Uranium and Nuclear Energy: Critical to the Clean Energy Transition

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February 22, 2022 | (64 mins 33 secs)

Nuclear energy’s profile as a highly efficient, reliable and zero-carbon producing energy source has helped to create a new bull market for physical uranium. In this webcast we will discuss:

• How government policies are shifting in favor of nuclear energy
• Why nuclear energy is the ideal complement to renewable energy sources
• Why a growing number of investors are investing in physical uranium and uranium miners
• Will a higher price of uranium act as the catalyst to address the structural supply deficit

Webcast Transcript

Natalie Noel, RIA Database: Cover Slide

Hi everyone. And thank you for joining us for today's webcast. Uranium, And Nuclear Energy: Critical To Clean Energy Transitions, sponsored by Sprott Asset Management. Today's webcast will be providing one CFP, one CIMA, and one CFA CE credit. If you have any questions on credit, please don't hesitate to give us call at (704) 540-2657.

We welcome and encourage your questions, so you can type your questions in the Q & A box to the right of the slides, and we'll get to as many of your questions as possible. Additional material is available for you to download in the documents folder at the bottom of your screen. As always, we appreciate your feedback. At your convenience, please take a moment to take our survey that is also locate at the bottom of your console. We will cover quite a bit of information during today's webcast. If at any point in time, you're interested in scheduling a one-on-one meeting with Sprott Asset Management, please click the one-on-one folder at the bottom of your screen and confirm the request. In the event you missed any part of today's webcast or simply would like to watch it again, a replay will be made available and all registrants will receive that information by email.

Wth that, I'd like to go ahead and turn it over to today's first speaker Edward Coyne, Senior Managing Director of Global Sales First Sprott Asset Management. So, Edward, take it away.

Ed Coyne: Slides 2-5 Introduction

Ed Coyne: Thank you, Natalie and thank you all for joining us today. I've got two special speakers with me today, Per Jander and John Ciampaglia. Per joins us as Director of Nuclear Renewables and Battery Metals from WMC Energy. Per joined WMC Energy with a broad background in the energy sector spanning over 22 years. Most recently Per spent over a decade in uranium sales and trading in various roles at the marketing division of Cameco Corporation. Per is leading the advice work with Sprott and also focuses on commercial engagement with the investment community as well as key customers in Europe and Asia. Per has his Masters of Science degree in Industrial Engineering and Management.

With us also today is our very own John Ciampaglia. John is the Chief Executive Officer at Sprott Asset Management and Senior Managing Director at Sprott Inc. John has more than 26 years of investment industry experience and serves as Chief Executive Officer of Sprott Asset Management and as a Senior Managing Director at SPRA Inc. John earned his Bachelor of Arts and Economics from York University, is a CFA charter holder and a Fellow of the Canadian Securities Institute.

I'm your host today, Edward Coyne, Senior Managing Director at Sprott Asset Management and I'll walk you through the webcast outline.

I've asked Per to join us, to really talk about the shifting sentiment towards nuclear energy and explore how government policies are shifting in favor of nuclear energy and what impact these could have on policies for uranium demand. Then we'll shift to John Ciampaglia who will then talk about uranium's bull market that we believe is underway. We'll look at why a growing number of investors are investing in physical uranium and uranium miners. We will also explore the higher price of uranium and how it acts as a catalyst to address the structural supply deficit. And lastly, explore why invest in uranium today and why now.

Before we then shift to the Q & A session, I'll talk briefly about Sprott's capabilities and credentials and managing physical commodities.

For those that are new to the Sprott family, Sprott is a global leader in precious metals and real asset investments with over 19 billion in assets under management through the end of September of 2021, we're one of the largest firms out there focus on precious metals and real assets. We offer a unique suite of solutions, whether you're looking to allocate to the physical market, whether that's gold, silver, a combination of gold and silver, platinum and Playdium, and of course, more recently uranium. We also offer a full suite of managed equities on both the active side through our Sprott Gold Equity Mutual Fund managed by John Hathway and Doug Row, as well as several factor-based ETFs that give you exposure to whether the senior large-cap mining stocks or the junior small-cap mining stocks.

We also have a full suite of solutions in the lending business where we actually raise capital and lend it to mid to small-cap mining companies, as well as brokerage services, where we customize solutions in the gold and gold equity markets.

With that, I'd like to now turn the attention to Per to talk really about the shifting sentiment towards nuclear energy. Per, first and foremost, thanks for joining us today.

Per Jander: Slide 6 - 14

Per Jander: Thank you very much, Edward. Thanks for having me on again. It's great to be back. So, starting off this presentation here, we're going to look a little bit at the clean energy transition like you see a lot in news and media today, and I think there is no doubt that human activity impacts the landscape, the air quality, the water quality and arguably even climate itself. So, this is sort of a collection term for how do we actually try to deal with this problem? How do we move away from emitting a lot of carbon emissions and try to switch to a society that uses much less, or emits much less carbon?

