Mothballed Uranium Mines Get New Lease on Life as Energy Prices Soar

Russia accounted for 6% of the world’s mined uranium production in 2020, yet it supplied roughly 16% of U.S. imports because of its dominance in enriching uranium for use in nuclear reactors, according to industry and official data.

The Ukraine war has driven up prices of crude oil and natural gas, making alternative power sources such as nuclear more competitive. The conflict has fanned concerns about the reliability of supplies from Central Asia, especially Kazakhstan, which was also roiled by unrest this year. Kazakhstan is the world’s biggest uranium producer and typically ships via Russia.

In the U.S., the Energy Department is seeking to avert the premature closure of reactors. A deadline to apply to share in a $6 billion pot created to help utilities keep nuclear operations running has been extended to July 5. Energy Secretary

Jennifer Granholm

says nuclear assets are vital to the Biden administration’s clean energy goals.

“We believe now is the start of a new cycle,” said

Duncan Craib,

chief executive of

Boss Energy Ltd.

BOE 11.87%

“The price of the commodity is going up, demand is increasing, and suppliers are reaching out for geopolitical stability.”

Boss Energy this month said it would restart the Honeymoon uranium mine in southern Australia, which was mothballed almost a decade ago. It expects to resume production by late next year.

The Ukraine war has highlighted vulnerabilities that the nuclear industry has yet to overcome in the decade since triple meltdowns at Japanese reactors in Fukushima led several countries to shun nuclear power. Russia’s shelling of Ukrainian nuclear plants has made some investors nervous about safety, while higher energy costs risk exacerbating an economic slowdown that would weigh on electricity demand.

Some mining executives worry that labor shortages and rising inflation will dent the viability of bringing old uranium mines and new projects into production.

In Canada’s Saskatchewan province,

Cameco Corp.

CCJ 2.07%

is working to restart the McArthur River mine, which has been closed since 2018. McArthur River is the world’s largest high-grade uranium mine.

“Yes, we’re bringing McArthur back, but we’re going to operate it at a lower-than-full-capacity rate,” said

Grant Isaac,

Cameco’s chief financial officer. “We’re still in supply discipline mode.”

Cameco’s view reflects the mining industry’s record of investing heavily in boom times only to swamp the market with product, depressing prices and making some operations unprofitable.

Still, Mr. Isaac said utilities’ improved confidence in nuclear-power generation was noticeable in contract lengths, which have widened to as much as 10 years, from two to five years previously.

Colorado-based

Energy Fuels Inc.,

UUUU 1.95%

which has several projects on standby, recently signed three contracts with American utilities for up to 4.2 million pounds of uranium combined between 2023 and 2030, said

Curtis Moore,

vice president of marketing and corporate development.

“We’re hiring people. We’re spending money on new equipment. We’re refurbishing older equipment and rehabilitating parts of our existing mines to be prepared for the restart of new production, perhaps as early as late summer,” he said.

The accelerating global energy transition had laid foundations for a nuclear revival, according to market analysts. Countries including the U.K. and France have said nuclear power will play an important role in cutting their greenhouse-gas emissions.

Globally, there are about 55 power reactors under construction, with China and India especially active, according to the World Nuclear Association. There are roughly 440 reactors in operation and hundreds more developments proposed world-wide.

While uranium is mostly used to generate electricity, it is also used to produce radioactive isotopes for medical diagnosis and cancer treatment as well as to power some naval ships and submarines.

Places such as Canada and Australia have strict safety regulations to limit the exposure of radiation for mine workers, although rules aren’t so stringent in all parts of the world, the World Nuclear Association says. While uranium mining typically doesn’t increase radiation exposure for people living near operations, the industry has faced opposition from some communities because of environmental concerns linked to spills of slurry and waste.

To meet rising demand and replace Russian supply, new sources of uranium production are needed, said

Jonathan Hinze,

president of UxC LLC, which assesses market prices.

“All told, the idled and new junior production could be upwards of 40 million pounds a year,” though that supply mostly won’t be needed until after 2030, Mr. Hinze said. Global output is currently 125 million to 130 million pounds annually, he said.

With uranium prices rising, miners are rushing to get more capital. Producers of uranium and two lesser-known materials—radium and vanadium—have had their second most active start to a year in equity capital markets since 2014, according to Dealogic.

Paladin Energy Ltd.

PDN 13.48%

recently raised roughly $150 million to restart the Langer Heinrich mine in Namibia and work could begin next month. Operations at Langer Heinrich were suspended in 2018 because of low uranium prices. Paladin aims to produce uranium again in 2024 and recently said it was negotiating a supply deal with North Carolina-based utility

Duke Energy Corp.

For Boss Energy, the roughly $80 million cost of restarting Honeymoon is covered by a recent equity raising, Mr. Craib said.

Not every uranium company will be successful in restarting production, said UxC’s Mr. Hinze.

“Those companies with deeper pockets and greater technical and resource capabilities will likely win the race,” he said.

