HardAssetsInvestor

Written by James Kitler, CFA  |

February 09, 2010

Thorium: Next-Gen Nuclear Fuel

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We take a look at the fuel of choice for the newest generation of nuclear power.

• Why is thorium better than uranium?
• Are there pure-plays for thorium?
• Keep your eyes on these technologies

In his most recent budget, President Obama called for increased support for nuclear energy, and why not? Nuclear power offers a golden combination: the ability to come online in large enough chunks to keep up with demand, with minimal environmental impact. It's no wonder, then, that new players are coming into the market every day, bringing with them new ideas for reactor designs, manufacturing processes—even nuclear fuel.

That's because uranium, plagued by continual supply shortages and storage concerns, is quickly becoming too much of a headache for power and technology companies to navigate. Instead, next-gen nuclear has its eye on a new fuel source: thorium.

Thorium: The Other Radioactive Metal

Thorium is a silvery-white, radioactive metal whose stability and brilliance at high temperatures make it ideal for use in heat-resistant ceramics, welding electrodes and even light bulb filaments. The metal is found in trace amounts almost everywhere; with an abundance in the Earth's crust of about 12 parts per million, thorium is several times more prevalent in the soil than its more popular cousin, uranium.

According to the United States Geological Survey, thorium deposits exist in Australia, Brazil, Canada, Greenland (Denmark), India, South Africa and the United States. In the U.S., two private companies hold major thorium claims: privately held Thorium Energy, which holds the claim to the Lemhi Pass in Idaho and Montana; and Wings Iron Ore, which holds Pea Ridge in Missouri, a mine whose ores and tailings are rich in thorium and other rare earth metals.

As recently as 2007, total thorium usage for the U.S. was a mere 3.5 metric tons, according to the USGS; consumption in 2008 and 2009 was so low, the numbers are actually negative. If thorium-based nuclear power takes off, though, it'll be a different story: a single gigawatt (GW) reactor is estimated to use a ton of thorium per year.

Thorium is mostly found in monazite, a byproduct of titanium and zirconium processing which is itself mined for its rare earth elements (REE). But since thorium isn't in great demand right now, the metal is often tossed out with the mine tailings. Indeed, it appears a major source of the thorium the U.S. has imported over the years was the older stocks left over from the processing of rare earth elements by Rhodia Electronics and Catalysis, Inc. in France.

This belies the fact that the fate of thorium supply is deeply tied to the greater rare earth element supply chain—one that has become increasingly dominated by the Chinese. China now produces 97 percent of the world's REE, and according to some analysts, the country may soon require all of it for domestic use. Some Western sources are available, such as Canadian E&P junior Avalon Rare Metals (TSX: AVL) and explorer Quest Uranium (TSX: QUC), but as we've covered before, the supply of REE could likely become a major point of contention in years to come.