This initiative started basically in 1997 with the Kyoto Protocol at the United Nations when you're trying to make an international effort to address these problems. And more specifically, the Paris Agreement in 2015 is when the clean energy transition was born. And now, we're starting to move more and more towards that. And I would say today, look maybe around one-third of the electricity production today carbon free or lower emitting, but we're going to need to switch to something that's more like 80% in the next 30 years, which is a huge challenge.

So, just taking a step back and looking at what is the problem here, I'm going to focus on the global annual carbon dioxide emissions. Because, from a greenhouse perspective, that is basically 75% of the effect is caused by carbon dioxide. And as you can see on this timeline, it's pretty much the definition of an exponential graph and it's really started with the industrial revolution and that just snowballed since then. There have been some periods with reductions, but I think we can all agree that in economic crisis, war, pandemics are not a great way to solve this problem. We need something a little bit more constructive.

This is also not a new problem. Scientists have been aware of it for quite some time, but I would say up until the 80, no one really cared about it. In the nineties, people started to care, especially with the Kyoto Protocol being formed there in 1997. And in early 2000, they actually started to gain quite a lot of momentum, but what happened then was the financial crisis came along, and basically it all went by the wayside.

Looking at what is different now this time around? And what we're seeing is that major nations are committing to net-zero targets. And this is despite COVID, despite all the struggles we've had over the last few years, it is still continued to gain momentum. And carbon neutrality, net-zero initiatives, are basically the same concepts and they can be done on an international scale. So, if you are emitting in one country in order to be carbon neutral, you can reduce emissions in another country. And there certainly are a lot lower hanging fruits in other countries. If you're in Norway for example, where you're 95% hydro, have no emissions, you can invest in another, in India or in China, and try to address the problems there. So, because it's a global problem, there's only one planet, there's only one atmosphere, so one change in one country also affects a change in another country.

So, what we're seeing is that quite a lot of parties now are actually enacting laws, how to address this, in Canada, Europe, the UK, Japan, and New Zealand have it actually written into law. And there are policy documents with a host of other large emitters, such as the US, Brazil, China, and Australia. And it really is gaining momentum. And these are very significant changes. It will have a real impact on emissions if these are indeed followed, and it's more focused on climate issues than I've ever seen before and it is gaining momentum.

And also, to keep in mind that going from 35 to 80% of low carbon emissions by 2050, it's a pretty huge task in a static world, but we shouldn't forget that it's also projected to be a 50% increase in electricity demand over the next 20 years alone. And this is even without electrification of the transport sector, focusing on that, which even can compound this even further. So, it's a very big challenge ahead of us, and addressing this challenge calls for some fundamental changes over energy systems.

Ed Coyne: Per, I'm going to stop you there for a second, because I think this chart is worth really thinking about. Because, the reality is we all talk about how can we use less and what technology's going to allow us to go greener, but I think it's lost on the fact that we're going to see basically the demand for electricity go up by close to 50% in the next two decades. That I think is a staggering number in itself, and so, you and I have talked about this many times how it's not one thing or the other, that we're going to really need everything we have. And I think, going to electrification, going to a carbon-neutral, going to a nuclear type of solution is just part of the solution. And these numbers to me are just staggering. When you look at this, it's probably just the use relative to the demand.

Per Jander: Oh, absolutely. I mean, you're so right. It's not one or the other, it's not a dollar spent on this, it's a dollar not spent on that. It is in enormous investments that need to be made in this, and every technology is going to need to be part of this solution.

Ed Coyne: Yes. Thank you.

Per Jander:Looking in particular what it means for nuclear growth, of course, you're going to have renewables, a lot of efforts are made on renewables, but looking at it from an energy system standpoint, you need a stable backbone of baseload power in the transmission system. That needs to be there in order for it to work. It needs to be energy supply, regardless of if the wind is blowing, if the sun is shining, if the rain is falling and you can have gas for this, and gas is certainly better than coal and oil, but it's not great from an emission perspective and it also can get quite expensive as we're seeing today, not to mention the energy security aspect that Germany is probably feeling right now in Europe, where it's hard to play tough against Putin when you're going to be very dependent on their gas going forward.

Ed Coyne: Right.

Per Jander: Looking at nuclear and the role they can play and is playing in a lot of countries, is that if you have a nuclear power station, you only refuel it once a year or once every two years in some cases, and you always have a reload on site at the nuclear power station itself, which means that you can run for two years at any given time and you're not held hostage to any supply chain issue or any geopolitical events that may happen. On top of that, the fuel cost for nuclear power is only about 5% of the total operating cost. If you're looking at gas, it's about 70%. So, a lot more price sensitive in gas power than you have once you have built the nuclear power station. Because again, the expensive part is to build the power station. Once you have it, use it as much as you can.

