Nuclear Energy Opportunities: Insights from Tribeca's Guy Keller

The Uranium Market Paradox

Guy Keller, fund manager at Tribeca Investment Partners, returned to Macro Voices to discuss the current state of the nuclear energy sector. One of the key topics addressed was the puzzling divergence in uranium prices over the past year.

Keller highlighted a chart from Ocean Wall showing that while enriched uranium product (EUP) prices more than doubled in 2024, the price of yellowcake uranium actually declined over the same period. This disconnect between different stages of the nuclear fuel cycle has left many industry observers perplexed.

According to Keller, the divergence likely stems from utilities being forced to focus on near-term fuel security in light of sanctions on Russian nuclear fuel imports:

"I think it comes down to just simple capacity. The end user for uranium and nuclear utilities, most of them are not just nuclear, they live in companies that are also producing electricity from a number of other sources. The nuclear fuel buyer is also the same team or sometimes individual that is responsible for refueling and maintenance and a whole bunch of other things."

He explained that with Russian sanctions creating uncertainty around enriched uranium supplies, utilities have had to prioritize securing enrichment services over raw uranium:

"Because you've had all of that uncertainty and you've had especially US utilities having to scramble to ensure that they can replace that Russian material, they've kind of just been forced to ignore the uranium upstream side of the equation because the EUP, the enriched uranium product, is much more near-term for them."

Keller noted that the timeframe from uranium mining to reactor use has extended from around 2 years to closer to 3 years due to the sanctions situation. This has allowed utilities to push uranium procurement further down their priority list for now.

Bottlenecks in Conversion and Enrichment

While many analysts have pointed to conversion capacity as the key bottleneck, Keller believes the price signals indicate issues in both conversion and enrichment:

"I think the answer to that is the bottlenecks in both. It was just the motivation of the converters and the enrichers to build more capacity required a commitment from those utilities to lock in contracts."

He explained that both converters and enrichers have been hesitant to invest in expanding capacity without firm long-term commitments from utilities. This standoff has contributed to the supply constraints pushing up prices for converted and enriched uranium products.

Keller expects this situation to gradually resolve as utilities recognize the need to lock in fuel supplies:

"I think that's what you're going to see this year is looking through that where the utilities say well, the price of conversion and enrichment has not come down so therefore we probably need to just lock this in and make sure we can get it."

The Role of Tech Companies in Nuclear

One of Keller's recent predictions that has started to materialize is increased involvement from technology companies in the nuclear sector. He drew parallels to how tech disruptors entered the electric vehicle industry:

"What I've been referring back to has been the battery electric vehicle buildout where a lot of these disruptors came in - the Teslas, the Chinese companies that had never built automobiles before came in and were able to get a foothold in that sector and compete against the old world ICE manufacturers."

Keller believes tech giants contracting for nuclear power will want assurances of fuel security:

"I think it would be naive to assume that these tech companies aren't aware of the whole nuclear fuel cycle and the precarious state around the supply of uranium and the rest of that fuel cycle. So I think they're going to be in the background to these utilities and saying to them 'show us that you have contracted uranium supply'."

He predicts tech firms may eventually secure their own fuel supplies as they build out nuclear generation capacity:

"When we press to the next stage that Trump alluded to around Stargate where these guys will be building electricity generation on their own sites, you'll definitely see tech companies come in saying 'right, we're contracted to go and build these SMR or advanced reactors and by the way we've just gone and secured 20 years worth of fuel'."

Challenges with Advanced Reactor Fuel

Many of the advanced reactor designs being pursued by tech companies and startups require high-assay low-enriched uranium (HALEU) fuel enriched to nearly 20% U-235. This presents additional fuel cycle challenges, as Keller explained:

"You need about 50 pounds of yellow cake uranium to make one pound of HALEU and of course the exact amount depends on overfeeding and underfeeding and some details of the production process, but it's about a 50 to 1."

He noted this will require significant expansion of enrichment capacity:

"It seems to me like a lot of this excitement around all of these sodium fast reactors and how cool they are technologically has occurred without a lot of discussion on where all the HALEU is going to come from."

Keller believes governments are starting to recognize and address this issue:

"This is exactly why you've seen the US Department of Energy be a real leader in this respect with a couple of billion dollars of grants towards progressing HALEU in the US."

However, he acknowledged there is still substantial work to be done to establish HALEU fuel production at the scale needed for widespread advanced reactor deployment.

