Part 1 of 2 Parts
Ukraine has signed a twelve-year deal with Canadian miner Cameco Corporation to provide uranium for all of its nuclear reactors. The deal gives each side the right to change sales volume with two-year’s notice. This information was provided by the Ukrainian state-owned utility Energoatom. The details of the arrangement have not been reported previously. It reflects the uncertainties caused by Russia’s war with Ukraine and underlies the high stakes for both parties.
The risks for Cameco are financial. The risk for Ukraine is reliance on a single provider which leaves it with few alternatives to maintain power supplies. Petro Kotin is the CEO of Energoatom. He said, “There's a lot of flexibility in the deal. The agreement is up to 2035, but two years prior to supply of the uranium, we are to (give) them an indication of what we will need, what volume of uranium we will require.”
Before the Russian invasion of Ukraine in February of 2022, Ukraine ran all of its reactors on Russian nuclear fuel. The Ukrainian fleet of reactors provide fifty five percent of Ukraine’s electricity. Ukraine has stopped Russian nuclear fuel purchases and has turned to Western companies such as Cameco.
In 2022, Cameco restarted operations at the world’s biggest high-grade uranium mine in northern Saskatchewan. A ten-year slump in the nuclear sector eased in 2022. This was partly because of the Ukraine war and partly because of global efforts to reduce carbon emissions.
As Cameco ramps up production for the Ukraine contracts, it is also betting on gaining more deals from Eastern European nations as they try to reduce dependence on Russian energy.
Cameco is the world’s fourth-largest uranium producer. Its stock is up more than fifty percent since January 31st, 2022. Expectations that Russia, who is a big producer of uranium, would launch a full scale invasion triggered an extended rally.
The agreement with Energoatom is worth at least four billion dollars at current uranium prices. Cameco will supply Ukraine with uranium hexafluoride from 2024 to 2035. This will allow Ukraine to end its reliance on Russian nuclear fuel.
The deal will supply the nine reactors under Ukrainian control. It also includes an option to supply six captured reactors in the southeastern Zaporizhzhia region if Ukraine regains control of them.
Cameco and Energoatom can each adjust how much uranium it delivers on two years’ notice. A spokesperson for Energoatom said that there were no restrictions on how much either of the two parties could adjust deliveries. Nick Carter is executive vice president of UxC LLC, an independent research firm focused on the nuclear fuel cycle. He said that the two-year window to adjust volumes without limit offers flexibility well beyond the usual uranium contract adjustment of five percent to fifteen percent annually.
For Cameco, the biggest risk is that Ukraine might require less uranium if Russia should capture or damage more reactors. Ukraine’s energy grid and thermal power generators have been military targets since the invasion.
Please read Part 2 next