by Jim Rickards, Daily Reckoning:
Uranium production is best understood as an industry played out on a geopolitical chessboard.
Enriched uranium is used to fuel nuclear reactors. The degree of enrichment is not high. Natural uranium (sometimes called yellowcake) has about 0.7% U-235 isotope. This is enriched to 3% to 5% for use in most reactors (called low-enriched uranium or LEU). Some specialized reactors require uranium enriched to 20% U-235 isotope, but those are rare.
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Uranium is also used in nuclear weapons, especially fusion thermonuclear bombs. Those are enriched to a minimum of 20% U-235 and more often are enriched to 90% U-235 (highly enriched uranium, HEU) for the most powerful weapons.
Uranium itself is not rare, but its mining and production are controlled by only a few countries working with source countries. The real stranglehold on HEU is the enrichment process itself, which is highly technical and, again, controlled by a handful of countries.
Countries with large or expanding nuclear arsenals (U.S., Russia, China and North Korea) will do what they have to do to obtain HEU. They are not price sensitive, but they are not large drivers of the world price either. The main driver is the demand for LEU for use in nuclear reactors. The two leading builders of nuclear reactors, both for domestic use and for export, are Russia and France. (The U.S. has good nuclear reactor technology and building capacity, but it is highly constrained by regulations as part of the green new scam).
France’s yellowcake comes almost exclusively from Niger. Russia has diverse sources including Russia itself, Kazakhstan, Uzbekistan and now Ukraine. China gets uranium from inside China and Namibia and South Africa. India sources uranium from mainly inside India.
A recent coup d’état in Niger has thrown France’s supply situation into turmoil. There is no evidence yet that Russia planned the coup; it was most likely indigenous. When I traveled in West Africa and Central Africa in the early 1980s, I was accustomed to staying in hotels with artillery shells and machine gun bullet holes in the facades from the last coup.
Still, it is clear that Russia is fanning the flames among the revolutionary forces and helping to keep the coup forces alive. The U.S. and UK conducted a clandestine coup in Ukraine in 2014 that deposed a pro-Russian president. One can almost hear Putin saying to himself, “Two can play.”
Meanwhile, France failed in its efforts to organize a multilateral force around the Economic Community of West African States (ECOWAS). France proposed to supply well-trained French Foreign Legion and other special forces to the effort. U.S. efforts to intervene have also failed.
Russia’s reaction was to deploy Wagner Group mercenaries to support the coup. What is likely at this point is more chaos and at least a temporary cut-off of exports of uranium from Niger.
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