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20 November 2014
by Mia Pepper

The nuclear house of cards

A Nuclear Reactor

Uranium miners Paladin Energy, Toro Energy and BHP Billiton all go into their Annual General Meetings over the next two weeks. There is likely to be a lot of posturing over a recent upturn in the uranium price. While the nuclear ideologues are charging ahead, many investors are treading carefully.

Mining journalist Dryblower this week made an interesting distinction between uranium and other minerals: "Because uranium is really not part of the pure mining industry but an arm of the nuclear industry it's easy to understand why most investors prefer simpler metals where there is a chance that a discovery can be brought into production without incurring multiple layers of complexity."

Indeed there are some complex reasons why uranium miners have been rejoicing this week.

Bloomberg considered the uranium price upturn as the US and EU enforced sanctions on trade with Russia. The Russian military connection and the rise in the uranium price doesn't stop there. This year an important deal ended between the US and Russia to disarm nuclear weapons and divert nuclear materials for nuclear energy. The end of this deal means more nuclear weapons and less surplus uranium – cause for celebration? Perhaps not.

It is a complex and unique aspect of the industry that sees the uranium price improve and companies like BHP, Rio Tinto, Paladin, Cameco and Toro Energy celebrate alongside the increased risk of nuclear war.

This unique aspect of the industry has also been seen with the recent decision by the Australian Government to open up uranium sales to India, a nuclear weapons state that is not a signatory to the Nuclear Non Proliferation Treaty, refuses to sign the Comprehensive Test Ban Treaty, has repeatedly been in armed conflict with Pakistan and is actively expanding its nuclear weapons arsenal and its missile capabilities.

Nuclear tensions have further increased in recent weeks with Pakistan successfully testing two balistic missiles following a spate of violence and conflict between the two countries. A conflict and nuclear threat many underestimate.

Uranium miners are also rejoicing as Japan re-opens it's first reactor since the 2011 earthquake, tsunami and ongoing nuclear disaster amongst mass protests across the Nation. The approval to restart the Sendai nuclear reactor has been described by the Japanese Times as a "bad precedent for nuclear restarts". The Sendai reactor is situated in a an area with volcanic activity, has important safety features that are yet to be designed and other safety features that won't be installed for another two years.

Among the threat of nuclear war and nuclear disaster, the other reason for celebration among uranium miners is an industrial dispute between workers at the worlds largest uranium mine operated by Canadian nuclear giant Cameco. The strike contributed to an increase in the uranium price in July this year as it was expected the strike would cause some of the global surplus of uranium to be bought up. Cameco workers went on strike in July 2014 after being without a formal contract since December 2013.

The marginal and short-term increase in uranium is hardly cause for celebration. Even from the miners' point of view, there is little to celebrate since the current price is barely half that needed to make new mines viable or profitable.

All this excitement is really based on the hope from the industry that there will be a long-term increase in the demand for uranium. Often pointing to new build reactors in India and China, the industry is optimistic.

However according the World Nuclear Industry Status Report of 2014 there are currently 39 operating reactors that are operating over their 40 year life expectancy and due for closure. The report projects a long term decline in the number of reactors after 2020.

Likewise, in a report released last week the International Energy Agency warns of a looming "wave of retirements" of ageing reactors with almost 200 of the 434 reactors expected to be shut down by 2040. IEA chief economist Faith Bristol said: "I am afraid we are not well-prepared in terms of policies and funds which are devoted to decommissioning. A major concern for all of us is how we are going to deal with this massive surge in retirements in nuclear power plants."

In the face of nuclear war, nuclear disaster, public opposition, financial struggle, and the growth and competitiveness of renewable technologies, the house of cards that is the nuclear industry is bound to collapse again.