1

Nuclear Power and the International Uranium

Market

Dustin J. GarrowInternational Uranium (USA) Corp.

NMA/NRC Uranium Recovery WorkshopJune 27, 2006

2

Uranium Mining and Milling

U3O8

Conversion to UF6

Natural UF6

Enrichment Fuel Fabrication

UO2 Fuel Rods

Light Water Power Reactors

Producers, world-wide, sell U3O8 to utilities and traders.

55 Gal. drums = 850 lbs U3O8

14 Ton cylinders = 8,000 kg UF6

Spent Fuel

Spent Fuel Storage at Reactors

Reprocessing

Waste Management Program

The Nuclear Fuel Cycle

Low Enriched UF6

Depleted UF6

“Tails”

3

World Nuclear Capacity(May 2006)

441 Reactors

369,374 Mwe

31 CountriesAnnual Requirement - 170 million

pounds U3O8

4

Nuclear Generating Capacity(Total – 369,374 Mwe)

Japan13%

Ukraine4%

France17%

Russia6%

Germany6%

South Korea5%

Remainder20% Canada

3%

United States26%

5

Electricity GenerationNuclear Share (%) - 2005

0 10 20 30 40 50 60 70 80France

Lit huania

Slovakia

Belg ium

Ukraine

Sweden

Sout h Korea

Bulgaria

Armenia

Slovenia

Sout h Korea

Hungary

F inland

Swit zerland

Germany

Czech Rep.

Japan

UK

Spain

USA

6

Reactors Under Construction(May 2006)

27 Reactors

21,051 Mwe

11 Countries

7

Longer Term Prospects

• China• Finland• France• India• Japan• Russian Federation• South Korea• Canada (?)• United Kingdom (?)• United States (?)

8

United States• Capacity Factors

• Operating License Extensions

• Early Site Licensing Program

• Browns Ferry -1 Restart (US$1.9 billion)

• Energy Policy Act of 2005

• New Nuclear Build– Sixteen companies have expressed an interest in constructing up to 25 new

nuclear power plants (no orders formalized)

– COL applications expected 2007-2008

– Expected commercial operations beginning 2014-2015

576.9

782.0

500

600

700

800

1990 2005

Increase in U.S. Nuclear Plant Output:(1990-2005)

Equivalent to 26 new 1,000-megawatt power plants

Year

Bill

ion

kWh

10

President George W. Bush- Position on Nuclear Power -

“Our goal is to start the construction of new nuclear power plants by the end of this decade.”(February 18, 2006)

“For the sake of economic security and national security, the United States of America must aggressively move forward with the construction of nuclear power plants.”(May 24, 2006)

11

Nuclear “Phase Out” Programs

• Belgium

• Germany

• Sweden

• United Kingdom (replacement)

12

World Nuclear Capacity Forecast(World Nuclear Association - 9/05)

250

300

350

400

450

500

550

600

650

700

750

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030G

we

Lower Reference Upper

13

World Uranium Requirements(World Nuclear Association - 9/05)

125

150

175

200

225

250

275

300

325

350

375

400

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029M

illion

lbs

U3O

8

Lower Reference Upper

14

World Uranium Production and Consumption

1946-2005

0

20

40

60

80

100

120

140

160

180

200

1946

1955

1970

1985

2000

Mill

ionP

ound

s U

3O8

Production Consumption

15

Secondary Uranium Sources

• U.S.-Russian Highly Enriched Uranium Program (1994-2013)

• U.S. Department of Energy Inventory

• Re-enrichment of Depleted UF6

• Mixed Oxide (MOX) / Reprocessed U

16

U.S. - Russia Highly Enriched Uranium Program

• 500 Metric Tons of Russian HEU (>90 % U235)

• Down-Blended to Commercial Fuel Grade (4.95 % U235)

• Contains 360-400 Million Pounds U3O8

• Deliveries continue through 2013

• Status - 269 Metric Tons HEU processed (equivalent to 10,746 nuclear warheads)

• HEU-II

17

Uranium Production - 2005(Total – 108.9 million lbs U3O8)

Australia23%Niger

8%

Russia8%

Kazakhstan10%

Namibia8%

Uzbekistan6%

Others8%

Canada29%

18

World’s Largest Uranium Mines2005

0

2

4

6

8

10

12

14

16

18

20

Mill

ion

Pou

nds

McArth

ur Rive

rRan

gerOlym

pic D

amRos

sing

Priargu

insky

Rabbit L

ake

McClea

n Lak

e

Akouta Arlit

Zhielt

ye V

ody

Vaal R

iver

19

Uranium Production - 2005(Total – 108.9 million lbs U3O8)

In-Situ Leach21%

Co-Product9%

By-Product2%

Conventional68%

20

Global Uranium Production1996-2005

91 92.8 87.780.8

91.5 94.5 93.7 92.6104.7 108.9

0

10

20

30

40

50

60

70

80

90

100

110

120

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

mill

ion

poun

ds U

3O8

21

How Do Utilities Buy Uranium?

• Spot (or near-term market) represents about 10-15% of annual volume

• Vast majority of uranium needs are filled through “term” uranium purchase agreements

• So, the important market to watch is not the spot demand and supply but conditions in the long-term (or multi-year) market

22

Uranium Transactions - Spot Market1990-2005

40.1

30.0

39.4

35.032.6

41.9

19.6

22.7

11.4

24.2

14.616.7

18.2

21.8

18.2

35.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Mill

ion

lbs.

U3O

8

23

Long-Term Uranium Contracting1995 – 2005

(Source: The Ux Consulting Company)

0

50

100

150

200

250

300

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

mill

ion

poun

ds U

3O8

Non-US US

24

U.S. Nuclear UtilitiesUranium Requirements vs. Contracted Supply

(December 31, 2005)

0

10

20

30

40

50

60

70

Mill

ion

lbs

U3O

8

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Uranium Requirements Contracted Supply

25

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

US

$ pe

r lb

U3O

8

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

Average U3O8 Spot Price Nuexco Long-Term U3O8

Uranium Price Trend1996 - 2002

26

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

Jan-03 Jan-04 Jan-05 Jan-06

US

$/lb

U3O

8

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

Average U3O8 Spot Price Long-Term U3O8 Price

Uranium Price Trend2003 - Present

27

Uranium Market Balance2006-2015

0

200

400

600

800

1000

1200

1400

1600

1800

2000

milli

on p

ound

s U

3O8

Requirements Primary Production (existing/development) Secondary Supplies Needed

28

Conclusions / Observations

• Nuclear power will continue to expand globally• New uranium production is needed in order to meet

requirements • Uranium market continues to adjust to changes in

fundamental demand and supply forces• Resultant price effects underscore continuing

imbalance especially in the term market• Uranium market instability can be expected for the

foreseeable future