Friday, February 18, 2011

Thor's Hammer

Shares of nuclear energy expert Lightbridge Corporation (LTBR:  Nasdaq) inched above the $6.00 price level recently.  At that price level the stock is valued near 4.8 times the company’s book value, the only reliable valuation metric available to investors.  Lightbridge has eeked out a living through consulting work  -  revenue in the twelve months ending September 2010 were $8.9 million.  However, the company has yet to produce a profit. 

What has investors ready to lay down nearly five times book value is an intriguing technology under development in Lightbridge’s laboratory that offers promise to reduce radioactive waste and reduce the amount of fuel available for nuclear weapon production. 

Lightbridge is developing nuclear fuel designs featuring thorium as a fuel alternative to uranium.  The company has developed a novel “seed and blanket” fuel assembly that differs from but can directly replace conventional fuel rod arrays.  The company claims that use of its thorium-based design could lead to a 50% reduction in volume of used fuel compared to standard uranium.  Additionally, its design could result in a 90% reduction in long-term radio-toxicity  -  at least after 200 to 300 years.  Most, importantly, as an all-metal fuel, Lightbridge’s thorium technology could increase reactor power by 30% compared to conventional oxide nuclear fuels, thereby lowering the capital cost per megawatt of energy generated.

The first question investors might ask is why Lightbridge is still reporting losses, if their technology holds such great promise.

Thorium is a radioactive metal found in small amounts in most rocks and soils, where it is about three times more abundant than uranium.  Yet another reason to get excited about a thorium-based fuel design.  It was discovered in 1828 by the Swedish chemist Jons Berzelius.  He named it after Thor, the Norse god of thunder.  

Unfortunately, thorium has its problems.  Fuel fabrication is very expensive compared to uranium.  There are unresolved problems in reprocessing solid fuels, although one thorium-based design, the molten salt reactor, shows promise in resolving this issue.  There is also concern over weapons proliferation risk in regard to thorium in general, although Lightbridge has been successful in its Radkowsky Thorium Reactor in reducing the likelihood of creating fuel usable for nuclear weapons production.

Research and development work on thorium has been underway for the last forty years or so and Lightbridge is not the only developer with a design.  In 2009, Atomic Energy of Canada Ltd. (AECL) began working with a consortium in China for work on thorium at the Candu-type reactors in Qinshan, China.  India is working on an advanced heavy water reactor for which approximately 75% of the nuclear fuel is thorium.  India’s Nuclear Power Corporation is responsible for operating the country’s thermal nuclear power program.  The Gas Turbine-Modular Helium Reactor (GT-MHR) is under development by General Atomics, a potential competitor of Lightbridge in the nuclear consulting arena, using a so-called prismatic fuel and building on U.S. nuclear technologies.

The “seed and blanket” concept under development at Lightbridge was originally developed by Alvin Radkowsky, who was the chief scientist of the United States Navy's nuclear propulsion program from 1950 to 1972.  Lightbridge has been involved in a Russian program based at Moscow’s Kurchatov Institute to develop a thorium-uranium fuel.  The work has been on-going since 1994, but it appears Thor’s will still need to wield his hammer before the company can achieve commercial success with its thorium technology.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  LBTR is included in Crystal Equity Research’s The Atomics Index in the Nuclear Group.


Anonymous said...

I think you might be missing some things: first, the seed and blanket technology is not the immediate technology driver but rather the all metal fuel rods which are now in a US test reactor in a joint program between Idaho National Labs and Texas A&M. Second, the company has 14 million in cash from a recent capital raise. Third, on their consulting side they recently signed agreements with all 6 GCC countries for nuclear consulting, in addition to their ongoing efforts in the UAE and now a new Kuwait Nuclear Program. I think this is why the stock trades higher

Anonymous said...

Thor is the most powerful

It will be fitting if power plants are fueled by Thorium