Clock - Uranium Supply Crunch and Critical ... - Andrew Johns

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Canada Research | Page 14 of 87Uraniumand Korea. Our numbers reflect 70 GW in China by 2020E, 55 GW in India by 2030E, aGerman phase-out by 2022E, roughly two-thirds of Japan’s reactors back online by 2017E,and retirement of nearly 10% of current world installed units by 2020E (26% by 2030E).We remain conservative on the ambitious plans of emerging Middle Eastern states.Exhibit 13: RJL Global Nuclear Capacity (GW)Global Operating Nuclear Capcity (GW)6506005505004504003503002502001501005002011CAGR2004-2011: -0.86%2012-2016: 4.76%2017-2021: 4.13%201220132014201520162017201820192020Rest of World W.Europe, Americas (ex-USA) USA Korea Japan Russia India ChinaSource: Raymond James Ltd., UxC, WNA, NIW, Company Reports2021202220232024202520262027202820292030Generally In-line with Other Forecasts. Exhibit 14 shows our forecast based ondevelopment category (currently operating, under construction, planned and proposed)through 2030E, relative to those from WNA and IAEA (September 2011). Our 2020Eforecast of 514 GW is just below the upper scenarios from both organizations, but by2030, our 615 GW projection is closest to WNA’s reference scenario and IAEA’s lowerscenario.Exhibit 14: RJL Global Nuclear Capacity vs. WNA and IAEA Scenarios (GW)Our reactor growth curve isclosest to WNA’s referencescenario850Global Reactor Capacity (GW)75065055045035025020102011201220132014201520162017201820192020RJL Current RJL Under Construction RJL Planned RJL ProposedWNA Upper WNA Reference WNA Lower IAEA UpperIAEA MidIAEA LowerSource: Raymond James Ltd., UxC, WNA, IAEA, NIW, Company ReportsConsumption Assumptions. With respect to uranium consumption, Exhibit 15 outlinesforecasts for burn rate (actual reactor consumption of uranium), burn rate + initial core(adds uranium required to ‘seed’ new reactors – typically amounting to 2x – 3x a typicalreload) and ‘total demand’, which adds purchases to maintain utilities’ strategicinventories, 1 – 3 years in advance of use. In-line with prevailing market prices foruranium and enrichment we assume 0.22% tails assay in all regions.2021202220232024202520262027202820292030Raymond James Ltd. | 2200 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
Uranium Canada Research | Page 15 of 87How does our forecasted uranium demand compare against other industry forecasts?Our projection is largely in-line with WNA’s ‘upper’ scenario for the 2012 – 2020 period,and between the ‘reference’ and ‘upper’ scenarios for 2021 – 2030. It is important tonote that WNA’s forecast does not include strategic inventory building by nuclearutilities and is best compared to the RJL Demand (Burn + Initial Cores).Exhibit 15: RJL Global Uranium Demand vs. WNA Scenarios (Mlbs/year)3753503253002752502252001751501251002010RJL Total Demand CAGR2005-2011: 1.35%2012-2016: 5.00%2017-2021: 4.10%201120122013201420152016201720182019RJL Total Demand (Burn + Initial Cores + Inventory Build)RJL Demand (Burn)WNA ReferenceSource: Raymond James Ltd., WNA, Company ReportsSupply-Demand Balance2020202120222023202420252026RJL Demand (Burn + Initial Cores)WNA UpperWNA LowerThree-year Deficit Starting in 2014E. We begin to see a deficit starting in 2014E andgrowing in 2015E as the HEU agreement expires. New mine supply, chiefly ramp-up atCigar, but also Africa (Imouraren, Husab) and Australia (Yeelirrie, Ranger 3 Deeps),pushes the market back into near-balance for several years. Supply is less certain furtherout, but based on existing discoveries, we see new production getting outpaced bydemand growth in Asia and leading to increasing supply deficits through the late2020Es.202720282029Through 2020E, our demand curveis similar to WNA’s upper scenarioAsian growth, end of Russian HEUand insufficient primary supplygrowth lead to a three-year deficitstarting in 2014EExhibit 16: RJL Global Uranium Supply vs. Demand (Mlbs/year)3253002752502252001751501251007520082009201020112012201320142015201620172018Secondary Supply New Mines Existing MinesBurn Burn + Cores + Inventory Build (Total Demand)Source: Raymond James Ltd., UxC, WNA, NIW, Company Reports201920202021202220232024202520262027202820292030Utilities Should Jump In. For the 2012 – 2020 period, we forecast a ~35 Mlbs cumulativedeficit. Leading up to 2013, we believe end-users will have little trouble securingsufficient material via existing term contracts. However, as supply deficits loom in the2014 – 2016 period, we believe utilities are likely to enter the market to ensure strategicinventories (1 to 3 years of forward requirements) are maintained. This may beaccomplished via increased spot/term purchases or more expensive secondary means.We believe utilities will increasecontracting activity, supportingprices as this supply shortfallloomsRaymond James Ltd. | 2200 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2
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Clock - Uranium Supply Crunch and Critical ... - Andrew Johns

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