Primary and secondary sources in Global Nuclear Fuel Supply; focus

on UraniumGeorges CAPUS

AREVA VP Front-End Marketing

Seminar on Global Nuclear Fuel Supply Permanent Mission of Japan to the IAEA

VIC January 26, 2009

> G. Capus – 2009_01_26 – IAEA VIC _ v03

Contents1. Projected nuclear reactor fleet; from fuel

demand to uranium demand scenarios and uncertainty

2. Supplying the uranium demand1. Primary and secondary sources2. Primary uranium outlook

1. Countries and security of supply2. Types of mines and potential cost trend3. Producers

3. Secondary sources1. uranium stocks2. Mox and RepU3. re-enriched tails4. downblended HEU

3. Balancing Supply and Demand: will future market equilibrium differ from past?

4. Focus on long term Security of Supply 5. Conclusions

> G. Capus – 2009_01_26 – IAEA VIC _ v04

1) Projected nuclear reactor fleet; from fuel demand to uranium demand scenarios and uncertainty

Warning: predicting the future is nonsense, forecasting is risky!Pros:

Global population growthGlobal economy growthGlobal warmingEnergy crisis

Cons:Ongoing financial crisis and impactsPublic acceptance, technical and manpower bottlenecks…

We, at AREVA, are confident many new reactors will be added in the coming decade, significantly helping at limiting CO2 emissions ( we are still expecting around 635 GWe by 2030 and working at turning it into reality…)

> G. Capus – 2009_01_26 – IAEA VIC _ v05

Projected nuclear reactor fleet; from fuel demand to uranium demand scenarios and uncertainty

Key parameters and sources of uncertainty in U demand forecastShort term: the fleet is slowly evolving

1) availability of major secondary sources (mostly U market insensitive)2) NPPs availability factor and load factor (mostly bound to technical issues or natural events, thus highly unpredictable)3) Enrichment tails assays (Uranium feed v.s. enrichment market situation)

Long term: all is possible but forecasting the future is difficult1) Top 1 parameter = projection of installed nuclear capacity2) Top 2 parameter = composition of future fleet ; LWR and related generation shares, HWR, FBR…Second order parameters

Enrichment tails assaysRecycling and substitutes (Mox, RepU, Th fuels?)Load factors

> G. Capus – 2009_01_26 – IAEA VIC _ v06

Projected nuclear reactor fleet; installed GWescenarios and uncertainty

After 20 years; a rapidly widening range of uncertainty

0

250

500

750

1000

1250

1500

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Net

GW

e

WNA-20071973 OECD scenarios

WW

2009to

2029

From OECD-NEA Nuclear Energy Outlook 2008

Under the high scenario, the nuclear share of global electricityproduction would rise from 16% today to 22% in 2050

NEA2008 high

NEA2008 low

Existing capacity

> G. Capus – 2009_01_26 – IAEA VIC _ v07

Projected nuclear reactor fleet; from GWe to uranium demand scenario

A simplified calculation assuming a steady yearly consumption of 168 tU per installed GWe (current fleet consumption of 62 ktU)

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100

150

200

250

1980

1985

1990

1995

2000

2005

2010

2015

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2025

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2035

2040

2045

2050

Nat

Ukt

WNA-20071973 OECD scenarios

WW

2009to

2029

From OECD-NEA Nuclear Energy Outlook 2008

NEA2008 high

NEA2008 low

Existing capacityMaxi past U prod

68 ktU in 1980

> G. Capus – 2009_01_26 – IAEA VIC _ v08

Will it be – easy, possible, difficult – impossible to fuel the projected nuclear reactor fleet?

Say up to 150 ktU /y, the resources in the ground are there, the projects are identified… So, what is needed? Adequate market signal (durably “sufficiently high” NatU prices)!

