Most importantly the PWR design is compact and thus has a lower capital cost than the typical reactor.

What makes NuScale SMR stand out is the ‘self-contained’ design.  Even though each unit is only about 25 meters in length and 5 meters wide, the vessel houses a reactor core, a pressurizer and a steam generator.  Each unit is capable of generating 50 megawatts of electricity.  The design has been under review by the U.S. Nuclear Regulatory Commission (NRC) for several years and recently passed the third phase of the NRC scrutiny.  NuScale expects the design review to be completed on-time by late 2020.

That will be just in time to begin NuScale’s first commercial deployment of its SMR in cooperation with the Utah Associated Municipal Power Systems, an energy-focused agency of the State of Utah.  Twelve of NuScale’s SMRs will be deployed side-by-side at a site in Idaho to build a total capacity of 720 megawatts.  Doosan will be helping in the first commercial steps by advising on the manufacturability of the components.  BWX Technologies, Inc. (BWXT: Nasdaq) has been selected as the manufacturer of the reactor.

NuScale is keen to get the kicks ironed out of its design.  Its pipeline is filling fast. Memorandums of understanding have been signed with parties in Canada and Jordan.  Additionally, Romania’s Societata Nationala Nuclearelectrica SA is looking at the technology for deployment in its market.

The company is still working to improve the economics of its SMR.  In May 2019, NuScale signed a memorandum of understanding with Enfission, LLC, to explore the use of Enfission’s nuclear fuel technology in NuScale’s SMR.   Enfission is a joint venture of nuclear fuel developer Lightbridge Corporation (LTBR: Nasdaq) and Framatome, a French nuclear reactor manufacturer.  Although not yet approved by the NRC, Lightbridge claims its innovative nuclear fuel rod can significantly decrease the cost of nuclear fuel for utility operators.

NuScale’s news is all good.  Its innovative design has won favor in the marketplace.  Regulatory hurdles are being cleared on-time and with ease. Interested customers are knocking on the door.  Alas, for investors, there is little reason to get excited.  NuScale is privately owned, but it has managed to raise over $80 million in new capital.  With private money coming in the door with such apparent ease, there is no need to tap the public capital market.  That is no reason to overlook NuScale.  After the first SMR is constructed and operating, NuScale may look at the world through different lenses.  An initial public offering could look more appealing.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 8/9/19 as “Capital for Small Nuclear Reactor”.

The post NuScale’s Small Nuclear Reactors Land A Big Investor appeared first on Alternative Energy Stocks.

by Debra Fiakas, CFA

The U.S. Administration took a swing at the uranium ball, but it is not clear if it was a miss and strike out or just a walk.  Some in the uranium industry are applauding a decision by the Trump Administration on the January 2018 petition by U.S. uranium producers Energy Fuels (UUUU:  NYSE) and Ur-energy (URG:  NYSE), requesting protection from uranium imports. The U.S. Commerce Department had investigated the petition under Section 232 of the 1962 Trade Expansion Act.  No new trade restrictions are being implemented at this time, but the Administration is establishing a working group to analyze U.S. nuclear fuel production.   A report is due back within 90 days.

The petitioners wanted U.S. nuclear power plant operators to buy at least 25% from U.S. uranium producers and cited unfair competition from Russia, Kazakhstan and Uzebekistan that make up the Commonwealth of Independent States (CIS).  According to the U.S. Energy Information Administration, in 2018, U.S. utilities bought about 40% of their uranium supply from CIS countries.

The U.S. utility industry had argued strenuously against the action that would dramatically increase their cost of nuclear fuel. At least one utility has argued that imposition of the 25% minimum domestic source quota could drive prices over $75 per pound for domestically sourced uranium. The recent spot price for uranium has been near $24.00 per pound.  This ‘world’ price might be increased nominally for a period of time.  Recent industry news suggests some utilities have made inquiries for future supply from sources in Canada and Australia.

If the prevailing spot price is any indication of potential contract prices utilities are willing to pay these days, it might not be enough for U.S. producers.  For example, Ur-Energy has revealed that it has been selling uranium from its Lost Creek project in Wyoming at prices averaging $48.00 per pound.  These sales are pursuant to contracts that have been in place for an unspecified time.  Even at the contract price Ur-Energy is not making money on its production.  In the twelve months ending March 2019, the company reported a net loss of $6.2 million on $8.6 million in total sales.  During this same period it took $13 million in cash resources to ‘keep the lights on and rent paid.’

