Uranium Ban?
On December 11, 2023, the US House of Representatives passed H.R. 1042 – title: Prohibiting Russian Uranium Imports Act. The Senate passed the bill on April 30 and it was signed into law two weeks later, on May 13, 2024.
The purpose of the law should be pretty obvious – to end U.S. reliance on uranium (enriched or otherwise) imported from Russia.
The effect of the bill may be a little less obvious. The waiver system embedded in the law has meant that the flow of Russian uranium into the US has continued pretty much unabated. That’s because the U.S. doesn’t have enough uranium – or uranium enrichment capacity – to meet its nuclear needs. Roughly 25% of America’s enriched uranium comes from Russia.
The waiver system was intended to buy the U.S. time to foster its domestic enriched uranium supply chain without losing actual supply. Russia was happy to go along because it’s got a war to pay for.
Friday morning Russia announced that it would be adding its own restrictions on its uranium exports to the U.S. – so I guess everybody’s in agreement now!
The Inflation Reduction Act provided the Department of Energy (DOE) with $700 million in funding to expand American high-assay low-enriched uranium enrichment (HALEU) supply. The DOE has announced the award of 6 HALEU supply contracts that extend for 10 years and could be worth a combined $2.7 billion.
The only American company currently enriching uranium in the U.S. was one of the awardees. That company is Centrus Energy (NYSE:LEU).
The other companies that have been awarded DOE contracts are BWXT, Framatome, GE Vernova, Orano and Westinghouse. None of these has started refining uranium.
How Much Uranium?
I am now going to share a block of text from Centrus Energy’s most recent quarterly earnings conference call because it contains the best rundown for all the development of nuclear Small Modular Reactors (SMR) and microreactors that’s occurred over the last month:
Microsoft recently signed a 20-year power purchase agreement to restart the reactor in Pennsylvania and the Department of Energy also finalized a financial package to enable the restart of the Palisade nuclear plant in Michigan.
These represent the first reactors to ever restart. After closing down on October 14th, Google announced a partnership with Kairos Power to deploy a fleet of HALEU-fueled reactors totaling 500 megawatts.
Two days later, Amazon announced a $500 million investment and a commitment to help deploy four SMRs HALEU fueled reactors in Washington State as well as potential reactor projects in Virginia.
That same day, the Department of Energy made $900 million available to support deployments of small modular reactors that follows action by TVA which increased its commitment to $350 million to develop small modular reactors at the Clinch River site in Tennessee.
The US military is also looking to nuclear energy for national security next year. The Pentagon will begin testing prototype HALEU microreactor at Idaho National Laboratory.
Meanwhile the US Air Force is looking to host a micro reactor in Alaska. The US army is evaluating bids for reactors at two of its bases and the navy recently began exploring possible reactor deployment on an underutilized sites in Maryland, Virginia and North Carolina…
‘These initiatives to expand nuclear, have something in common. They all require fuel where the growth comes from reactor powered by LEU or HALEU or a mix of both centrus is well positioned since our Ohio plant is the only US site license for HALEU production and one of only two sites licensed for LEU…”
We first brought Centrus (NYSE: LEU) to your attention back In June at $43 a share. The stock hit a high of $118 on November 1. The stock was down 12% to $70 on the Russia news today. At that price, the forward P/E is roughly 25. That’s a decent entry, though there’s an outside chance the stock trades down to its next support point at $55.
Cheers,
Briton Ryle
Chief Investment Strategist