Write to Rhiannon Hoyle at [email protected]

Russia accounted for 6% of the world’s mined uranium production in 2020, yet it supplied roughly 16% of U.S. imports because of its dominance in enriching uranium for use in nuclear reactors, according to industry and official data.

The Ukraine war has driven up prices of crude oil and natural gas, making alternative power sources such as nuclear more competitive. The conflict has fanned concerns about the reliability of supplies from Central Asia, especially Kazakhstan, which was also roiled by unrest this year. Kazakhstan is the world’s biggest uranium producer and typically ships via Russia.

In the U.S., the Energy Department is seeking to avert the premature closure of reactors. A deadline to apply to share in a $6 billion pot created to help utilities keep nuclear operations running has been extended to July 5. Energy Secretary

Jennifer Granholm

says nuclear assets are vital to the Biden administration’s clean energy goals.

“We believe now is the start of a new cycle,” said

Duncan Craib,

chief executive of

Boss Energy Ltd.

BOE 11.87%

“The price of the commodity is going up, demand is increasing, and suppliers are reaching out for geopolitical stability.”

Boss Energy this month said it would restart the Honeymoon uranium mine in southern Australia, which was mothballed almost a decade ago. It expects to resume production by late next year.

The Ukraine war has highlighted vulnerabilities that the nuclear industry has yet to overcome in the decade since triple meltdowns at Japanese reactors in Fukushima led several countries to shun nuclear power. Russia’s shelling of Ukrainian nuclear plants has made some investors nervous about safety, while higher energy costs risk exacerbating an economic slowdown that would weigh on electricity demand.

Some mining executives worry that labor shortages and rising inflation will dent the viability of bringing old uranium mines and new projects into production.

In Canada’s Saskatchewan province,

Cameco Corp.

CCJ 2.07%

is working to restart the McArthur River mine, which has been closed since 2018. McArthur River is the world’s largest high-grade uranium mine.

“Yes, we’re bringing McArthur back, but we’re going to operate it at a lower-than-full-capacity rate,” said

Grant Isaac,

Cameco’s chief financial officer. “We’re still in supply discipline mode.”

Cameco’s view reflects the mining industry’s record of investing heavily in boom times only to swamp the market with product, depressing prices and making some operations unprofitable.

Still, Mr. Isaac said utilities’ improved confidence in nuclear-power generation was noticeable in contract lengths, which have widened to as much as 10 years, from two to five years previously.

Colorado-based

Energy Fuels Inc.,

UUUU 1.95%

which has several projects on standby, recently signed three contracts with American utilities for up to 4.2 million pounds of uranium combined between 2023 and 2030, said

Curtis Moore,

vice president of marketing and corporate development.

“We’re hiring people. We’re spending money on new equipment. We’re refurbishing older equipment and rehabilitating parts of our existing mines to be prepared for the restart of new production, perhaps as early as late summer,” he said.

The accelerating global energy transition had laid foundations for a nuclear revival, according to market analysts. Countries including the U.K. and France have said nuclear power will play an important role in cutting their greenhouse-gas emissions.

Globally, there are about 55 power reactors under construction, with China and India especially active, according to the World Nuclear Association. There are roughly 440 reactors in operation and hundreds more developments proposed world-wide.

While uranium is mostly used to generate electricity, it is also used to produce radioactive isotopes for medical diagnosis and cancer treatment as well as to power some naval ships and submarines.

Places such as Canada and Australia have strict safety regulations to limit the exposure of radiation for mine workers, although rules aren’t so stringent in all parts of the world, the World Nuclear Association says. While uranium mining typically doesn’t increase radiation exposure for people living near operations, the industry has faced opposition from some communities because of environmental concerns linked to spills of slurry and waste.

To meet rising demand and replace Russian supply, new sources of uranium production are needed, said

Jonathan Hinze,

president of UxC LLC, which assesses market prices.

“All told, the idled and new junior production could be upwards of 40 million pounds a year,” though that supply mostly won’t be needed until after 2030, Mr. Hinze said. Global output is currently 125 million to 130 million pounds annually, he said.

With uranium prices rising, miners are rushing to get more capital. Producers of uranium and two lesser-known materials—radium and vanadium—have had their second most active start to a year in equity capital markets since 2014, according to Dealogic.

Paladin Energy Ltd.

PDN 13.48%

recently raised roughly $150 million to restart the Langer Heinrich mine in Namibia and work could begin next month. Operations at Langer Heinrich were suspended in 2018 because of low uranium prices. Paladin aims to produce uranium again in 2024 and recently said it was negotiating a supply deal with North Carolina-based utility

Duke Energy Corp.

For Boss Energy, the roughly $80 million cost of restarting Honeymoon is covered by a recent equity raising, Mr. Craib said.

Not every uranium company will be successful in restarting production, said UxC’s Mr. Hinze.

“Those companies with deeper pockets and greater technical and resource capabilities will likely win the race,” he said.

Write to Rhiannon Hoyle at [email protected]