Energy Fuels is not finding the road any smoother.  Its net loss in the last reported twelve months was $26.6 million on $32.1 million in total sales of uranium and vanadium.  Management at Energy Fuels is undaunted by the languid uranium price and planning to recover at least 50,000 pounds of uranium by year end 2019. Current production is from the Nicholas Ranch project where the company uses lower-cost in situ recovery technology.  The same recovery method is planned for the Alta Mesa project, but that is being kept on standby for fairer days.

The kerfluffle over uranium imports aside, the most important matter for another of the U.S. uranium developers, Westwater Resources (WWR:  Nasdaq), is not selling price.  In June 2018, the Company was informed that the Republic of Turkey mining authority was revoking Westwater’s license to mine uranium at its Temrezli uranium property.  The Company has since filed a request for arbitration with the International Center for Settlement of Investment Disputes (ICSID).  A tribunal was seated in May 2019, composed of one member nominated each by Westwater and the Republic of Turkey.  The two nominees than selected a panel chair.  No additional actions have been scheduled.

Turkey is just coming to the nuclear power game.  Construction just commenced in April 2018, on Turkey’s first nuclear power plant at Akkuyu.  Two additional plants are in the planning stages.  The Temrezli project is one of Turkey’s largest and highest grade uranium deposits with an estimated 13,282 million pounds of contained uranium at an average grade of 1,157 part per milliliter of U308.

Turkey has two additional cases pending before ICSID.  The country’s various agencies have had experience with arbitration, with a mix of outcomes. Nonetheless, the case outcomes suggest Turkey has a history of respecting the arbitration process.  Westwater management points out that Turkey has continued to promote foreign direct investment and may want to avoid the negative publicity of protracted arbitration action.  We note that the calendar is, in fact, well filled with trade shows and events showcasing Turkey’s various industries and commercial interests and laying out the welcome mat for international visitors. Thus it appears Turkey may have whiffed on domestic uranium production as well.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 7/16/19 as “Whiff on Uranium”.

The post Admin Reviews Fuel Production To Mixed Nuclear Reactions appeared first on Alternative Energy Stocks.

Several graphite developers have made plans to integrate forward into the hottest segment of the market  –  battery-grade graphite.  According to Industrial Minerals, spherical graphite suitable for lithium ion battery anodes is priced in a range of $2,700 to $2,800 per metric ton in China where many battery manufacturers are located.  This compares quite well to the range of about $655 to $790 per metric ton for flake graphite concentrate.

The integration strategy has sent the sector into a frenzy of activity to prove their graphite meets expectations of battery manufacturers.  The only graphite deposit in the U.S. mainland is under development by Westwater Resources (WWR:  Nasdaq).  Historically, known as uranium producers, Westwater made a critical decision to diversify into other energy materials with strategic investments in lithium exploration licenses in Utah and Nevada.  Then in April 2018, Westwater acquired Alabama Graphite with graphite development projects in Coosa and Bama Counties in Alabama.  The graphite deposits are well documented and have a history of exploitation when the U.S. was still in graphite game in the 1940s.

Trying to get back in the game with a competitive battery-grade material, Westwater recently released new data from independent tests.   The company puts low volumes of its natural flake graphite through a series of refinement steps  –  purifying, micronizing, shaped into spheres and then coated with carbon powder.  The most recent tests found Westwater’sCoated Spherical Purified Graphite or ULTRA–CSPG held up better than comparable graphite from Chinese sources in long-term cycling tests.

Although no long-term, high-volume off-take agreement is in place, Westwater has customer interest for one of its basic battery materials  – Purified Micronized Graphite or PMG.  The company’s PMG has also held up well under independent tests that found exceptional results for performance enhancement in lead acid battery cells.  An undisclosed lead acid battery manufacture has declared interest in commercial volumes beginning in 2021, and continues early testing.

A list of graphite companies covered in this series can be found here.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a Speculative Buy rating on the shares of Westwater Resources, Inc. (WWR:  Nasdaq) through its CER Reports series.

This article was first published on the Small Cap Strategist weblog on 4/12/19 as part of the post “Graphite Developers Eye Large Growing Market.” 

The post Yankee Graphite appeared first on Alternative Energy Stocks.

