Bank of China International released a research report saying that it maintains CGN Mining's (01164) “buy” rating because the market's positive view of US nuclear power demand may reinforce the fundamentals of supply and demand. The bank believes that US nuclear power owners are still waiting for the election results to be released before deciding on future development progress. The Republican Party is generally seen as more supportive of nuclear power, and may speed up approval, especially environmental approval, making the market more optimistic about nuclear power and natural uranium. With only two weeks left until the election, the bank advises investors to refocus on the natural uranium sector and prepare for event-driven transactions.

Bank of China International's main views are as follows:

Tech giants are entering nuclear power

On October 16, AWS announced a partnership with Dominion in the latter's North Virginia

SMR is being deployed near the Anna nuclear power plant. According to media reports, nearly half of the US data centers are located in Virginia, and 70% of the world's internet data traffic is transmitted through the data center valley in the northern part of the state.

Earlier, on October 14, Google announced that it had reached a power purchase agreement with SMR developer Kairos Power, hoping to put the first unit into production in 2030.

The US is betting on small piles, when will the first pile be completed?

After Microsoft reached an agreement with Constellation Energy to restart the Sanli Island nuclear power plant earlier, the traditional nuclear power plants that can be restarted in the US are already very limited. Future incremental nuclear power plants are likely to come mainly from next-generation nuclear power plants —

The last two traditional large-scale pressurized water reactors took a full ten years, and only completed and put into operation by Southern Co in the last two years. This construction cycle is really difficult to meet the rapidly growing electricity demand driven by rapidly iterative generative artificial intelligence.

Therefore, small piles are considered the most viable route for future nuclear power in the US. Investors familiar with the bank are aware of some of the shortcomings of this technology route: high costs before large-scale launch, long regulatory approval and deployment cycles, and potential nuclear proliferation risks. Currently, the only reactor type approved by the US Nuclear Regulatory Commission is NuScale's 50MW module.

For data center applications, small piles can be deployed near the data center and skip the grid-connected queuing process, making their cost more acceptable to technology companies, especially in the context of sharp increases in data center rents. However, considering approval and technical challenges, the bank assumes that the US will not add any new small-reactor units in the next five years, and assumes that the world may have 10GW small reactors in operation by 2035.

Effects on natural uranium

In the longer term (after 2035), small piles are likely to be a driver of natural uranium demand. The bank currently anticipates a natural uranium supply gap of 8,500 tons in 2035 (considering the successful commissioning of several greenfield projects). And to fill this gap, higher uranium prices are needed to stimulate exploration and development. Any progress in the US reactor could further drive the imbalance between supply and demand, thereby driving up uranium prices.