Impact of Tariffs on Nuclear Fuel

The interview touched on the potential impacts of recent tariff announcements on the nuclear fuel market. Keller noted that responses from affected countries have been much quicker this time compared to the previous Trump administration.

Regarding uranium specifically, he expects Canadian supplies would likely be exempted given their strategic importance to the US nuclear industry. Keller also emphasized that fuel costs are a relatively small portion of nuclear plant operating expenses:

"The one great thing about nuclear power is that the fuel cost of generating nuclear power is very small as a total percentage of the operating cost because all of the cost has gone into building the things."

This means tariffs on uranium imports would have a limited impact on electricity prices from nuclear plants in the near-term.

Australia's Uranium Potential

As an Australian fund manager, Keller provided perspective on his country's vast uranium resources and the political obstacles to developing them. He noted that state governments control uranium mining policies, so federal changes alone cannot open up the entire country to production.

Keller sees potential for policy shifts in some key states:

"Western Australia, there's some good defined projects there. There is a Labor government in place, there is an election coming up there in March. It probably doesn't change color in Western Australia, however there's potentially an economic argument to make to the government and the trade unions on the basis of the West has had mining job losses for the first time since the GFC."

He believes emphasizing job creation and carbon-neutral exports could help build support for uranium mining. However, Keller cautioned that even with policy changes, it would take years to bring significant new production online:

"It's not going to be an immediate thing, things get switched on. It's a 3 to 5 to 6 year process probably."

Nuclear Innovation Opportunities

Keller explained that his fund has expanded beyond just uranium mining to invest in nuclear technology and innovation:

"When I first looked at this sort of thesis 8 to 10 years ago, I work for a global natural resources business and mining is our specialty, so it would have been really easy to call ourselves a uranium mining fund. But when I was looking at is there technology out there that's going to disrupt my demand thesis for uranium, because it's important when you're thinking long term for a product like this that's so specialized, you don't want to be caught out."

He sees small modular reactors (SMRs) and advanced reactors as key areas of opportunity:

"There was also a demand driver in the middle of all that being small modular and advanced modular reactors where none of that technology is new, there's been various governments looking at it since the Manhattan Project, the 1950s. It's just always been the problem of the demand has always been gigawatt scale and you could never make smaller scale work commercially."

Keller likened the potential cost curve for SMRs to electric vehicles:

"We've seen companies like Tesla where that first vehicle they put out was almost luxury car prices, just eye-watering, and now you can pick these things up for the same as you can pick up an ICE sedan somewhere."

His fund has increased exposure to nuclear innovation companies from around 3% in early 2024 to as much as 35-40% more recently. Keller sees this area as attracting significant interest from tech investors looking for innovative energy solutions.

Outlook for Uranium and Nuclear

Despite recent weakness in uranium prices and mining stocks, Keller remains optimistic about the sector's long-term prospects:

"I think it's a really interesting time in the sector because as I alluded to before, most of the uranium stocks are on sale due to just silliness around spot prices and short interest, especially here in the ASX."

He believes it's only a matter of time before utilities recognize the need to secure long-term fuel supplies:

"It's just going to be a matter of time before the utilities wake up and realize that they need to play catch-up and this sector moves extraordinarily fast."

Keller expects 2025 to be a strong year for nuclear energy investments as the disconnect between enriched fuel and uranium prices resolves and more nuclear innovation companies come to market. While volatility remains high, he sees significant upside potential for well-positioned companies across the nuclear fuel cycle and technology landscape.

Conclusion

The interview with Guy Keller provided valuable insights into the complex dynamics shaping the nuclear energy sector. From the puzzling divergence in uranium prices to the entry of tech giants and the challenges of fueling advanced reactors, the industry is navigating a period of significant change and opportunity.

For investors, Keller emphasized the importance of looking beyond just uranium mining to consider the entire nuclear fuel cycle and emerging technologies. While near-term volatility persists, the long-term outlook appears bright as governments and companies increasingly turn to nuclear power to meet clean energy goals.

As the sector evolves, staying informed on policy developments, technological advancements, and shifting market dynamics will be crucial for identifying the most promising investment opportunities in nuclear energy. Keller's perspective as an active fund manager in the space offers a valuable lens for understanding this complex but potentially lucrative corner of the energy market.

Article created from: https://www.youtube.com/watch?v=dwmbsLczPpA