After toiling away for almost two decades, perfecting its nuclear power reactor design, NuScale Power is on the cusp of commercial stage with its innovative Small Modular Reactor (SMR).  The company has applied for certification by the U.S. Nuclear Regulatory Commission (NRC) and expects to approval by 2021.  In a departure from conventional construction methods NuScale’s SMR is to be manufactured in a factory setting and assembled on site. NuScale has also lined up a first customer, the Utah Associated Municipal Power Systems (UAMPS), which is planning to build a nuclear power plant with twelve of NuScale’s 50-gigawatt SMRs.  UAMPS expects its project to be completed by 2026.

Yet privately-held NuScale leaves investors with few options to get a stake in what promises to be a seminal moment in the nuclear power industry. As alternatives to a direct investment in NuScale, investors can consider the company’s partners.

BWX Technologies, Inc. (BWXT:  NYSE) has been tapped by NuScale to produce the core reactor of the SMR.  BWXT is a supplier of nuclear components and fuel to the U.S. government and proprietary fuel for the CANDU class of commercial power reactors.  Additional manufacturers may be responsible for other systems, such as chemical control or electrical.  While BWXT and other systems manufacturers are ‘mission critical’ partnerships for NuScale, they are not the only ones of importance. 

NuScale has had a long standing partnership with Fluor Corporation (FLR: NYSE), a well-established engineering, procurement and construction company.  Fluor had been a source of technical support as NuScale was completing the design of its module reactor.  The company has also given Fluor exclusive rights to engineering and construction contracts when the SMR is finally certified for commercial.  NuScale might be the winner in the pact.  Fluor has been designing and constructing commercial nuclear facilities since 1970, when Fluor began work on Alabama Power’s Farley Nuclear Plant.  Even before Fluor had done extensive engineering and construction work for the U.S. government nuclear program.

Fluor was an early believer in NuScale’s plan to bring a small modular reactor to the nuclear power industry.  In 2012, Fluor invested committed to a $30 million investment in NuScale and now holds a majority equity interest in NuScale.  Consequently, NuScale’s financial performance is reported by Fluor in its Industrial, Infrastructure & Power segment.  NuScale costs and expenses net of reimbursements totaled $76 million in 2017, compared to $92 million and $80 million in 2016 and 2015, respectively.

NuScale has not been entirely dependent upon Fluor’s largesse.  In 2014, the company received a $217 million multi-year funding award from the U.S. Department of Energy.  The DOE has a technical support program aimed at promoting small modular reactors through the reimbursement of first-of-a-kind engineering costs.  NuScale reported $48 million in reimbursable expenses in 2017, compared to $57 million and $48 million in 2016 and 2015, respectively.  The company expects to qualify for the entire DOE award before the end of 2018.

A stake in Fluor could be a back door to NuScale.  Fluor shares are trading at 13.9 times projected earnings for 2019.  That compares favorably against the current 25.1 multiple of Fluor’s trailing earnings.  Analysts following Fluor clearly see strength in the company’s future sales and earnings.  In the twelve months ending June 2018, Fluor reported $19.7 billion in total sales, providing $252.0 million in net income or $1.79 in earnings per share.  In that same period, Fluor generated $41.5 million in operating cash flow.

Cash flows have been sufficient to cover capital expenditures and a dividend payout ratio near 47%.  Strong cash flows have also helped build up the cash kitty to $1.8 billion, which just tops debt of $1.7 billion.

Financial metrics all point to a strong company  –  profitable and secure. However, Flour is still an engineering, procurement and construction business model, that is subject to quarterly variance as it works through projects large and small.  The business model is subject to project delays and changes that can unexpectedly impact reported sales and earnings. Such developments can whipsaw the stock price.  The beta risk measure is 1.68, revealing a somewhat volatile stock price.

Investors looking for smoother sailing could consider shares of BWX Technologies instead.  Its beta measure is a modest 0.59.  There is compensation to be paid for the lower price risk.  BWTX share trade at 21.1 times estimated earnings, which is favorable in comparison to a 38.1 multiple times trailing earnings.

BWXT reported $1.8 billion in total revenue in the twelve months ending June 2018, providing $158 million in net income or $1.57 in earnings per share.  BWXT is also quite successful in converting sales to cash.  In the same twelve month period operating cash flow was $175.4 million.

The BWXT balance sheet is not as flush as that of Fluor.  The debt-to-equity ratio is 175.3, revealing a heavy reliance on debt.  The cash balance at the end of June 2018, was $319.5 million and covered less than half outstanding debt.  BWXT’s management team might be more confident turning up leverage because the business model of selling nuclear reactor components and fuel modules affords more predictable revenue and earnings streams.

