The first half of 2015 has already seen China connect four new reactors to its power grid, reflecting the country's impressive expansion in nuclear power generation. Yet China produces only four million pounds ("Mlb") of uranium a year from in-country sources - while importing nearly 15 times this amount to fuel its reactors.

China securing a growing share of current & future uranium supply - In 2014 alone, China imported 55Mlb of uranium, up 12% from 2013 and represented 37% of global mine supply (Figure 1). China typically purchases directly from uranium miners, such as Langer Heinrich in Namibia. Its development of the Husab mine, with planned production towards the end of this year, and its recent interest in acquiring a stake in French nuclear giant, Areva, is consistent with China continuing to focus on sourcing uranium from direct investment in mining projects, as opposed to buying in the market - it effectively by-passes the spot market. This approach ensures access to uranium by Chinese companies while limiting the availability of production from these mines to other utility companies.

China's growing global & domestic nuclear power plans - The market's positive perspective on China's expanding low-emissions energy from nuclear is illustrated by the recent IPO of part of the country's 2nd largest nuclear enterprise, China National Nuclear Corp. (CNNC), which was 135 times oversubscribed: CNNC sought to raise US$2 billion and attracted interest for US$273 billion. Proceeds are to be used, not only to construct new reactors in China, but for acquiring more uranium assets abroad to ensure security of supply. Tying up sources of uranium is essential since China is guaranteeing lifetime fuel supply for the reactors that it is constructing outside of China.

CNNC has used this business model in Argentina where it has guaranteed the supply of nuclear fuel for the life of Argentina's 4th and 5th reactors. Construction of the 4th reactor is scheduled to start in October of this year. China's deepening investment in Argentina's growing nuclear energy program, which currently relies entirely on imported uranium, offers significant prospects for U3O8 Corp's Laguna Salada Deposit - the most advanced uranium project in the country on which we recently established a partnership with the provincial resource company.

Figure 1 - China's Uranium Imports

Sources: WNN, Reuters, Toll Cross, Cantor Fitzgerald