Ed Coyne: Well, I think the supply chain issue is something that rings true with everybody. Whether you're building a house or buying a new sofa, you can only imagine it when you're talking about fuel or nuclear, how these are real concerns, particularly going forward.

Per: Oh, absolutely. And the good thing with nuclear entities is that they are fairly insensitive to it, especially compared to other industries.

So, looking at a little bit more on the policy initiative. This is actually a slide that we talked about six months ago, so I'm just going to highlight some of the changes that have happened, and I mean, everything nuclear moves at a snail's pace, just looking at how things have changed and is changing. In the United States, for example, this was obviously talking about the budget now, the infrastructure bill is in place. There is $6 billion of tax credit to support power plants that are aging or in threat of being shut down. This is only up to 2026, not to 2031, but in the next four or five years, you are seeing 6 billion, which is quite substantial. And you have already seen power stations in Illinois for example, being rescued as well, and this is going to spread throughout the country.

You have also 3.5 billion for advanced nuclear power, this is also in the bill, and on top of this, you have 8 billion for clean hydrogen and nuclear is definitely going to be part of that as well. So, there's quite a lot of funding already available in the United States today. The main change has been Europe. You're looking at the taxonomy, it's more or less a done deal already, so, people are starting to plan for it, countries are announcing that they are going to extend the life of power stations, they're going to build new nuclear power. Holland, for example, has been very quiet on the nuclear market. They have a couple of power stations, but they're very small. They announced that they're going to build new reactors. They're going to start up their program again. Poland has a very ambitious program that they're embarking on. The Czech Republic, Sweden and Finland are all discussing new build and life extensions. And most of all that we all heard a couple of weeks ago in France with Macron announced they're going to build six new reactors and potentially eight more. And these are not any reactors. These are the EPRs that they build, and those are 1600. Megawatts a piece. So, when you talk about a small reactor, for example, that's about 300 megawatts, this is 1600. So, at least five of those in one reactor alone. Wow.

And again, going on with China, they're obviously have been on a very clear path for the last 10 years now. You look at them in their planned reactors that they're or proposed reactors in their plans, it's over 150 reactors in the next 15 years. So, staggering numbers there, but they all...

Ed Coyne: Say that number again?

Per Jander: 150 in 15 years.

Ed Coyne: Wow!

Per Jander: And they're on target. They're building a lot of them already and announcing new ones as we go. Japan again, obviously they have a huge setback during the Fukushima disaster, and they're about 5% today, but they already have in their goal that they're going to be up at 20% by 2030. So, a lot of very real things are happening. Policy announcements are one thing, but here you see real changes actually happening.

Ed Coyne: And I think it's interesting too because so many of us in the U.S. that are on this call, think of whatever happens here is what's happening globally. But in this case, it seems like it's just the opposite. We're sort of playing catch up, and other parts of the world are really leading the charge in this.

Per Jander: Absolutely. It really is. As I said, China has been on a path for the last 10, 15 years and they're only picking up speed. And the really positive news is Europe, that things are really coming around there and hopefully it spreads over here too. It certainly seems like, with bipartisan support, I think the potential in this country here is really, really big.

Looking a little bit at the reactors in the world today, of course, the number about 440, about stayed the same for the last two decades. So, the total number might be the same, but the kept capacity has gone up. And that is because some of the older reactors that are being decommissioned, they're fairly small, maybe about 500 megawatts and the new ones that are coming online can be two or three times the size of that. So, the overall impact is that the overall capacity is increasing.

And looking at the construction of a power station, basically, the definition is that once you start pouring the concrete, then that's when the construction has started. They plan about five to seven years to get it online. Now, you look at the ones being built in the United States, in France and Finland, certainly being a lot longer than that, but at the same time, you also get a lot more experience from that. And for first of a kind reactors, it's always hard to build, but the collective experience from this is obviously going to serve you very well going forward when you build new ones.

I will like to highlight another project that's probably not so well familiar in this country, it's in the United Arab Emirates, The Baraka Plant. It's four reactors, 1400 megawatts each, so it's a very, very big site. It's Korean design. They started building it maybe five, six years ago, announced obviously before that, but it's on time and on budget. A plant of this size to be such a success story is really something that hasn't been highlighted enough, I think. It's probably a fairly quiet part of the world from a European and North American perspective, but it really is a success story. And it just goes to show that there are really good technologies out there and they can deliver.

Ed Coyne: Well to have on time and on budget in the same sentence is something I've never heard before. So, that's quite impressive.

Per Jander: No, it really is a success story. So, I think that a lot can be learned from that and it's learned too. And they're very open to sharing information and share the success stories they've had and experience with it, so it's a very, very good story for, for nuclear energy in general. And over the next two years, what we're going to see is obviously we're going to see more and more reactors being announced. And these green numbers you see here, they're going to move into the blue once you start construction and eventually go yellow. And from the other side, you also have with the life-extension plans and money support funds being available for that, you also going to see fewer reactors fall off. So, the yellow numbers will not diminish as the reactors are getting older.