Both BWX Technology and Fluor will benefit from NuScale’s success in commercializing.  Each stock has its positives and negatives.  Perhaps the better alternative is to take positions in both companies.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 10/31/18 as “Stake in Nuclear Power Innovation.” 

The post Two Stocks That Could Benefit From NuScale’s Sucess appeared first on Alternative Energy Stocks.

The chart of spot uranium prices presents a dismal picture for this key energy commodity. After a brief spike in early 2006, the spot price has been in a long-term slide down hill. In the last year and a half it appears the price as found a level of support at the $20.00 price level as the shares have bounced around between that support level and up to the high 20s. With each bound higher shareholders of uranium producers cheer the end of what has been a long ‘down’ cycle. A click up to US$27.50 in recent days has sent uranium company shares higher.

The price chart also shows that there have been two attempts at recovery in the past, one in 2011 and another in early 2015. What makes shareholders think this year is different?

The future of the uranium industry may not be told by the uranium spot price chart at all. Most uranium is purchased by electric power producers through long-term contracts at specified prices. However, in recent years, utilities have been dipping into inventories built up over the years and buying at spot prices to take advantage of the lowest prices in a decade. Those inventories are running low and when gone entirely, the nuclear power producers will have to pick up the phone and call uranium producers.
Those phone calls could be like a soft spring breeze for an industry that has been in hibernation through a long, cold cycle. Likely there will be immediate impact on pricing that will reverberate around the world to small producers based in the U.S. such as Westwater Resources (WRR: Nasdaq) and major producers such as KazAtomProm JSC in Kazakhstan. Many uranium producers have idled operations like Westwaters’ Texas in situ uranium sites or KazAtomProm’s December 2017 decision to cut uranium production by 20%. Altogether uranium producers cut production by 30 million pounds per year beginning in 2016, a significant amount given annual consumption is near 150 million to 160 million points per year.

Cameco Corporation (CCJ: NYSE) provides a good illustration of how inventories could finally be soaked up. Cameco made it clear in the beginning of 2018, that it would be a frequent visitor to the uranium spot market to help fulfill contractual commitments. Like so many others Cameco shut down its McArthur River operation, removing 18 million pounds from the market in 2018, leaving expected Cameco production at around 20 million pounds. As a consequence, Cameco said it would turn to the spot market to source enough uranium to fulfill contracts that are expected in a range of 28 million to 30 million pounds in 2018.
With a major producer like Cameco present at an unprecedented level, the supply-demand dynamic in the spot market could be realigned. Cameco has been expected to purchase as many as 10 million pounds in 2018. While inventories had been ample over the past few years, the industry watchdog UxC reports inventories in the global spot market have been trimmed to about 20 million pounds in mid 2018.
If all predictions regarding Cameco come to pass, the point is nigh at which the uranium pantry has reached that precariously low point that alarms nuclear power producers. The uranium spot price chart may not provide a good prediction of the industry’s turnaround, but inventory levels may be the spot-on predictor of the future.
Given marginal costs at its Texas operations, Westwater Resources is watching for U3O8 prices well over $35.00 per pound. The company will need about a year preparation to resume production. As sluggish as this response might seem, it will be typical of all uranium companies that have suspended production.
Smaller producers like Westwater might be expected to participate in a uranium industry recovery. Inventory capitulation may trigger the industry’s turnaround, but it will be other developments that sustain a long-term advance for the industry. On the demand side, Japan’s utilities have implemented more rigorous safety inspection protocols for nuclear power production sites, restarting nine reactors. Japan’s Fukushima disaster in early 2011 was a seminal event in the nuclear power industry, so the country’s return to nuclear power is expected to have a strong influence on policy decisions in other countries. As 2018 began, there were 57 reactors under construction around the world. Since a typical 1,000 megawatt nuclear power reactor needs about 25 metric tons of enriched uranium each year, these reactors could have a significant impact on future demand for uranium.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 9/25/18 as “Spot On: Uranium Inventories.” 

The post Spotting A Uranium Rebound: Inventories Are Key appeared first on Alternative Energy Stocks.

The post Yellow Cake Debut described the capital raising effort of one of the newest players in the uranium supply chain.  Yellow Cake leadership brought the aspiring intermediary to the capital market at a critical time for uranium producers.  The uranium market has been in an extended trough period since the industry peak in 2007.  At that time considerable development had been undertaken and capacity was beginning to generate sufficient supply to create stockpiled inventories.  As this bloated condition persisted, in 2011 the nuclear power and its uranium supply chain were shocked by a Pacific Ocean tsunami that led to a nuclear spill at the Fukushima Power Plant in Japan.