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Nat

Ukt

From OECD-NEA Nuclear Energy Outlook 2008

NEA2008 high

NEA2008 low

Maxi past U prod68 ktU in 1980

RB2007_Existing + committed+ planned + prospective

Mine capacity

RB2007_Existing + committed+ planned + prospective

Mine capacity

Actual production

> G. Capus – 2009_01_26 – IAEA VIC _ v09

2-1) Supplying the uranium demand; Primary and secondary sources

Definitions: (from WNA Report 2007 p. 116)Secondary suppliesSecondary supplies may be defined as all materials other than primary production (sometimes also named “already mined uranium” or AMU)Conversely primary sourcesprimary sources correspond to “freshly mined uranium”Secondary supply sources include

Inventories- Commercial NatU and LEU inventories- Government & strategic inventories- HEU inventories- …

Use of recycled materials of various types- RepU- MOX from civilian fuel cycle- MOX from excess military stockpiles- NatU equivalent recovered through depleted U re-enrichment - Scraps and other sources

> G. Capus – 2009_01_26 – IAEA VIC _ v010

Global Uranium Secondary SuppliesA large share of total supplyObviously, most of the secondary sources come from previously stockpiled uranium

From OECD-NEA – IAEA « Red Book » 2007

Commercial stockpiles

build-up

Military stockpiles

build-up

Secondary supplies

Primary supplies

(Mineproduction)

Primary uranium remainsthe dominant supply source

> G. Capus – 2009_01_26 – IAEA VIC _ v011

2-2) Primary uranium outlook

Primary uranium outlook1. Countries and security of supply2. Types of mines and potential cost trend3. Producers (possible changes in market and

corporate structures …financing… Cooperation among producers, possible impact of the credit crisis.)

> G. Capus – 2009_01_26 – IAEA VIC _ v012

Conventional fissile resources representmore than 200 years* of 2007 world demand

General total of conventional resources: 16,000 000 tWorld demand in 2007: less than 70,000 t

Resources: > 200 times 2007 demand

10.55.5General total

Subtotal

> 130

80 to 130

40 to 80

< 40

7 to 22

7.8

3.0

4.8

SpeculativeResources

2.8

?

0.8

2.0

PrognosticatedResources

2.13

?

0.3

0.6

1.2

InferredResources

3.34

?

0.7

0.8

1.8

ReasonablyAssured

ResourcesCost of recovery

$/kgU

Unconventional

Conventional

CATEGORY of Uranium resources (million tons = Mt)

Source: OECD Nuclear Energy Agency & IAEA "Uranium 2007: Resources, Production and Demand"

+ With Gen IV Fast Breeder Reactor, resources are virtually unlimited

1 Based on direct geologicalevidence

2 Based on indirect geologicalevidence

3 Extrapolated values

Identified (deposits) Undiscovered

* Of which * Of which about 80 years about 80 years with a very highwith a very high

probability probability

31 2

> G. Capus – 2009_01_26 – IAEA VIC _ v013

Uranium market price & «Identified Resources»More More thanthan allall the currently «Identified Resources» (up to 50$/lb in early 2007 $ estimates!) are are neededneeded to fuel a sharply growing Nuclear RenaissanceTherefore: what should be an adequate LT price level????

0

20

40

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140

déc-

00

juin

-01

déc-

01

juin

-02

déc-

02

juin

-03

déc-

03

juin

-04

déc-

04

juin

-05

déc-

05

juin

-06

déc-

06

juin

-07

déc-

07

US

$/lb

U3O

8

Spot price40$/kgU limit80$/kgU limit130$/kgU limit260$/kgU limitLT_Price

2.974.46

5.47

Identified U Resourcesin MtU (RB2007)

?

> G. Capus – 2009_01_26 – IAEA VIC _ v014

World Uranium resources*; a widespread energy source potential

Identified uranium resources Top 10 countries (88%) + 5 next (96%)

•Id. Resources recoverable at less than 130$/kgU or 50 $/lbU3O8•Total 5.47 MtU as of 1/01/07

RUSSIA

3

Jordan

Uzbekistan

India

China

Mongolia

AUSTRALIA

1

23%

10%

KAZAKHSTAN

2

15%15%

U.S.A.