Ed Coyne: So, the efficiency both from a production standpoint, but also from a cost standpoint. I mean, these reactors, from what I understand costs between six and 10 billion to construct and build. I mean, people probably wonder where the money actually comes from. I mean, if you think about it from a country by country basis, any thought on that, just to get a sense of where this capital is, is it simply just from the tax space or where is it coming from?

Per Jander: In a lot of countries it is, especially in the Western world, in other countries, there could be support from China, for Chinese reactors, the Russians traditionally help to when they build reactors they also provide some financing, and obviously the Emirates, they have plenty of money there, so they don't really need financing.

Ed Coyne: Right. So, it's case by case?

Per Jander: Case by case.

Ed Coyne: Yes  And I think it's great though, that the newer ones will stay newer and in production longer, so the cost per construction per hour, I guess our energy hour becomes more attractive over time?

Per Jander: It certainly does. Absolutely. And then, switching quickly to uranium, I mean, this is such an interesting slide, and we can probably have a separate webcast on this alone, but I just want to highlight a couple of things on this. And not focus on so much where the uranium has come from, but of course, one thing that stands out, it's like, well, there was a lot, and it's probably unique for uranium that you had so much uranium mine even before there was a demand from a reactor perspective, of course, and this is the effect of the cold war. So, a lot of uranium in the fifties and sixties was mined as a part of the nuclear arms race.

Now, if you look at what happens with that, so sure of some stockpiles around and some weapons are around, but one of the other success stories of the nuclear industry, if you look at the gap between the requirements and what was being produced in the nineties through to 2010 is actually that some of the warheads were down blended, the uranium was down blended and fed into civilian reactors. And it was Russian warheads that were dismantled, the uranium was blended down and it fed American reactors. It's called The Megatons: The Megawatt Program, and it was from for 20 years, it actually provided 50% of the U.S. demand. So, you had warheads that were pointed at the US, but then provided 10% of the entire country's electricity, which is a really good success story.

Ed Coyne: That's a phenomenal success story. And I wish we would've promoted that more as a country. That's actually a phenomenal story when you think about what that means politically, as well as environmental.

Per: Absolutely. The other thing I want to highlight here is the increase in demand, from 1970 to 1990, it was obviously an extreme increase, and that was like building nuclear power stations, but it was done in the 1970s. Obviously, you wanted to remove the dependence again, energy, security dependence on oil because of the oil crisis, so that's why you saw a huge success for nuclear energy was really when the industry really took off and started. And I just want you to highlight that. If we're serious about the decarbonization and the net-zero issues, and the policies and announcements are being today, if they are going to take place and translate in the uranium demand, we're going to see a similar increase if not even bigger. So, this is not enough. And that's what we are looking at for the next 20 years.

Ed Coyne: Right. Interesting. Thank you.

Per Jander: And the final slide where I just want to part to is demand and supply picture essentially. And demand is obviously predicted to grow as we're building more and more reactors. And this green line is certainly going to start to shift over time. And you have shutdown reversals and life extensions, so that's going to start sort of having a median impact on the near end of that curve. And then, as you have more new reactors being announced and certainly coming online, that's going to start lifting up a little further out in time. And something to keep in mind too. Like once you start a new reactor, the initial core is four times the annual requirement, because you're starting from scratch, you're not just replacing a little bit, you need an entire new core and you place that in there. So, that's a lot of uranium that goes into that new reactor.

And, as far as new production coming online, there is a production available, certainly is, but inflation and supply cost have a potential to drive those cost up a lot. And we're looking at $55, $60, and it's going to be something well north of that.

Ed Coyne: And it wasn't that long ago. It was at 30 a pound. Correct?

Per Jander: Exactly. It keeps moving up all the time.

Ed Coyne: Yes.

Per Jander: And lastly, just focusing on the gap between, obviously supply and demand, because there is a persistent gap. And part of the reason that has been able to be there is the stockpiles we showed where the uranium was mine before actually they were needed, so there's been plenty of those lying around. Other inventories, there's something called underfeeding when you have an enrichment facility for enriching uranium, you can actually create uranium in that as well if you don't have enough demand for your enrichment services. There is a recycling of spent fuel as well. Some of these sources are finite, obviously, the stockpiles definitely are, and the underfeeding is depend on the limited quantities and recycling is very expensive and France is doing a lot of that, but you're dealing with liquid spent fuel, so its a very complex and expensive process to do that.

Ed Coyne: Okay.

Per Jander: And so, looking at the finite sources and it was projected to maybe last until 2030, that was say 15 years ago, now Cameco and Cataneprum, have reduced their production and they have bought well over 55, 60 million pounds, I think that's Cameco alone and Cataneprum basically reduce their production and then buy uranium in the market to feed into your long term contract, so that's increasing the speed of the depletion of the secondary supply. And obviously, last year was unprecedented purchases in the market from investors, not least of all was Sprott uranium fund, 25 million pounds that was not part of any forecast and that's been taken out the market as well.