The world view of nuclear power shifted seemingly overnight, causing Japan as well Germany and others to take nuclear power plants offline.  Demand for uranium dried up.  These many years later, the industry is still working through excess inventories.  Selling prices for U308 were gutted after the Fukushima incident and have remained at historic low levels.

As a consequence company valuations have remained stubbornly stuck near historic lows.  As shown in the table below, the average of the group is a value of 2.03 times book value.

It may well be an opportune time for investors to look at the uranium sector. Multiples are near historic lows, providing investors with good bargains. More importantly there is some evidence that undervaluation might be near an end, providing investors with the prospect of near-term price appreciation.  Our signal for a shift in the industry cycle off the trough, is in the production decisions of uranium suppliers.  In December 2017, JSC National Atomic Company Kazatomprom, considered to be among the lowest-cost uranium producers in the world, announced plans to cut production by 20% or about 11,000 tons over three years beginning in 2018. Kazatomprom’s announcement was followed a month later by a similar decision from Cameco (CCJ:  NYSE, CCO:  TSX) to suspend production at its McArthur River mine beginning January 2018.

These are two of the largest uranium producers in the world.  It is widely expected that with this production taken off-line, the last of uranium inventories will be burned off by existing demand.  Prices are expected to rebound and could even appreciate to the point where production capacity will be taken back out of mothballs.  It is expected that production will drive the sector going forward and the days of inventory influence are coming to an end.

In this new age which uranium producer is better than the next?  Historic profitability could be one way to sort out the best uranium company.  This would give an investor a company with a known track record for delivering profits when in production.  Alternatively, investors could choose the companies with a ready production capacity rather than companies with development projects focused on new deposits.  Those companies that had shuttered established operations will find it easier to jump back into production and begin delivering profits to the bottom line.

More importantly the recovery could dramatic, taking the uranium sector to record levels.  Global nuclear power reactor requirements are increasing in the long-term.  There are currently 465 nuclear power reactors in operation around the world.  Since Fukushima there has been a shift in the use of nuclear power from developed countries  –  U.S., France, Germany and Japan  –  to Asian countries  –  China, India.  There are currently 58 nuclear power reactors under construction around the world, representing a 16% increase in nuclear capacity.  There are another 157 reactors in the planning stages in China, India, South Korea and Russia that are expected to be operational by 2030.  This would add another 42% increase in production capacity.

With global warming and carbon emissions continuing to make the headlines, nuclear power is likely to become a larger portion of future energy.  Nonetheless, investors may have some time for due diligence.  There are signs the uranium sector is poised for a recovery, but so far there has been a limited response from investors.  Early birds still have a chance to find that special uranium worm.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

The post Flocking to Uranium appeared first on Alternative Energy Stocks.

by Debra Fiakas, CFA

Investors have a new opportunity for a stake in nuclear power.  Last week a successful initial offering was staged by a new player in the uranium supply chain.  Yellow Cake, plc. (YCA: LON) sold 76 million shares at £200 per share, raising £151 million (US$200 million). Uranium Participation Corporation (U:  TO)took US$25 million of the deal, giving the Canada-based uranium speculator a 16% stake in the company.  Yellow Cake is listed on AIM under the symbol YCA.  In its third day of trading the stock closed up 1.25% from its debut.

Yellow Cake means to be a player in the uranium market, buying and holding a stockpile of the ‘yellowcake’ concentrate or U308 from which the company takes its name.  The company proposes to act as an intermediary between uranium producers and nuclear utilities.  Management has wasted no time in establishing relationships and investing its capital  –  moves that could set up a compelling investment opportunity for investors.

In April 2018, Yellow Cake announced an agreement with CanAlaska Uranium Ltd. (CVV:  TSX) that  gives Yellow Cake the option to acquire up to 60% ownership in CanAlaska’s Grease River uranium development project in the Athabasca Basin in Northern Canada.  The option can be exercised with payment of CN$300,000 in cash and 2.5 million Yellow Cake shares.  The initial exercise payment must be followed up with an additional investment of CN$5.0 million to fund exploration in Grease River.  Eventually the two companies are expected to form a joint venture to exploit the Grease River uranium.