6

6%

NAMIBIA

8

5%

CANADA

5

8%

BRAZIL

7

5%

S.AFRICA

4

8%

NIGER

9

5%

Ukraine

10

others

Source OECD-NEA–IAEA « Red Book 07»

> G. Capus – 2009_01_26 – IAEA VIC _ v015

Uranium: a production mainly coming from politically stable countries

A rather slow ramp-up of global productionA fast increase in KazakhstanAlmost 60% from top 3 countries

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

2002 2003 2004 2005 2006 2007 2008*

tU

OthersAfricaother CISKazakhstanAustraliaCanada

* preliminary

> G. Capus – 2009_01_26 – IAEA VIC _ v016

World uranium production 2007; countriesMajor producing countries likely to remain exporters in the LT…

Total 2007 = 41 700 tU (108 MlbU3O8)Top 10 = 96%

Namibia7%

Ukraine2%

China2%

autres4%

USA4%

Uzbekistan5%

Canada22%

1

Australia21%

2Kazakhstan

16%3

Russia9%4

Niger8%5

6

7

89

10Producing & consumingcountry

Producing country

> G. Capus – 2009_01_26 – IAEA VIC _ v017

World uranium production 2007(major producers)

The production structure is basically concentrated (oligopoly), however less than other fuel cycle segments opposite tendencies: + juniors – take over = resulting trend?

KAZATOMPROM12%

AREVA partners /Niger2% AREVA

14%

CAMECO18%

RTZ - ERA11%RTZ-RÖSSING

6%

NAVOÏ MMC5%

AEP/TVEL9%

Others*15%

BHP-B ODM8%

Total 41700 tUTop 10 = 90%Top 10 = 90%* Others <= 1000 tU/an

1

2

3

4

5

6

7 Canada, USA

AustraliaNamibia

Canada, Niger, Kazakhstan

Kazakhstan

Russia, Kazakhstan

Uzbekistan

Australia

> G. Capus – 2009_01_26 – IAEA VIC _ v018

Mining and processing methods; current repartition

Main types of Mining Methods

Open pitUndergroundUndergroundIn Situ Leach (ISL or ISR)

Tailings reprocessing…

Main types of process for U3O8 recovery

Conventional ore dynamic Conventional ore dynamic processingprocessingConventional ore static processing (Heap leaching)ISL Solution processingBy-product processing

Copper- UGold- UPhosphoric acid – U…

25%

45%

30%

-%

30%

10%

3%

57%

• Cost structure differs from one method to another• However the overall coststhe overall costs are not directly linked to mining and

processing methods, but instead to a combination of factorsa combination of factors including• The average grade• The ore-body depth• The reagents (types and consumption…), extractants…

> G. Capus – 2009_01_26 – IAEA VIC _ v019

2-3) Secondary sources

Secondary sources; main categoriesUranium stockpiles (commercial, strategic…)Mox and RepU; the recycling sourceRe-enriched tails; another form of recyclingDownblended HEU; from weapon grade U to civil fuel

In the recent years they were contributing to up to 45% to the up to 45% to the Market S&D balanceMarket S&D balanceSome are easy to forecast (like Mox or RepU)Other are much more unpredictable (excess material disposition by Governments) but this is improving…Finally some are creating some « market addiction » like Russian HEU?

> G. Capus – 2009_01_26 – IAEA VIC _ v020

U stockpiles estimates: What’s left?

Cumulative production less cumulative reactor requirements: the easy way to get a raw figure for U « inventories »

From OECD-NEA – IAEA « Red Book » 2007

Around625 000tU

As of end 2006

Around 1 700 000 tUCurrently asDU tailsSpent fuelFissionnedProcess losses

From a cumulative production of about 2 350 000tU

> G. Capus – 2009_01_26 – IAEA VIC _ v021

Estimates for recoverable fissile material from stockpiles: a high recyclable potential

If some is consumed an some not easily recoverable, most can be recovered for use as NatU equivalent in existing reactors*However in most cases this would require in most cases this would require dedicated industrialdedicated industrial capacitiescapacities

