The Exchanges

Q Alright, let's start by having you give me a walkthrough of the, uh, uranium fuel supply chain, the nuclear fuel supply chain. So, like, take me from soup to nuts. What do we start with, and what do we end with?

A Yeah, happy to. Um, I mean, the, the background is that every, every reactor needs fuel, as, as most people know. And we can talk about types of fuel, but, but all fuel in reactors in the U.S. today is made using a five-step process. So, step one is you mine uranium out of the ground. You then convert it to a gas. That's called the conversion step. Um, you then enrich it, which is really a refining separation step. You then deconvert it into a solid, back into a solid. And with that solid, you then make fuel, fuel fabrication. So fuel pellets or trisoparticles or whatever that is. So five steps total. Um, the US does all of the steps. The US does not do the middle step at commercial scale. So that's where the bottleneck is, which I'm sure we'll talk about today.

AI assessment note: “all fuel in reactors in the U.S. today is made using a five-step process”

Q over time as the U.S.-Russian relations have moved? Like, I get the sense it's one of these areas that, like, We kind of don't like to talk about it because we're sort of reliant on Russia to some extent right now, but we need it, you know, and so we're sort of unwilling to sanction it or stop buying from Russia. Is that, do I have that sort of right?

A Well, in, in twenty-twenty-four, there was a Russian uranium imports ban passed by Congress, and so there's a waiver process, um, that's, that's ongoing right now where the Secretary of Energy can waive, uh, the ban. If a utility needs it and there's not another source, which has been the case, um, that waiver process expires January first, 20, 28. And so the setup today is yes, it's still three quarters Europe, one quarter Russia. Um, most of that Russian uranium is coming in. It's all coming in under those waivers. Um, I think it's gone from about 25% to 20% as utilities look to diversify and get ahead of the full 20, 28 ban. But That is currently the breakdown. Um, a lot of people have asked, how, how do we even get here? How is it the case that we're still importing from Russia? You have to go all the way back to the fall of the Berlin wall, the end of the cold war. So eighties, the U S was the leader in global enrichment, something like 86% at the peak. Um, and then the Berlin wall fell and we entered a treaty with, with Russia, which was called Um, the megatons to megawatts program, and in that, in that trade program, we imported Russian, uh, warheads. We downblended them and used, used that downblended material to run our reactors. Um, we then, you know, sent the depleted uranium back to Russia, uh, to be, or the, we sent the depleted uranium back to Russia to be enriche…

AI assessment note: “in twenty-twenty-four, there was a Russian uranium imports ban passed by Congress”

Q Okay, so back to the supply chain then. So we, we mine our uranium, maybe in the U.S., but probably in Canada or in Kazakhstan. We convert it, again, maybe in the U.S. through one facility, but more likely again in Canada or in Europe. Where then today does the enrichment typically take place?

A Yeah, so this is, this is what really put us onto this, onto this problem and, and deciding, hey, we need to really start a company to address enrichment in the U.S., was if you look at enrichment today and what the U.S. consumes, It's about 75% Europe, European producers, um, and it's about 25% Russia. And so we can talk about the history of, of how we got here, but there's no commercial at scale, uh, U.S. producer operating, um, anywhere. There is one facility in the U.S. that's run by a European firm called Urenco down in New Mexico, and that produces about 20% of U.S. demand. But the other 80% is coming from overseas, and a full 20, 25% is Russia, depending on the year.

AI assessment note: “It's about 75% Europe, European producers, um, and it's about 25% Russia.”

Q to. My understanding from chatting with you is it's not actually quite that simple, and, and it is kind of a different process, or at least you want different equipment if you're going to be producing LEU versus HALU. So at the high level, can you just walk through, like, are those the same process run at different frequencies or for different lengths, or is it actually a different process?

