Deutsche Bank analysts think uranium mining is a good business

Here is another signal that the investment bankers are taking a fresh, hard look at the prospects for the nuclear power industry and finding that there are a number of reasons to get involved.

According to an article titled Another Investment bank Joins the Uranium Bulls FNArena – a self described supplier of financial, business, and economic news services Deutsche Bank analysts have produced a report about the prospects of the uranium mining industry that details why they believe that the industry will be profitable well into the future.

Their reasoning includes various obstacles to increased production rates including the care with which environmental impacts of new mines are reviewed, the limited number of experienced workers, and the outright restrictions on new mines in countries like Australia. On the other side of the supply-demand equation, they note that the World Nuclear Agency reports that there are 30 new reactors on order or under construction, and that total does not include any reactors in the US, the UK or Australia. All of those countries have indicated a strong interest in new nuclear power plants, but do not yet have any on order.

The price of uranium has increased by about 300-400% in the past five years. The major companies like COGEMA, CAMECO, and Rio Tinto that continued their uranium operations through the low price era, when uranium yellowcake was selling for close to $10 per pound (it’s current price is closer to $50 per pound) are doing very well indeed.

At the current price, I have no fear that the supply of uranium will be sufficient to allow construction of as many plants as the vendors can build or the customers can finance. There are a number of known resources that were simply not profitable to mine when the price was low. Those resources are now becoming available again since the cost of production is far below the selling price.

One final thought – uranium, even at $50 per pound, is an incredible energy bargain. A pound of uranium has as much potential energy as 2 thousand tons of oil. Even with our current, wasteful once through fuel cycle, it has as much energy as 20 tons. The current world price for oil at $70 per barrel works out to about $550 per ton.