Around625 000tU

As of end 2006

Around 1 700 000 tUCurrently asDU tailsSpent fuelFissionnedProcess losses

From a cumulative production of about 2 350 000tU**

Scale: 2 500 000 tU

* FBR not considered here

% of the original

U235 content

Translatedin ktons

Equiv. NatU

Commercial inventoriesFC pipeline &strategicTotal HEU stockpiles

Recoverable from tails(nw2= 0,1%)

Recoverable from SF(RepU only)

Losses & wastes(including secondary tails)

ConsumedFissionned

** At YE 2006; estimates are within a +- 2% range

3% 70 3% 65

11% 250 19% 455

10% 230

27%

27%

Recoverable from SF as Pu + separated Pu(from U238 balance)

Feedfor

freshfuel

Balanceto

total

250

> G. Capus – 2009_01_26 – IAEA VIC _ v022

From the top of the pile: example of USA commercial grade stockpile evolution

1) Build-up, then 2) drawdown, then 3) instant transfer from Gvt to Market, and more recently 4) stabilization and even again build-up

0

20

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78 80 82

1984

1986

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1994

1996

1998

2000

2002

2004

2006

ktN

atU

equi

v.

Utilities NatU Utilities EUP Suppliers NatUSuppliers EUP GOVT NatU GOVT EUPTOTAL COMMERCIAL

data DOE-EIA

2

1 4

3

> G. Capus – 2009_01_26 – IAEA VIC _ v023

How military & strategic stockpiles reach the market(1/3) example of US- Russia HEU deal

Huge quantities of NatUFNatUF66

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tU

feed tUUS quota tUUsed quota tU

(source UxCfromUS DoC)

Mainly added to the US-DOE (95, 96, 97, 98)inventory (now for sale)

• Back to Russia for HEU dilution or• Sold outside the US, or • Added to the « Monitored Inventory »

> G. Capus – 2009_01_26 – IAEA VIC _ v024

US-Russia HEU deal: a complex secondary supply

Scheme of yearly physical flows (rounded in tU and MSWU)

HEU (90% U235)

NatUF6 orDEUF6

(x% U235)

SWUs(nw2 =

0.1x%U235)

+

+

In Russia

LEUF6(4.4% U235

in average)

In the US

LEUO2(4.4% U235

in average)From TenexTo USEC

From USECto

US Fuelfabricators

30t

900t

900t

+

SEU (1.5% U235)

830t

LEUcontaining

9000 tUas NatUF6

and5.5 MSWU

However a smaller net contribution to the Global Market for NatUF6 and SWUs

However a smaller net contribution to the Global Market for NatUF6 and SWUs

> G. Capus – 2009_01_26 – IAEA VIC _ v025

How military & strategic stockpiles reach the market(2/3) example of US-DOE Excess U

US-DOE Dec. 2008 Excess Uranium Management Plan

0

500

1000

1500

2000

2500

3000

3500

4000

4500

FY2008 FY2010 FY2012 FY2014 FY2016 FY2018 FY2020

tU

Off-spec non UF6DU as UF6Russian Origin NU for initial coresunallocated HEU downblendallocated HEU downblend10% of maxi anticip. US requrts

As tNatU equiv.

> G. Capus – 2009_01_26 – IAEA VIC _ v026

Depleted Uranium (Tails) re-enrichment; top 1 top 1 potentialpotential from the pile

Currently participating to the supplies, this source is driven by both Uranium & SWU market conditions

0

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Recovered NatU equiv. (in tU)D

U fe

edne

eds

(tDU

)

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1

2

3

4

5

6

7

8

MSW

U n

eede

d

0 50 100 150 200 250SWU cost

Examples for DUF6 atat 0.35% U235 0.35% U235 depleteddepleted to 0.1%to 0.1%and 5$/kgU as UF6 for handling, no other cost than SWUs

Equivalent of a large mine = large enrichment plant= x billion dollars

0

50

100

150

200

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300

Nat

Uco

st Recovrd NatU$/kgU as UF6

US$/lbU308 for Conv. = 12

> G. Capus – 2009_01_26 – IAEA VIC _ v027

From apart the pile*: MOX is a significantsecondary supply, where recycling is the choice

* Does not belong to the U235 inventory balance

WNA estimate for worldwide current MOX use = 1400 t NatU equiv.

