COP28 nuclear tripling pledge smooths path for uranium mine financing

A pledge from more than 20 countries, including the US, to triple global nuclear power by 2050 will ease efforts to finance new uranium mines, uranium sector experts told S&P Global Commodity Insights.

Initial signatories to the pledge at the recent UN Climate Change Conference, also known as COP28, accounted for at least 65% of global nuclear electricity generation in 2022 and 63% of estimated uranium requirements in 2023, based on World Nuclear Association data. The signatories committed to the "aspirational goal" of increasing nuclear power and to marshalling nuclear investment and lending and supporting new reactor builds.

The agreement, while nonbinding and lacking a detailed road map to achieve the tripling goal, is a symbolic victory for nuclear power and uranium mining and a signal of the acceptance of fission as key to avoiding the worst impacts of climate change. If a nuclear power renaissance occurs, many new uranium mines will be needed to meet demand for the nuclear fuel, experts said.

"It wasn't five, six years ago, nuclear wasn't even welcome [at the climate conference]. We weren't in the green zone or blue zone. We were in the taxicab zone out on the curb," said Scott Melbye, president of the Uranium Producers of America, referring to COP28 areas open to invited delegates. "And now we're center stage."

The pledge will be a firm signal to investors that nuclear power, and by extension uranium, has a long-term place in the energy transition power mix, uranium market veterans told Commodity Insights.

"It will likely lead to the ability to finance nuclear power plants, both in countries that can afford to pay for them and also in countries that can't afford to pay for them, because they likely can rely on some form of Western subsidy," said Rick Rule, a veteran mining investor and former president and CEO of commodities asset manager Sprott U.S. Holdings Inc.

Fresh from investor meetings in the Middle East on the back of COP28, Melbye, who is also president and CEO of Uranium Royalty Corp. and executive vice president of US miner Uranium Energy Corp., said there is already an increase in interest from investors looking at nuclear and the supply chain that fuels it. Likewise, Rule said the pledge gave uranium the "kiss of approval" from governments all over the world.

"It means that large multilateral lenders or private lenders can, without fear of political repercussion, lend to the uranium business," Rule said. "That part's enormously important."

The tripling promise comes as countries move to bolster nuclear supply chains in other ways, such as US efforts to limit dependence on Russian nuclear fuels and EU policies defining nuclear power as key to net-zero commitments.

Bear to bull

Until the past few years, the outlook for nuclear and uranium outside China was grim. After the 2011 Fukushima Dai-ichi reactor disaster, uranium prices crumbled and countries such as Japan sought to lessen dependence on nuclear, in part due to the risk of radioactive pollution.

Meanwhile, uranium miners slashed output, shutting down mines and curbing production. For miners such as Cameco Corp. it became cheaper to fill longer-term contracts buying on the spot market rather than mining their reserves.

But in recent years, countries including Japan and the US have recommitted to nuclear power as a means of ensuring access to low-carbon power and baseload stability, which is an issue for intermittent solar and wind power when it is not paired with energy storage.

At the same time, uranium prices have regained strength, spurring big producers such as Cameco and NAC Kazatomprom JSC to restart some production. The Platts-assessed spot price of U₃O₈ delivered to Canada has traded over $80 per pound since Nov. 21. Spot prices are the highest they have been since a major price spike in 2007, according to pricing data from nuclear fuel consultancy UxC LLC published on Cameco's website.

Still, nuclear power in countries such as the US faces obstacles in ballooning nuclear plant construction costs. Southern Co.'s expansion of the Alvin W. Vogtle nuclear plant through subsidiary Georgia Power Co. saw costs swell by an estimated $17 billion from an initial budget of $14 billion in 2008, according to the Associated Press.

Melbye and Rule hope that the COP28 tripling pledge leads to more streamlined regulations to help lower construction costs.

"One of the important things about this announcement is, to the extent that the political will now exists to eliminate the regulatory blockade of nuclear, the front-end capital costs associated with establishing nuclear generating capacity can decline ... precipitously," Rule said.

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