Yellowcake made an even more significant move through an off-take agreement with JSC National Atomic Company Kazatomprom, a significant uranium producer in Kazakhstan.  With the IPO completed, Yellow Cake is buying 8.1 million pounds of U308 or ‘yellowcake’ concentrate from Kazatomprom at a price near US$21.00 per pound.  Yellowcake has also pledged to buy up to US$100 million of Kazatomprom’s uranium annually for the next nine years.  The off-take agreement represents about a quarter of Kazatomprom’s production capacity.

Well-timed Market Entry

Yellow Cake is entering the uranium market at a pivotal point in the industry’s cycle.  With nuclear power out of favor since 2011, when a natural disaster cause a massive failure at the Fukushima Nuclear Power plant in Japan, uranium prices have been at record low levels from a high around US$70.00 per pound.  Indeed, Yellow Cake just bought concentrate material from Kazatomprom at a price about 8% below the prevailing spot price near US$22.50, according to uranium industry analysts at UxC.

The current concentrate spot price is well below the marginal cost of production for most uranium producers.  As a consequence many uranium players have shuttered production and delayed exploration projects.  Even Kazatomprom, considered to be among the lowest-cost uranium producers in the world, has announced plans to cut production by 20% or about 11,000 tons over three years beginning in 2018.  Kazatomprom’s announcement was followed a month later by a similar decision from Cameco (CCJ:  NYSE, CCO:  TSX) to suspend production at its McArthur River mine beginning January 2018.

Since Kazatomprom is the largest producer in the world, its market moves could have an impact on the entire industry.  The company’s decision to cut production by 11,000 tons represents about 7.5% of total global uranium supply while the deal with Yellow Cake soaks up about 5%.

Yellow Cake may have come to the market at the perfect time.  Many in the industry believe that higher prices are around the corner.  The logic is that as low cost producers such Kazatomprom and Cameco cut output, there will be pressure on supply from uranium users coming into the market to replace expiring supply agreements. FocusEconomics, an industry research firm, has predicted a spot price of US$26.30 per pound by the end of 2018, representing a 17% increase over the prevailing spot price.

Industry Cycle Trough

Uranium prices are determined in a murky environment.  There is no open market for uranium concentrate and therefore no posted clearing prices. Buyers and sellers negotiate contracts privately.  Nuclear power producers typically set up long term supply pacts at contracted prices above the spot price.  At the beginning of 2018, reported contract prices were near US$30.00 per pound compared to the prevailing spots price near US$20.25. Uranium pricing is essentially the same worldwide.

Contract prices are heavily influenced by the uncovered supply requirements of utilities with nuclear power plants.  UxC estimated that uncovered demand was near 4.1 million pounds at the beginning of 2018.  The figure is not significant, but UxC estimates that from 2018 through 2020 there will be 54.9 million pounds requiring coverage.  After 2020 annual uncovered demand is estimated to rise rapidly to 150 million pounds by 2025 and over 179 million pounds by 2030.  With contracting activity picking up, the prognosis for U308 prices appears promising and may prove Yellow Cake’s leadership to be remarkably prescient.

What may be even more favorable for Yellow Cake and its stockpile of U308 is the gap between uncovered demand and production capacity.  The predicted 179 million uncovered pounds in 2030, is estimated to exceed currently planned production capacity by 16 million pounds.  The potential for a future supply gap in uranium could be especially helpful for a well funded intermediary with the ability to access the capital market and secure off-take agreements with the largest uranium producers in the world.

Measuring Value

The other collector of uranium supplies, Uranium Participation, is now one of Yellow Cake’s significant shareholders.  It also presents Uranium Participation shares trade on the Toronto Exchange at 9.7 times trailing earnings and 1.1 times book value.  That provides something of a ruler to measure Yellow Cake.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.  Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

The post Yellow Cake Debut appeared first on Alternative Energy Stocks.

Nuclear energy stocks are publicly traded companies that develop, own, or manage nuclear power plants or the technology and equipment used in such plants.

This list was last updated on 2/10/2022.

If you know of any nuclear energy stock that is not listed here, but which should be, please let us know in the comments. Also for stocks in the list that you think should be removed.

The post List of Nuclear Energy Stocks appeared first on Alternative Energy Stocks.

by Debra Fiakas

Saudi Arabia plans to build 17.8 gigawatts of nuclear capacity by 2032, requiring about sixteen reactors.  It is an ambitious plan and one that could have a significant impact on the nuclear power construction industry.  Now the Saudi government is moving forward with a bidding process with nuclear power plant construction companies.  Bids are expected before the end of 2018 and signing of contracts will be sometime in 2019.