> G. Capus – 2009_01_26 – IAEA VIC _ v028

MOX; a secondary supply with long term potential(from Spent Fuel to New Fuel)

Views fromAREVA Industrial

Recycling Facilities

La Hague(SF cask handling)

La Hague(general view)

Melox Mox fuelfabrication plant

(general view) MOX fuel assembly

> G. Capus – 2009_01_26 – IAEA VIC _ v029

From the pile: RepU is a significant secondarysupply, however currently under-recycled

The driver for RepU use should be mainly the uranium marketsituation, however it is currently driven by other factors and constrainedconstrained by the by the neededneeded dedicateddedicated capacitiescapacities

The new AREVA GB2 plant (view below) will includededicated cascades for RepU enrichmentin unit N which will start construction this year

> G. Capus – 2009_01_26 – IAEA VIC _ v030

From the pile*: RepU is a significant secondarysupply, however currently under-recycled

Dedicated facilities under construction or firmly plannedFrance (Pierrelate site)

GB2 centrifuge enrichment plant: RepU dedicated cascades in Unit N (2nd unit)REC2 : for RepU handling, sampling and blendingComurhex RepU; a new RepU conversion plant is under detaileddesign stage

These new capacities will mainly feed the FBFC fuel fabrication plant (Romans site) currently hosting two lines dedicated to RepUfuel (from UF6 to assemblies)Elsewhere: some capacities are currently recycling RepU

Russia & KazakhstanUSA from former governmental programs (BLEU project…)

Or planning to do so; Japan…

> G. Capus – 2009_01_26 – IAEA VIC _ v031

3) Balancing Supply and Demand: will future market equilibrium differ from past?

1) Lengthy period of overproduction (largely triggered by price spike due to over-stated fleet forecast and then enrichment monopoly request for advance feed delivery)2) Lengthy period of production capacity reduction and massive secondary supplies3) Entering instability ???

1970 1975 1980 1985 1990 1995 2000 20050

10000

20000

30000

40000

50000

60000

70000

tU

0

10

20

30

40

50

60

70

80

Spot priceYear average

US$i1 2

3

> G. Capus – 2009_01_26 – IAEA VIC _ v032

Comments on future market equilibriumA frequent approach is to pile up all the potential supplies as announced or foreseen => this result in re-doing the past!

From WNA MR 2007 –Upper Supply Scenario

Is this likely to occur?

> G. Capus – 2009_01_26 – IAEA VIC _ v033

Comments on future market equilibrium;is a massive uranium glut likely?

Many factors have dramatically changed since the glut of the early 1980’s

No more significant subsidies for U productionNo more significant financing from Governments No more SWU monopolyLengthy and demanding licensing processes

Two types of market trend are thus possible, in theory at least1) To continue to heavily rely upon already mined uranium and deplete the stockpiled material to its end or so.2) To progressively increase the mines output to timely reach the level needed by the expected fleet increase. We must find a way to de-commoditize uranium, meaning to smooth its market volatility.

> G. Capus – 2009_01_26 – IAEA VIC _ v034

4) Focusing on long term Security of Supply

Question asked: Uranium producers’ strategies for hedging against risk (accidents, disasters, contract disputes, work stoppages, etc.)?

By the way, what about UF6 conversion????

