The Energy Report: Surprisingly, Simon, you are predicting a shortfall in the international uranium supply over the next couple of years. Where does Japan fit in from your vantage point in Australia?
Simon Tonkin: With the Japanese reactors idle, people are concerned about what will happen to its idled reactor fuel stockpile. Not to worry: the Japanese material is stored in a different form than U3O8, and it is specifically configured for use in the Japanese reactors. Selling off the stockpile would require significant investment in down blending. We do not see a risk of Japan divesting its uranium stockpile in the near term. And by the time that might become an option, the Japanese reactors will certainly have restarted.
TER: Is China an increasingly important demand factor for uranium?
ST: China is securing supply all around the world because it plans to cap carbon emissions by 2030. Capping pollution will require replacing coal generation with nuclear energy reactors and renewable sources. Without a doubt, China is the most important factor driving demand—and that simple fact is reason enough to buy cheap stock in Australia-based uranium miners. However, investors need to be selective and cautious as there are numerous junior uranium companies that require further funding.
TER: Is there a disconnect between the price of the commodity and the equities?
ST: The uranium price has gone up 40% and is trading around the US$40 per pound (US$40/lb) mark. The equities have gone down 10%. The reason for that disparity is market sentiment. People do not believe that the price will continue to rise. Consequently, a lot of uranium companies are being starved of the capital to continue exploration and development. Now the Chinese are riding in with ready cash.