A Um, I think the, the thing to remember is this is all really just a separation distillation process, and so Producing HALU, you typically ingest LEU, and then you'll enrich that up to HALU. And so it's, it's really a repeated process. Now, the things that are different, the important things that are different are, um, around criticality and licensing. And, you know, the licensing is different to reflect the criticality difference and a few other differences. Um, but fundamentally the process does not have to change from a physics standpoint. Um, what does have to change is things like you mentioned, um, things that hold uranium, um, a certain volume of uranium may need to be smaller in the case of HALU to make sure that you can't have accidental criticality and that you're ensuring safety. But I would say that that's the primary, primary difference between the two is, is criticality considerations, which is, which is why you see, um, you know, in the past couple of years, the DOE putting out Awards for, uh, HALU enrichment specifically, um, and LEU enrichment capability, and then also HALU deconversion. And so that last step that you asked about, those last two steps of deconversion and fuel fabrication, as you bring, uh, HALU UF-Six down into solid form, uh, you're now getting even more density of, of uranium. And so as it's at a HALU level, um, You know, up to 19.75% U-Tur-th…

AI assessment note: “fundamentally the process does not have to change from a physics standpoint.”

Q my favorite questions to ask. If you could, um, if you could wave a magic wand and solve some problem in the nuclear supply chain that isn't the one you're currently solving, something other than enrichment capacity in the U.S., what would you solve? It's another way of asking the question, like, what do you view as the biggest bottleneck besides the one you're going to try to go tackle?

A Yeah, I think we already talked about conversion. I think, I think as enrichment in the U.S. gets scaled up, You know, five to 10 times. You're gonna need more conversion capacity. I think people are working on that. I think that will get solved. Then you look at the next bottleneck, um, of US mining. And if you look at, you know, ideally we have that in the US too at scale, at a scale that meets all of our needs. Um, that would be, that would be really where I would wave the magic wand. Um, you know, does the US have as good of deposits as some other countries? No, it doesn't. Um, but today For us product to be mined, you know, it's shipped all the way out of the country to be converted in, in a lot of cases, and then shipped all the way back. I think we should have a full domestic supply chain. And so, um, you know, you talk to us mining companies and, and a lot of the challenges are just around things like mining permits and, uh, how long that takes. And so I think if we can see, uh, rationalization of those processes, Especially given, you know, things are moving to ISR, uh, and are much more, uh, you know, lower impact to the environment. I think if, if regulations can begin to reflect the reality of what mining is today, uh, and, and make that more streamlined and allow for U.S. mining to come back, I think that'll be a great thing for the U.S. supply chain, because at th…

AI assessment note: “Then you look at the next bottleneck, um, of US mining.”

Q Yeah, so let's get straight to the, the geopolitics, I guess, or at least the geography of it. So as it stands today, what's a typical supply chain look like, starting from mining through to ultimately usage in a, in a reactor?

A Yeah, so with mining, um, U.S. gets mined product from a bunch of sources, including from mines in the U.S., but Canada is a, is a very large producer, and Kazakhstan's a large producer. And, um, Australia also has great deposits, but if, if you look at, at today, it's really Kazakhstan, Canada are going to drive it for the U.S. That's where we get most of the U-Thia weight that we, we consume. Um, conversion is, is also international. We have one facility doing conversion in the U.S. Um, that's Honeywell, uh, sold under Converdine in Southern Illinois. It's actually, um, five miles from where our facility is. So, uh, that's in Metropolis, Illinois. You also have conversion, uh, in Canada, outside Toronto, uh, done by Cameco. And then you've got, uh, the Europeans who also do conversion. And so.

AI assessment note: “with mining, um, U.S. gets mined product from a bunch of sources”

Q Partially because there aren't, those advanced reactors don't mostly exist yet, or at least they're not commercial in the market, but Halo, there is, uh, zero current capacity, or essentially zero. I mean, walk me through, like, if I wanted to go buy Halo tomorrow, what would that look like?