Ed Coyne: Well, and that's a good segue, and thank you for that Per. And we're going to actually, at the end of this webcast, turn back to Per as well as John, who I'm going to introduce momentarily for some Q & A. We've got a lot of nice questions coming in and as those continue to come in, we'll address those at the end of the webcast.

Well Per, thank you for giving us the green initiative view, the demand view, the nuclear view. I'd like to shift now to John and have John really talk about the bull market that we believe is underway and really talk about uranium from an investor's point of view. How can our listeners on this call really participate, and what we see is a potential bull market. So, John, I'll shift to you now and talk a little bit about what's going on from the investor side of the table.

John Ciampaglia: Slides 15-29 

John Ciampaglia: Yes. Thanks Ed, and thank you everybody for joining us today on the call. Investor education is really important to us, and I know this topic is new for many people, including very sophisticated institutional investors that we've spoken to over the last several months. So, that's one of our key goals today. And if you do have questions, please send them in, we'll do our best to circle back.

Per, thanks so much for that excellent overview. You're definitely our subject matter expert and we're very pleased to have you act as a technical advisor to this Sprott Physical Uranium Trust. You've really provided a lot of valuable historical and present-day perspective on what's going on in the nuclear energy and uranium sectors.

Now, I'd like to shift gears a little bit and talk about the perspective that I have gained over the last year, speaking to dozens of investors about this topic. And, what I can tell you is that nuclear is a highly polarizing topic and it evokes a lot of fear in people, whether it's from nuclear war or some of the large scale accidents that have unfortunately happened in the past, but the narrative has really changed and governments are changing and investor sentiments have changed. I just thought I'd start off by sharing what I have learned and what I thought has been really interesting from the investor's perspective. So again, these are not my views, these are views that I have formed based on dozens of different conversations I've had with investors in the sector over the last year.

So, the first point I wanted to share is that interest in uranium is truly going global. I have spoken to investors right around the globe, there's no real preference in any one sector. There's lots of interest in North America, Europe, lots of interest in Australia, New Zealand, Asia, Singapore, had dozens of calls with people right around the globe. So, it's really a global category. And I think when you look at the previous slides showing you all the reactors and all of the countries focused on decarbonization plans, I think that's exactly why.

The investor types are incredibly diverse and more diverse than I probably thought, lots of institutions interested in the category, family offices, RAAs, and individual investors, and they've also had many different mandates. And this is probably one takeaway that I underestimated is how diverse the interest is. I've spoken to people that are running general equity portfolios, small-cap portfolios, international equity portfolios, value strategies, commodity strategies, macro strategies, and energy transition strategies, which I think you're going to hear this term more and more. As a key investment theme, as a society, we spent the last 150 years building many different systems and networks and infrastructure related to fossil fuels based forms of energy, and the next 30, 40 years are going to be very focused on the transition to more renewables, nuclear, and new technologies that are going to help us to decarbonize the atmosphere.

A lot of investors are invested in physical uranium or vehicles that hold physical uranium and they're also invested in the underlying equities. And I find that almost universally. And despite this interest I'm talking about, I would tell you that after a nine-year bear market, this is not a crowded trade. These are, I would say, early adopters, people that have done their homework, somewhat contrarian in nature and that's why we think it's still in the very early innings.

On this slide are just some headlines from major publications that we've been collecting over the last few months. And as you can see, the narrative has clearly shifted. There's growing acknowledgment by governments and the media that nuclear needs to be part of the green energy mix. There will always be tremendous support, whether it's financial or regulatory or policy for renewables, but the world is figured out that we cannot be a hundred percent reliant on renewables alone. So, this growing recognition that nuclear needs to be part of the mix if we have any chance of hitting our greenhouse gas reduction targets is really the driver.

I would say the other key theme is science over fear. I've seen lots of scientist groups coming out in favor of nuclear energy. And I'll talk a little bit in the presentation about nuclear's track record. And my sense is, people are more afraid of climate change than they are of the risk of a large-scale accident in nuclear power plant. And that's my personal belief based on the conversations I've had with many investors.

Energy transition is a key theme. There are lots of things happening in Europe right now that are giving people a lot of anxiety, and I would say, and having a very dire financial impact on them, whether your home heating bills have doubled in the UK or continental Europe in this past winter, it is having a real issue.

The other key theme is obviously around energy security, energy sovereignty. You're going to hear these terms more and more. Per talked about Germany's decision to close most of its power plants in the last few years. They just close three, they have three left to go. At the same time, they're hugely dependent on natural gas from Russia. How that's being played out right now with the current issues within the Ukraine.

