One thought came to me last night when I was trying to see how things can be in the Indian power sector in 5-10 years from now, especially on the Nuclear power side.
NTPC plans to initiate nuclear power. Reliance Power also has plans to set-up a nuclear power plant as well – that may happen, and RNRL could become supplier/owner of Uranium mines. This scenario could come sooner is RNRL lost the court case because they may want to use other options.
Everyone in India is doing a JV with Nuclear Power Corporation of India Limited (NPCIL) and Uranium Corporation of India Limited (UCIL).
1000 MW nuclear plant needs about 2000 lb of Uranium per annum, and current domestic production of Uranium ore falls much short of requirements even with the current 4000 MW installed capacity of nuclear power.
Uranium ore price is currently at $45/lb, while peak prices were $145/lb in 2007-2008, which may return in 3-4 years. While steel and copper have run up from their lows, this commodity has not run up yet and it will take longer, but Uranium is high beta commodity and will move up swiftly when the times change. So now is a good time to lock in supply contracts or buy mines for next 5-10 years of usage.
ONGC and RIL are already buying interests in Uranium ores in Australia and Africa. So ADAG will not stay behind as they are more into Power other players and we won’t be surprised to hear news on this front in coming months.