A Uh, you would have to purchase it from Russia, and so that's what actually triggered me looking into the space. So, if we rewind to, like, late At Founders Fund, I was, you know, looking at all the advanced reactors companies, deciding to invest in one. Um, I asked them what the hardest thing about building their company was going to be, and it was purchasing fuel, it was obtaining HALU. And they said, the only place we can get it is actually Russia, and we have to import it. And so I said, well, why don't, why don't you just get the U.S. companies to, to make HALU? Is it that much harder to go to a higher level? And they said, there, there really is no U.S. owned production. Um, and so that kicked this all off, and I, I realized pretty quickly that, um, that Russia was the only source, and unless there was a new source that came online very soon, really by end of decade, um, all the advanced reactor companies would, would have a hard time scaling up. And so, you know, fast forward to today, the DOE has actually stepped up and made some HALO available to advanced reactors. Um, but that's, that's really only going to take them through first Demonstrations first deployments to really scale up will need a new supply. And so, um, you have Europe saying that they're going to bring capability online in Europe, um, in the early 20 thirties. And then, uh, the other two companies saying…

AI assessment note: “you would have to purchase it from Russia”

Q Russia, for that matter, um, then, yeah, like, great for the government to step in. So, okay, so you got this big DOE award to, to go build that. Like, just talk to me about what that, first of all, talk to me about the Paducah site, because it's interesting. Um, And then what do you, what's it going to look like? What are you actually going to build there?

A Yeah, so Paducah is actually the last place the U.S. did commercial scale enrichment. Um, it's where we did enrichment that fueled all the U.S. reactors, and that facility was, was shut down in 2013, and so the Paducah community, uh, Paducah western Kentucky, the very western tip of Kentucky, that community remembers when the enrichment plant was operating, and they're very comfortable with enrichment, they understand it, they're comfortable with nuclear, um, and so as we looked around for basically a year, In over 10 other states, something like a thousand different pieces of land, um, we found Paducah to be the most supportive, the most excited about bringing enrichment capacity back. So our site in Paducah is on the DOE site. That's the site where the enrichment was performed previously. It was called the Paducah gaseous diffusion plant, and we have about a hundred acres at the south end of that site. That we've leased, um, for a long period of time that we will build our facility on. And so a hundred acres and, and, you know, again, building enough capacity there to satisfy HALU through the next decade, and then enough LEU capacity to displace, um, adversarial imports into the US. And so that's the scale of it. That's where we're doing it. Timeline is, you know, Before end of decade. Um, and then, and then, yeah, that's the rationale on why Paducah, but it's an incredible, …

AI assessment note: “we have about a hundred acres at the south end of that site”

Q demand for new nuclear fuel. You guys scale up and want to continue to scale up. How big a challenge is it for you that there is this, like, fixed, limited conversion capacity in the U.S.? Presumably you can go buy, UF-Six is what comes out of a conversion facility. You can go buy it from Canada or Kazakhstan or whatever, but is that problematic? Is that hard to do?

A Uh, we, we're not too worried about it. So, you know, we've looked carefully at that market today. There's still spare capacity. Um, there's still a good amount of inventory in the market, and so we think that it can support a certain amount of U.S. enrichment expansion, but at some point, um, you know, post like a doubling of U.S. enrichment on U.S. soil, you're probably looking at needing to expand conversion in one way or another, and if you looked at the NEI did a survey on this, um, uh, Nuclear Energy Institute, uh, they did a survey, I believe it was last year, On people's concerns of bottlenecks in the supply chain. Buy utilities, and I believe that the, the utilities, uh, all converge on conversion being the next big bottleneck that, that would have to be solved. In response to that, there's a few companies that have been talking about building conversion facilities, and conversion's a relatively known process. It's done without, um, a lot of technical difficulty in Europe, um, and in Canada, and even in the US, and so, um, we expect that that'll, that'll get done, and, and it'll be a bottleneck that's removed as the market needs it to be. Um, within the next five years, five to 10 years.

AI assessment note: “we're not too worried about it. So, you know, we've looked carefully”

Q to the commodity price of uranium, or are you kind of Insulated from that because it's tolling. In other words, like, you know, commodity prices of uranium go up, they go down. It's like any other commodity market. Um, but you're providing a fixed service kind of in the middle of the supply chain there. So do you, are you long uranium effectively, or are you totally indifferent to it?

