Silex invented and initially developed the ‘SILEX’ laser-based uranium enrichment technology in Sydney during the 1990’s. The technology was licensed exclusively in 2006 to GE-Hitachi Global Laser Enrichment LLC (‘GLE’), a business venture currently comprising GE (51%), Hitachi (25%) and Cameco (24%). Silex and GLE jointly continue to commercialise the technology for potential deployment in the USA. The target markets are the global nuclear fuel markets for natural and enriched uranium, worth several billions of dollars annually.
The SILEX technology was invented by Silex Systems scientists Dr Michael Goldsworthy and Dr Horst Struve in the mid 1990’s. In order to facilitate the potential commercial deployment of the technology in the United States, an Agreement for Cooperation between the governments of the United States and Australia was signed in May 2000.
In June 2001, the technology was officially Classified by the United States and Australian governments, bringing the project formally under the strict security and regulatory protocols of each country.
In 2006, Silex signed a Technology Commercialisation and License agreement with General Electric Company (GE) to develop and commercialise the technology to enrich uranium for use in nuclear power reactors around the world. Since 2008, the project has been managed by GE subsidiary GLE.
Naturally occurring uranium must be enriched before it can be used as fuel in a nuclear power reactor. Enrichment is a technically difficult process and constitutes a major component of nuclear fuel costs accounting for around one third of the cost of nuclear fuel and up to 5% of the total cost of the electricity generated at current prices.
Uranium enrichment involves increasing the atomic concentration of the ‘active’ U235
isotope from 0.7% in natural uranium to approximately 5% required for reactor fuel. GLE and Silex are jointly developing the SILEX third generation laser enrichment technology:
- Separation of Isotopes by Laser EXcitation (SILEX)
- Highly selective excitation of 235UF6 to separate isotopes
The two methods of uranium enrichment used to date have been the now obsolete Gas Diffusion (first generation) and Gas Centrifuge (second generation). Silex’s third generation laser-based process provides much higher enrichment process efficiency compared to these earlier methods, potentially offering significantly lower overall costs.
Nuclear Fuel Production
The SILEX technology can be utilised in 2 steps of the Nuclear Fuel Cycle to produce:
1. natural grade uranium via re-processing of tails inventories; and
2. enriched uranium for use as fuel in nuclear power reactors.
The SILEX Technology
The SILEX technology is a unique laser-based process that has the potential to economically separate uranium isotopes as well as several other elements.
It has a number of advantages over other uranium enrichment processes including:
- SILEX laser technology has inherently higher efficiency resulting in lower costs;
- Smaller environmental footprint than centrifuge and diffusion plants; and
- Anticipated to have the lowest capital costs of all enrichment technologies.
Significantly, the SILEX technology is the only third generation laser-based uranium enrichment technology under commercial development in the world today.
SILEX Technology License Agreement with GLE
Silex’s agreement with GLE is an exclusive worldwide commercialisation and licensing agreement for the SILEX technology. The underlying value in the agreement with GLE is a perpetual royalty of up to 12 percent payable to Silex, comprising:
- A base royalty of 7 percent of revenues generated from enrichment services using the SILEX technology; and
- An additional royalty of up to 5 percent based on the total cost of deployment whereby the lower the cost of deployment per unit production, the higher the royalty.
Additionally, under the commercialisation and license agreement there are potentially two further milestone payments payable:
- US$5 million – on commencement of construction of the initial commercial plant; and
- US$15 million – upon verification by the US Nuclear Regulatory Commission of construction compliance and operational readiness of the initial commercial plant.
These milestone payments follow the US$15 million milestone payment that was received by Silex in July 2013, triggered by the successful completion of the Test Loop Phase 1 Program Milestone: Technology Demonstration and Validation.
Phase II: Full-Scale Engineering and Economic Validation
The focus of the Company is firmly set on the remainder of the commercialisation program for the SILEX technology.
||Test Loop technology demonstration and NRC commercial plant licence approval
||Economic and engineering validation for the initial commercial production module
||Commenced in 2013
||Construction of the first full-scale commercial production facility
||To be confirmed
Whilst the pace of this commercialisation program was slowed significantly by GLE in July 2014 in line with continued adverse conditions in the nuclear fuel markets, the technology engineering and economic validation program has continued to achieve significant progress during FY2016. Key technology demonstration activities relating to improved process efficiency and scaled-up laser system performance were completed during the year in review at the Wilmington and Sydney project sites respectively.
Subject to successfully completing the GLE restructure with new investors on board, we will aim for the commercialisation program to be ramped up again in the near future, in anticipation of the commencement of a recovery in nuclear fuel market conditions.
Nuclear Industry Outlook
Nuclear Power Outlook
Challenging market conditions continued to impact the nuclear fuel markets throughout FY2016. This was not unexpected given the continued slow pace of the restart of the Japanese nuclear reactor fleet following the Fukushima disaster in 2011 and the announcement of the premature retirement of a number of reactors in the US and Europe. As a result, demand for enrichment and uranium remains low and accordingly prices are currently depressed.
Longer term, a more positive outlook remains for the nuclear industry, driven by the merits of nuclear power as a clean emissions-free source of base load electricity becoming better understood around the world. Ten new reactor units commenced operations in the past year giving a total of 445 operable reactors globally. With an additional 61 reactors under construction and 170 planned – the demand and supply fundamentals of the nuclear fuel markets are set to recover in the coming years.
Billions of dollars of investment continues to be made every year in the nuclear industry with new nuclear plant builds continuing in the US and the UK, as well as more extensive programs in China, Russia, India and South Korea. This is in addition to extensions being granted to the operating lives of existing nuclear plants which could see many of these plants generating clean, reliable and affordable baseload electricity for up to 80 years.
Nuclear Fuel Market Outlook
The predicted growth in nuclear reactor build as highlighted above underpins the forecast market conditions that could support increasing demand for nuclear fuel from the early 2020’s. Both uranium and enrichment (U/SWU) price recovery and uncovered demand are expected to improve, according to industry analysts Ux Consulting and others. In addition, given the current environment which has precipitated the curtailment of future projects and expansion opportunities and shuttering of existing capacity by both U and SWU producers, ‘accessible’ supply could decrease as demand increases. This provides potential for GLE and the SILEX technology to participate in the annual global market for uranium and enrichment from the early 2020’s.
We therefore remain encouraged by these positive developments in the global nuclear industry. We continue to believe the SILEX technology, being our core asset and the only third generation laser enrichment technology being commercialised in the world, is the best path forward to deliver value to our shareholders.