And then, the headlines, you know, have really changed from governments. The US, Per talked about being very pro-nuclear from a democratic administration, which I find amazing. You often see photoshoots of the energy secretary of power plants showing her support for nuclear energy and new technologies. Japan clearly would like to get more power plants back online. The UK has pledged financial support to France, the biggest user of nuclear energy, just in the last week or so, signal that they would like to build up to 14 more plants. And yes, countries like Germany, Spain, Belgium are all on the path of winding down nuclear power plants. But I think the current environment I'm sure is giving them a moment to rethink that.

Why don't we go to the next slide, please? So, a lot of this is about reliability and energy security and sovereignty. And Per talked about how nuclear energy is the most reliable because it operates almost all the time. So, we call this baseload power. Things like renewables have issues with intermittency. Obviously, at nighttime, you cannot collect anything from solar rays. And when the wind is not blowing as much as your model says, you have issues with wind, and when it doesn't rain as much, you have issues with hydroelectric. And these three issues are happening right now around the world. Europe, in the past year, is having big energy issues because the wind is simply not blowing as much, and it hasn't rained as much. And so, what happens, you have to fire up coal and natural gas power plants as your backup plan. And obviously, everyone is trying to move away from those forms of energy. So, it really puts them in a conundrum. Energy is really the perfect complement to renewable energy. And that's really what we hope most governments come to acknowledge.

Moving to the next slide. Nuclear energy is super efficient and uranium in particular. This is just the fun little illustration of how much energy is within different forms of fuel. So, if you look at one uranium fuel pellet, which goes into a nuclear core, both the size of a gummy bear, provides the equivalent energy of three barrels of oil, one ton of coal in 17,000 cubic feet of natural gas.

We go to the next slide. We've talked a lot about decarbonization, climate Accords, climate change, and this is all about greenhouse gas emissions. And if you look at this chart here, which shows how much greenhouse gases are emitted by different forms of power, you can see that nuclear, wind and solar, and to a lesser degree hydro really lead the pack, and coal is the dirtiest. And that's exactly what many countries have been forced to do as the price of natural gas has increased enormously this year. And as some of the renewables have not produced the same amount of energy as predicted, they've had to rely on natural gas and coal, which really defeats the whole purpose of decarbonizing.

Why don't we go to the next slide? And talked about the safety track record, which I think scientists, many scientists have acknowledged. If you look at the long-term track record of nuclear compared to different forms of energy, nuclear is one of the safest and conversely the dirtiest and the most dangerous is coal. And I think most people don't realize how much of the world's electricity is still being produced by coal. Places like China are still over 50%, and yes, that number comes down every decade, but they still have a long way to go. So generally, producing nuclear or operating nuclear power plants is very safe. Yes, we've had a couple of very large-scale accidents, but overall, if you compare it to all the different forms of energy production, it has a very good track record.

Let me go to the next slide. Okay. So, this shows you the chart of the uranium price. This is in the spot market going all the way back to the late 1960s. And then you can see that there were three different periods where the uranium price was propelled very strongly for different reasons. In the 1970s, there was an oil price shock, which was the big catalyst. People were worried about being reliant on middle east oil, which really provided a lot of policy support to build out the nuclear fleet, which happened in the United States and Europe. And then, if you look at the big spike there, that was really driven by the commodity supercycle, the Chinese build out of cities and infrastructure. And you saw the price of uranium skyrocket to almost $140 a pound. After the financial crisis, it kind of moved back down to $40. And right before the Fukushima accident in 2011, the price was around 70 to $75. And then, the sector obviously suffered enormously as countries like Germany, signaled that they wanted to close down their power plants and the price of uranium fell down to about $18, which was not an economic price for anybody in the world to pull it out of the ground. And we saw major producers shut in large-scale mines or curtail production, and that helped to rebalance the market. This current bull market we think started in late 2016 after basing it around $18, the price has kind of been grinding up to kind of $30 a pound last year, and right now we're around $43. And we did touch about $50 in the fall of 2021.

So, you can see that when the price wants to move in this sector, historically, it really goes, with previous gains in the 600 to 1800%. We think we're still in the very early stages of getting back to equilibrium pricing. Equilibrium pricing is basically a price that incentivizes a producer to actually mine uranium and bring it to market. And for the last few years, there's not been an incentive price, which is why a lot of production has been shut in. Why don't we go to the next slide, please?

Ed Coyne: John, let me just stop you for one second. And you talk about equilibrium pricing, you know, with the trading between the 40 to $50 range and currently around 43 a pound, is there a number just, I'm not asking you to prognosticate what the number's going to be going forward, but what would the equilibrium pricing be based off the information we currently have?

John Ciampaglia: Sure. Well, every producer in every mind has a different cost curve. But let's just say that right now that certain producers still have an incentive to actually buy in the open market to fulfill contracts that they had made years ago than actually restart their production. And yes, Cameco in the last couple of weeks, has signaled that they are going to reopen in two years from now a mine that they closed four years ago. So, you think about it, it's basically going to be six years from closure to back to production.