A Uh, for, for LEU, we're certainly indifferent. So the, the model on LEU is almost entirely a tolling operation. And so utilities will purchase the U-throw-eight. Um, and then we'll enrich it. And so that enrichment price is independent of the U-threatment price. On, on HALU, um, as we're selling to advanced reactor vendors, they often don't have fuel buying teams, so many of them are more inclined to purchase EUP, enriched uranium product, really that final product before going and making your final fuel form that you might want, which in many cases is Triso particles for advanced reactors. Um, and so Really, on, on LEU, it's very independent. On HALU, it's less independent, and in many cases, we will be buying the U-Thiaway-O-A, and having it converted and enriching it and selling EUP when advanced reactors want us to do that. And so, we're then interacting with the U-Thiaway-O-A, and you have, UF, you know, conversion markets. Um, We will price EUP in that case at a fair price that's based on those market prices. So really our core business is, is enrichment and we'll interact with, um, and contract with utilities in whatever way makes sense for them.

AI assessment note: “for LEU, we're certainly indifferent. So the, the model on LEU is almost entirely a tolling operation.”

Q Illinois for what, like, uh, 50 years or some crazy long period of time. Literally only one. It continues to operate, and I think they recently announced that they're expanding capacity by, like, 20% or something like that. But, I mean, you know, you're obviously focused on, like, alleviating a supply chain bottleneck, as we will soon talk about. Um, how big a challenge do you think that one is?

A Yes, I mean, the whole history on the facility, like you said, you know, 50, 50 plus years of operations. Originally a joint venture between General Atomic and And Honeywell. Um, and then it was, it was always marketed under, under Converdine, which was really the, the sales arm of that joint venture. And then, like you said, spun out under Solstice. So as, uh, you know, in the, as the, as the market hit a rough patch and just, there wasn't a belief that there was going to be expansion of nuclear and people's inventory swelled, um, the conversion market had a tough time and that facility was actually mothballed. Um, and then it was brought back. And so it's been, it's been getting ramped back up the last couple of years. I think that's where you're referring to is working all the way towards nameplate capacity and then potentially further. Um, and so, so we, we've seen that facility expand, uh, production. They've had some great wins on that front the last couple of years. Um, but you know, there's going to be a limit to how far they could expand it at that site. And so You know, enrichment's, enrichment's really the main bottleneck in the industry, certainly in the domestic industry. Conversion's probably the second, and there's been a few people that have been talking about building new conversion facilities, so we think it's something that'll get solved over the next five to…

AI assessment note: “Conversion's probably the second, and there's been a few people that have been talking”

Q on, and that I think matter from the perspective of the industry. One, which is the incumbent fuel, LEU, and then the second, which is for kind of the next gen, the Gen-IV reactors, which generally run on HALU. Can you just walk me through the difference between those two, and both in general, and then like what it means for For what you have to build for enrichment capacity?

A Right. Yeah, so like you said, there's really two types of fuel, LEU and HALU, that are used in nuclear energy, which is what we're focused on. Um, LEU is anywhere from three to five percent enriched of U-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-TW-T And the reason it's 19.75 is you want to keep some buffer against the 20% that really triggers, uh, weapons grade classification and a whole bunch of international standards. Um, and so the reason that there's two different levels, uh, if we go back, you know, to the underlying tech, the traditional reactors that you have that are gigawatt scale and are very large, um, you know, those have a large core And so, uh, they don't need a lot of enrichment to get fuel to go critical. Um, you have a larger amount of fuel in there, and it can, it can burn for a longer period of time with still, uh, pretty good efficiency, and so that's traditionally been done to three to five percent. As we look to, uh, factory build reactors and make them smaller, the core has to get smaller, and so to get, get criticality, to get Good burn-up, and refueling cycles that work for SMRs. Um, you end up wanting to go higher, and people have chosen to go, in some cases, 15, 16%. Uh, in most cases, though, all the way to 19.75. So most of the advanc…

AI assessment note: “LEU is anywhere from three to five percent... And the reason it's 19.75”