Our review of possible bidders began with Toshiba’s (6502:  Tokyo) Westinghouse Electric Company and Russia’s Rosatom Group.  The last two posts, “Saudi Arabia Goes Nuclear” on January 16^th and “Answering Saudi Arabia Request for Nuclear Proposals” on January 19^th discussed their prospects.  There are more players around the world who might like to get a taste of Saudi Arabia’s nuclear dreams.

The most obvious is France’s Areva, SA (AREVA:  PA), which has been a leader in the nuclear power industry since the 1950s.   Majority owned by the French government, the company specializes in renewable energy and nuclear power technologies.  Areva has strong Middle East connections.  Its second largest shareholder after the French government is the Kuwait Investment Authority.

It is just that by the time the bids need to be submitted control of Areva’s nuclear reactor design and manufacturing interests will have been sold to the French electricity provider, EDF, SA. (EDF:  FR).  In December 2017, EDF agreed to buy 75% of Areva’s nuclear reactor unit.  EDF has been under pressure to diversify into renewable energy sources and has already made significant investments in photovoltaic technology and solutions.

Areva has been on the skids for the past several years.  Its troubles are not unique as the historic nuclear industry leaders have all been impacted by weakened interest in nuclear power since the Fukushima disaster.  Weakened order books have put stress on balance sheets.  Additionally, the rise of Russian, Korean and Chinese competition has been felt around the world.  Areva has had some technological problems as well.  Most recently the company has been under fire for faulty fuel rods sold in Areva’s nuclear fuel division.

The company reported net losses in 2014 and 2015, and was reportedly near bankruptcy as 2016 came to a close with yet another loss.  However, at the beginning of 2017, the French government signaled a willingness to back the company contingent on a major restructuring.  The sale of the nuclear reactor unit to EDF is a part of that effort.

Areva has a portfolio of three reactor units:  the EPR, ATMEA1 and KERENA.  These are modern versions of the pressurized and boiling water reactor technologies.  The company makes the three designs available in range of 1,100 megawatt to 1,650 megawatt electric output.  Areva also offers low power reactors in a range of 2 to 100 megawatt hours, which are sometimes used by plant operators preparing for implementation of a nuclear power program.

There are at least 100 Areva reactors installed and working around the world.  Three new ones are under construction in Finland, China and France. The installed base and Areva’s longevity in nuclear power should be enough to it a serious contender with Saudi decision makers.

Two upstarts in Asia could give Areva and the others some competition.  Korea Electric Power Corporation (KEP:  NYSE)  (KEPCO) is already working in the Middle East building what will be the largest operational nuclear power plant in the world.  The project is largely completed and appears to be on schedule.  KEPCO is building four of its APR-1400 reactors for the United Arab Emirates.  The plant is the UAE’s first nuclear power installation and will have a capacity of 5,600 megawatts of electricity.

KEPCO’s APR-1400 is a pressurized water nuclear reactor design that is a refined version of the older OPR-1000 design.  The company has one APR-1400 in operation and another seven under construction, including the four in the UAE.  KEPCO’s portfolio and installed base may seem insignificant against Areva and Westinghouse, but its few successes are creating a big impression in the Middle East.

KEPCO also stands out against the other nuclear reactor companies because it is profitable.  In the twelve months ending September 2017, the company reported $2.8 billion in net income on $55.5 billion in total sales.  That represents a net margin of 5%.  Of course, the company’s electricity sales contribute significantly to the bottom line.  For a potential customer concerned about the ability of a construction company to see a project to a successful completion, the source of cash flows and cash resources may not matter.

China is also in the running through its China Nuclear Engineering and Construction Group (CNECC).  The company has been at the center of China’s nuclear power program, playing a large role in making China the largest nuclear power producer in the world.  Mainland China has 38 nuclear power reactors in operation and another 20 under construction.  While China built its own nuclear power plants, the country has drawn nuclear technology from France, Germany, Russia and the U.S.  The State Nuclear Power Technology Corporation made the Westinghouse AP-1000 the main basis of technology for the immediate future.  This is evident in the CAP-1400 and CAP-1000 designs now in use in China.

While China has understandably been focused on solving its own environmental and power problems, it also exports nuclear power designs.  China’s own Hualong One third generation pressurized water reactor design has become the cornerstone of its export efforts.  There are now four projects under construction in China and two in Pakistan.