And so, it's to happen, but the reality is as Per said, the inflation rates and the costs of everything, whether it's materials or labor or shipping, logistics, fuel, have gone up so much that, that price, that incentive price keeps going up. And I think that's one of the elements that investors are really focused on right now.

I would say one of the key questions I got last year from institutional investors and many investors was, "Has the price of uranium hit its inflection point?" Meaning, has it finally broken out of this kind of zigzagging sideways action that it experienced for many years? And they were all looking for this signal to say, "Okay, it's real this time. It's not going to be a false start. It's really broken out. Something's happened. The catalyst has happened". And, I would say right now, the question I'm getting now is "When are we going to see the inflection point in the term price?" I'll just go back a step and explain the difference.

So, the spot price of uranium is really where you can buy uranium if you were going to take delivery today, and most non-utility buyers are focused on the spot market. The term market is where utilities contract to buy. And so, it's not a just-in-time inventory system, you can't run a nuclear power plant on that basis. So, they buy uranium years and years in the future. They want to have the security of supply, they want to have the security of price, and so these contracts are entered into, by utilities and producers for future delivery. And, I think what people have been most focused on the last few months based on my conversations is, "Have we seen the inflection point for when utilities are going to resume long-term purchase to make sure they have future inventory?" And I thought the recent conference call by Cameco which is one of the world's biggest producers just a couple of weeks ago, was a really interesting signal for me and many others because they said in 2021, they had contracted to sell 30 million pounds of uranium for future delivery to utilities. And they said that, so far in 2022, and remember this call was about two weeks ago, they've already booked 40 million pounds for the early start of 2022. That to me is a very good sign that the utilities are starting to take notice of the changing dynamics in the uranium market, and they're more concerned about security of price and security of supply than they were before. When quite honestly, there was no urgency, because the price was just kind of zigzagging between 20 and $28 for a number of years.

So, there's clearly a mind shift that's happening with the utilities. They're starting to take action. They're starting to reengage with the producers and putting out RFPs for longer-term delivery. And I think that's a really good sign.

Ed Coyne: That's fantastic. Thank you for that. That's helpful.

John Ciampaglia: Sure. So, let me just talk a little bit about slide 23 there. And you can see what's happened to price of uranium over time, and also the impact that non-utility buyers. So, these are financial intermediaries, it could be a hedge fund, it could be an investment fund, these would be buyers of physical uranium because they have a bullish view on the price of the commodity, and so they will invest in uranium in different forms. You can see there in that first commodity supercycle, going back in the mid-2000s, it was fairly active. Non-utility buyers, mostly hedge funds were pretty active in the marketplace. There was at least one vehicle in the marketplace as well, participating in that. And then, after Fukushima happened in 2011, you can see that completely evaporated. So, for a number of years, really nothing was happening. The utilities were basically able to buy a lot of uranium without a lot of competition from non-utility buyers. Yes, there was a little bit of a blip there in 2018 when Cameco closed the MacArthur river mine and another investment vehicle came to market, but you could see there's been a long period there where non-utility buyers have not had had much impact.

Now, look at the bar for 2021, it's obviously gone straight up. And a lot of that has obviously been the spot as physical uranium trust coming to market. And I'll just talk a little bit about what impact it's had in the marketplace so far.

So, why don't we go to the next slide? So, this vehicle was launched just in July of 2021. It's harder to leave. It's only a few months ago. And it was formed from the acquisition of Uranium Participation Corp., which was an investment vehicle that began way back in 2005. And I always like sharing this stat with people. So, from 2005, which was in that commodity supercycle to July of 2021, it's about 16 years, over that period of time, Uranium Participation Corp acquired 18.1 million pounds of U3O8. U3O8 is the form of uranium that the trust holds, it's sometimes called yellow cake, and it's essentially a yellowy-brown powder that you store in steal drums, like whale drums. And that's the starting point along its journey to enrichment and conversion and ultimately becoming those fuel pellets. So, it took them about 16 years to accumulate this 18.1 million pounds. So, the physical uranium trust comes along in July, it's completely re-engineered and investors obviously respond.

Why don't we go to the next slide? And investors respond way beyond our expectations. It's now the world's largest fit Graham trust. It's gone from 600 million to approximately 2 billion. And this is important because what we've noticed is as the fund gets bigger, it's allowed more and more institutions and larger institutions to get interested in the category. The reality is there are not many liquid and large ways to invest in the sector. And the reason for that is that for nine years, the sector was basically shrinking. Bear markets really wipe out a lot of companies and investments, and, there weren't a lot of investments left standing. So, as the fund gets bigger, there is a bit of a network effect that allows more and more parties to get interested in it.

It's a very liquid and convenient way to own physical uranium. Obviously, it is the most regulated substance on earth for obvious reasons. So, it is a way for investors of all types to get interested in it.

