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The big announcement from China that could upset uranium bulls

Kitco News

China has started testing a nuclear reactor that uses thorium as a fuel, according to a report published by Nature last week.

Researchers have experimented with thorium energy production before, but China may be able to commercialize the technology.

Nature said that China has spent 3 billion yuan (US$500 million) on developing thorium technology.

The first trial plant is small, with an estimated output of two megawatts of energy, but if successful power authorities envisage a 373-megawatt reactor by the end of the decade.

An added advantage is that the thorium is a by-product of rare earth metal processing. China is the world's largest producer of rare earth elements.

Uranium has been rocketing higher this month. Today uranium futures on Nymex show the price trading at $44.15 a pound, a nine-year high. Weekly spot prices show uranium trading at $39 a pound, its highest level since March 2015. The Sprott Physical Uranium Trust is credited with driving the revival of uranium.

Much of the anticipated demand for that uranium is expected to come from China, which is building out a reactor fleet. But if the experimental thorium reactors gain traction, that could crimp demand, writes BMO Metals is a note published today.

"While the near-term uranium rally is founded on relatively aggressive investment buying, the long-term case relies heavily on Chinese demand, with the target for 120GWe of nuclear capacity by 2030 more than doubling today’s levels. However, as part of its technological push China is starting to test its experimental thorium-based molten salt nuclear reactor, which does not use uranium," writes BMO.

"This type of reactor does not need the same extent of cooling water, increasing its potential for use in inland areas. Thorium also is naturally more abundant than uranium and doesn’t decay to plutonium leaving less legacy risk. To be clear, this is very much still at the developmental stage, however, were it to be commercially viable this could be China’s new low carbon offering to the developing world in place of coal plants."

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