> G. Capus – 2009_01_26 – IAEA VIC _ v035

Identified Risks threatening S&D balance

The following set of Root cause…Accident and other technical causesAccident and other technical causesSocial / political interferencesSocial / political interferencesRegulation inadequacyRegulation inadequacyMarket dysfunctionMarket dysfunction

Impacting either an actual supply source or a planned supply source firmly committed to deliverA prospective production area representing significant resources

May turn into =>Temporary and geographically limited delivery disturbances, or intoLengthy and widespread market tension

Depending upon the size of the affected source and of the impacted market segment mitigation capacity

> G. Capus – 2009_01_26 – IAEA VIC _ v036

Actual examples of risk occurrences and already identified consequences

Technical event leading to a temporary suspension of an existing production center:

in uranium; McArthur River flooding in 2003, consequences limited to some pressure on priceIn conversion: Port Hope ; so far no visible consequences

Technical event leading to a temporary suspension of a firmly planned and committed project:

Cigar Lake project flooding; consequences so far limited to somepressure on price (from Oct. 06)

Regulation inadequacy leading to a risky situationLack of sea ports open to nuclear transports in Australia; limited number of Shipping Cies accepting nuclear cargoes

Social / political interferencesBan on uranium mining (example of a recently lifted ban in Western Australia…)

Market dysfunctionRecent U price volatility; cost components price spike

> G. Capus – 2009_01_26 – IAEA VIC _ v037

Uranium producers’ possible strategies for hedging against risk

Technical Causes: Work constantly at sticking to the best achievable practices, monitor, benchmark and improve

Social, political, regulatory causes:Keep good relationship with all stakeholdersComply, dialogue and anticipate

Market inefficiencyIs it up to producers?

All causesKeep a sufficient level of inventory and/or set up a back-up policy

Timely invest: example: AREVA has committed > 8 billion € of investment to Key Front-end projects, of which about half are outside Europe and around half of that in its advanced uranium mining projects

> G. Capus – 2009_01_26 – IAEA VIC _ v038

Conclusions

A few concluding remarks

> G. Capus – 2009_01_26 – IAEA VIC _ v039

Uranium: when fueling the fleet, think LT

LT natural uranium supply is a production and cost issue, not a resources in the ground issueMines with production cost well above 60$/lbU308 neededSecondary sources are not a sufficient answer without accelerating recycling

U productionWNA Ref 08-30

U productionWNA upper 08-30

HEU remainingpotential:150ktnatU

equiv.

MOX & RepUpotential@

currentcapacity: 120ktnatU

equiv.

Cumulated 2008-2030

Existing mines

New mines

Existing fleet

New build

ktU

0

500

1,000

1,500

2,000

2,500

Ref.Req-2008-2030

> G. Capus – 2009_01_26 – IAEA VIC _ v040

Revisit the Long Term Security of Supply

Several countries with a large NPP fleet (like Japan, France andothers) are also scarcely endowed in oil, gas, coal and uranium.Therefore they have always been focused at improving their LT Security of Supply in Energy

Populated countries with ambitious nuclear power programs are also scarcely endowed in uranium (China, India…) and will increasingly secure LT sources

Because the World is now increasingly shifting to low to no CO2emitting power sources, Nuclear Power is back and nuclear fuel LT security of supply must be revisited

Securing uranium exploration and mining remains a key part of the answer along with the other fuel cycle segments including all forms of recyclingincluding all forms of recycling

> G. Capus – 2009_01_26 – IAEA VIC _ v041

Estimate of World Uranium Exploration Expenditures (Historical)

A strong correlation with the spot price…in real term

0

200

400

600

800

1000

1200

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

MU

S$

(cur

rent

)

0

20

40

60

80

100

120

US

$i/lb

U3O

8

Total explo&devSpot price TrT

About 130$/lbU3O8in 2008 money

42

The End

> G. Capus – 2009_01_26 – IAEA VIC _ v044

Annex 1: Selected references

The Global Nuclear Fuel Market – S&D 2007-2030 – WNA 2007

G. Capus – 2005 – paper 1.2 in IAEA Fissile Material Management Strategies for Sustainable Nuclear Energy

K. Fukuda & M. Ceyhan – 2005 – paper 2.3 in IAEA Fissile Material Management Strategies for Sustainable Nuclear Energy

OECD-NEA 2008 - Nuclear Energy Outlook

OECD-NEA & IAEA 2007 - Uranium 2007: Resources, Production and Demand