Shares of CNECC trade on the Singapore exchange under the symbol 601611.  The stock is currently priced at a trailing price-earnings ratio is 35.2 and 30.5 times forward earnings.  The current price is just above the 52-week low price, suggesting investors are less than enamored with recent performance.

The Saudi’s will not be worried as much about recent earnings or stock price multiple as they are about how well China’s reactors function.  Most likely China Nuclear Engineering will have a chance to submit bids for the first two Saudi reactors.  However, its limited track record outside China’s own nuclear power program may also limits its prospects.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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by Debra Fiakas CFA

Earlier this week nuclear fuel technology developer, Lightbridge Corporation (LTBR:  Nasdaq), reported year-end 2015 financial results and provided an update on recent accomplishments.  Not unexpectedly, Lightbridge reported a net loss of $4.3 million or $0.24 per share for the year.  During the year the company scraped together $900,000 in revenue from consulting services, an effort to leverage the expertise of its scientists and engineers as they continue work on new fuel technologies.  The contribution margin of the consulting work was $216,239  –  not nearly enough to cover administrative spending or the costs of research and development on the company’s innovative nuclear fuel rod.   Fortunately, a good share of expenses were paid with stock and thus Lightbridge only needed $3.7 million in cash to support operations, most of which came from the corporate bank account balance of $4.2 million at the beginning of the year.

As dismal as those numbers might seem, for a change Lightbridge could tell more in its financial report than just a story of ‘we are hanging in there.’

Lightbridge has taken a giant step forward in its quest to bring new nuclear fuel technology to the market.  France’s nuclear fuel giant, Areva NP (ARVCF:  OTC; AREVA:  PA), has entered into a joint development agreement with Lightbridge.  The objective is to establish a formal joint venture that would complete development of Lightbridge’s novel metallic nuclear fuel technology and then manufacture and sell the fuel assemblies.  The two companies have until the end of 2016 to get a definitive agreement put into place.

Of late Areva has made efforts to focus more keenly on the nuclear sector, refining and escalating its products and services for nuclear operators.  A joint venture with Lightbridge gives Areva access to a metallic fuel technology that could give nuclear power plant owners the chance to increase operating efficiency for the first time in decades.  Usually to expand output the power plant owner must seek local, state and federal approval for a new reactor  –  a costly and time consuming undertaking.  Tests have shown that Lightbridge’s all-metal fuel assembly can increase power output by as much as 17% in existing power plants.  New power plants, with large containment structures, could get up to a 30% power ‘uprate.’  The economics of such capacity expansion are quite appealing and it might be that Areva sees Lightbridge’s novel design as an easy sell to its power plant customers.

So easy, that Areva has pledged considerable engineering and managerial support over the next months to bring the joint venture to fruition.  Areva will not be footing the bill alone.  The two companies have agreed to share expenses.  During the earnings conference call Lightbridge management emphasized how zealously they have been husbanding their bank account.  Two ‘equity credit lines’ have remaining availability for additional draw down.  Management claims these financial resources should be sufficient to support its financial commitment to the joint venture as well as its operations through to first revenue from the sale of the fuel assemblies.

Still there is much to be done before that first important order.  There is more testing to be completed in research reactors.  All the while, Lightbridge and Areva will need to perfect the manufacturing processes.  Then the completed fuel assemblies must be tested under severe accident situations.  Assuming those tests are favorable, Lightbridge will still need to get final approval from the U.S. Nuclear Regulatory Commission or any other oversight or permitting organization in countries where the joint venture partners intend to sell the assemblies.

Lightbridge management has suggested that its fuel assemblies will not get installed in commercial reactors until 2020.  That is a full four years away, which probably explains at least in part why Lightbridge stock is still priced well below a buck a share.  For U.S. investors facing a particularly volatile equity market and considerable uncertainly in interest rates and economic prospects, it is difficult to give full valuation for a product still in development by a small company with a long history of losses and scant history of commercial success.  Thus LTBR remains priced as an option on management’s ability to execute on its strategic plan.  Indeed, the stock traded down in following news of the Areva relationship even though, in our view, the option should have increased by  a measure to reflect a ‘so far so good’  premium.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Lightbridge Corporation (LTBR) is included in the Nuclear Group of Crystal Equity Research’s Atomics Index composed of companies using the power of the atom to create energy.

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