We've gone from 18.1 million pounds, which we acquired through the acquisition and the Fund now owns 45.9 million pounds of U3O8, which is why on the previous slide you saw that big pop in 2021. So, the trust has not been the only driver of it, but it's been a meaningful driver of that return of the non-utility buyers. We have other investment funds out there doing this as well. We even have some uranium mining companies that have been buying physical uranium and parking it on their balance sheets as they've raised equity. So, there's been a lot of interesting things happening. And all of this buying by non-utilities is clearly woken up the utilities. Because, at the end of the day, they need this to operate their power plants. There's no substitution. You need this uranium. 

The next slide talks a little bit about or shows the daily and cumulative pounds. And I think what the key takeaway here is historically before we entered the market, many industry participants complain that the uranium market was very illiquid, it wasn't very active, it wasn't very transparent. The price discovery was questionable. And I think, our entrance into the market and all of the support we've received from investors around the world has really allowed us to reinvigorate the spot market. And this just shows you how much uranium we buy day to day. All of this is completely transparent on our website. We disclose it every night, how many pounds the trust holds, how much cash it holds. And this has been something that's been very well received by investors because the market is not very transparent.

And if I go to the next slide, please? I'm going to touch briefly on the other side, which is the uranium miners, which I mentioned. A lot of investors seem to own them, both. It seems different for everyone, depending on how aggressive you want to be. Uranium stocks are more volatile obviously than the physical commodity, so everybody has a different volatility tolerance, but they're often held together.

And what amazes me is that when you think about 10% of the world's power generated by nuclear energy, and then you look at the chart on the right, and you look at the collective market capitalization of all the uranium miners in the world, that we were able to find, there's 83 re companies. So, these 83 companies are different producers, developers, and explorers. If you were to sum up their market capitalization, it's $29.06 billion, which is nothing when you compare it to some of the oil and gas companies on the left side there. So, it's equivalent to about 1/10th the market cap of Exxon Mobil. And obviously, the market cap of 29 billion, as I said, it's been repressed over many years because of the bear market, but we think this is finally coming back to life and that the only way the future needs of all the existing and planned nuclear reactors, their needs in terms of their supply are going to be met, is if there's more investment in the sector, whether that's exploration development. And so, we think the companies involved in the sector are very interesting investments as well.

And so, why don't we wrap up in the interest of time, because I know we have some questions? And so, I'm just going to sum up by saying there is clearly a shift and acknowledgment that nuclear needs to be part of the mix and that a new bull market is clearly emerging in our minds. Non-utility buyers are clearly helping, but the utilities are the ones that ultimately need the uranium and they're the ones that are going to be re-engaging with producers and contracting for their future needs, which we think will provide an incentive price and bring those pounds to market. And, if the incentive price is not reached, we think that the supply of uranium will continue to be constrained with either idle mines or stalled development projects or curtail production. And so, it's something that is going to take time to play out, but it's a critical element and the world is acknowledging that we need nuclear as part of this mix and we think the market fundamentals are very favorable as a result. And I'll just pause right there and we'll open up to questions.

Ed Coyne: Slides 30-33

Ed Coyne: Well, thank you, John. And yes, I'd like to get to the questions quickly as well. I just wanted to reiterate our suite of offerings within the commodity trust, whether it's our uranium, our gold and silver trust, which is CEF, the gold trust, which is PHYS, the silver trust, which is PSLV, and the one I like to refer to as the original green metal, which is SPPP, which is the Sprott Physical Platinum and Palladium Trust. You can certainly, we access all those on the New York Stock Exchange, as well as the Toronto Stock Exchange with the exception of the Uranium Trust, which is going to be one of the first questions because I've gotten it about six times now on the screen that I will ask of you in a moment once I turn it back to Natalie to refer to a few compliance comments, we need to make first, and then we'll go into the Q & A.

And for those that want to get more information on the firm or our funds, specifically as it relates to uranium, I encourage you to reach out to your respective senior investment consultants on page 32. Whether you're on the west coast, central region, or east coast, you can also always reach out to me directly, Edward Coyne, who's the Senior Managing Director at the firm, we'd be happy to address any questions or concerns or interests you have and send out specific material that would be helpful in understanding more about who we are and what we do within the market. So, with that, I'll turn it over to Natalie, and then we'll open it up for some questions.

Natalie Noel: Great. And thank you all for such an informative presentation. Just as a reminder, a copy of today's presentation, as well as additional material can be found in the documents folder at the bottom of your screen. We appreciate your feedback. Please take a moment to fill out our brief survey also locate the bottom of your screen. Our speakers will be taking advisor questions, please type your questions in the Q & A box to the right of the slides, and we'll get to as many of your questions as possible. In the event your question is not answered on today's webcast, a member of the Sprott Asset Management team will reach out to you directly.