Lightbridge's Nuclear Fuel Innovation

In the excitement over the Biden Administration’s uranium ‘awakening’ many investors may have overlooked one of the names as a potential beneficiary of an emphasis on domestic uranium production.  Lightbridge Corporation (LTBR:  Nasdaq) is bringing to the market one of the first innovations in nuclear fuel in decades.  Its proprietary metallic nuclear fuel with a unique lobed design offers a more efficient and safer alternative for large water nuclear power reactors.

Lightbridge’s fuel core is made from a uranium-zirconium alloy that affords exceptional thermal conductivity.  The fuel is housed in a helically-twisted four-lobed rod that offers increased fuel surface area and a shorter distance for heat to reach cooling water.  The increased fuel rod surface area makes it possible for the Lightbridge fuel rod to operate at low temperatures.  The design also helps eliminate most of the potentially dangerous fuel rod swelling that plague conventional round fuel rods.

The company claims its fuel rod can deliver real savings for its nuclear power plant target market.  Power output can be increased as much as 10% and the operating cycle extended by six months in existing power reactors.  Those numbers should turn the heads of nuclear power plant owners all over the world.  Even more compelling is the potential efficiency in created in new reactors, which can achieve as much as 30% power uprate with Lightbridge fuel rods deployed in large power reactors.      

There are 419 water reactors around the world with 100 of them located in the U.S.  Lightbridge’s fuel rod can be used in each and every one of them as well as the new reactors that are under construction.  A nuclear power plant spends about $50 million each year to fuel a reactor.  This implies an addressable market for Lightbridge near $5 billion in the U.S. alone.           

We expect nuclear power to continue receiving considerable attention by policy makes as well as investors in the next few years.  Nuclear power plant operators need to increase power output to meet the world’s clean energy goals.  More efficient fuel technology could be an important element in reaching those targets.  Getting more energy out of an existing nuclear reactor reduces pressure to find sites and raise capital for new reactors.

Sometime this year or next Lightbridge expects to begin manufacturing at least samples of its nuclear fuel materials for use in test reactors.  The company also plans to product and test its multi-lobed fuel rod with enriched uranium inside.  Successful test results should put Lightbridge closer to commercial stage.

Of course, the practical side of prototypes and test materials is the construction of a pilot plant to fabricate its fuel and rod assemblies.  That requires capital.  At the end of March 2022, Lightbridge had $28.2 million in cash on its balance sheet.  The company uses about $2.0 million each quarter to keep operations going, implying a requirement for $16 million over the next two years to keep the lights on.  This budget leaves about $12 million for capital investments over the next two years. 

Lightbridge management has not issued a budget for its investment plans.  Given inflation in nearly all aspects of construction, it is likely $12 million might not be sufficient.  In the past the company has issued new shares of common stock to raise capital and it is likely they would seek the same resource in the future.  That said, the LTBR price could be a factor.  The shares have been on a roller coaster ride over the past year, falling by 67% from its 52-week high price of $14.60 in early November 2021, to the current price near $4.75.  Insiders hold 3% of outstanding shares and even at that modest stake are likely to side with shareholders in not wanting to see excessive dilution by selling shares at a bargain.

 

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.