Fluoride Action Network

Going nuclear: Firm places bet on uranium company

Source: The Post Star (Glens Falls NY) | December 2nd, 2012 | By Scott Donnelly
Industry type: Nuclear Industry

To hear Chris Grosso talk about uranium, one might peg him for a nuclear power plant engineer.

Phrases like “depleted uranium hexafluoride” roll easily off his tongue as he explains the nuclear fuel cycle in animated tones.

But Grosso is a venture capitalist and financial manager who, as a partner with Thomas Kershner at Kershner, Grosso Wealth Management in Saratoga Springs, has spent a lot of time over the past eight years learning the ins and outs of nuclear energy.

It’s a road that began with a $350,000 investment eight years ago to buy International Isotopes, then a small company that provided radioactive isotopes for use mainly in the health care industry. The firm was on the verge of bankruptcy at the time.

“If you look at the industry, there are no small nuclear companies out there,” said Grosso, who is now one of three people who make up International Isotopes’ board of directors. “Generally, you’re either a behemoth or you don’t exist.”

In International Isotopes, Kershner and Grosso saw an opportunity to make a bet on a company with a lot of upside potential.

“Most of our clients’ portfolios — our high net-worth portfolios — are blue-chip stocks that people have heard of,” Kershner said. The International Isotopes move was one of the Spa City firm’s first venture capital plays in the small-cap market, giving intrepid investors a chance to diversify their holdings.

Though teetering on the edge of insolvency, International Isotopes did have one thing going for it that caught Kershner and Grosso’s attention: an established track record and good working relationship with the Nuclear Regulatory Commission. The firm had been licensed by the commission to handle radioactive materials.

“That’s the only asset we saw,” Grosso said.

A switch to energy

Today, the Saratoga Springs financial management firm is guiding International Isotopes toward a future in which it is the only company making money by reducing the volatility of waste from the nuclear fuel enrichment process.

Since the initial investment eight years ago, International Isotopes, headquartered in Idaho Falls, Idaho, has patented a process that turns volatile nuclear waste into saleable industrial compounds while, at the same time, converting what’s left over into a more stable and manageable material.

Circumstances haven’t been kind, however. As International Isotopes was working toward securing licenses to operate a new processing facility in New Mexico in 2010, it appeared the world was on the brink of a “nuclear renaissance,” Grosso said during an interview that year.

The worldwide demand for energy was rising even as nuclear energy was increasingly seen as an alternative to greenhouse gas-emitting power plants.

It seemed a new technology that could lessen the threat of nuclear waste was well-positioned to take advantage of that renaissance, Grosso said.

But on March 11, 2011, a tsunami triggered a nuclear disaster at a facility in Fukushima, Japan.

“There’s no question the nuclear renaissance got its head clipped,” Grosso said in a Nov. 15 interview. While there are still 104 nuclear reactors in the United States and more being built globally, plans to expand the world’s nuclear energy capacity aren’t what they were pre-Fukushima, he said.

Still, there are more nuclear energy facilities in the works worldwide, and International Isotopes is well-positioned to provide its technological process to the industry. There’s more than enough material coming out of the nuclear energy pipeline to fuel the company’s business plan, Grosso said.

Part of the pressure is coming from the end of international agreements by which enriched uranium — the fuel for nuclear reactors — was provided to the United States. That has prompted plans to build several new uranium enrichment facilities in the U.S., including one by GE in North Carolina. Other firms are building enrichment plants in Ohio, Idaho and New Mexico.

A license to help

On Oct. 2, the Nuclear Regulatory Commission granted International Isotopes a 40-year license to build and operate a facility near Hobbs, N.M., that will address the most powerful stigma of nuclear energy: fields of steel containers that hold the toxic by-product of the nuclear fuel enrichment process.

In 2010, the company purchased 660 acres on which to construct its first commercial processing facility utilizing the conversion technology.

Later that year, the company struck a deal with Urenco to take depleted uranium from the latter firm’s new uranium enrichment facility in Eunice, N.M., about 15 miles from the soon-to-be-built International Isotopes facility.

At the heart of the company’s business plan is the “fluorine extraction process.”

The fluorine solution

Unlike conventional processes for converting depleted uranium into its most stable form, uranium oxide, International Isotopes has found a way to reclaim fluorine that is combined with the uranium as part of the enrichment process.

The uranium oxide that is left is much less volatile and can be disposed of in low-level radioactive waste facilities.

International Isotopes’ new facility will strip the fluorine from depleted uranium and process it into pure gas.

So, in addition to the contract to take depleted uranium from Urenco, International Isotopes has struck deals to provide industrial fluorine gas to companies that need it to make a range of products, from solar energy panels to computer chips.

Grosso said confidentiality clauses kept him from disclosing details of some of those contracts, but he said one was a long-term agreement to supply specialty gas to a Fortune 500 manufacturer.

Green from going green

International Isotopes already operates an 8,000-square-foot pilot plant in Idaho Falls, Idaho, where the fluorine extraction process has been fine-tuned.

One of the first revenue streams anticipated will be payments from uranium enrichment facilities.

Because of the end of the Megatons to Megawatts program — by which nuclear weapons from Russia and the U.S. were dismantled and their nuclear fuel used for energy — there are new enrichment plants coming online in the U.S. soon, Grosso said.

He cited industry estimates that put depleted uranium output from planned U.S. plants, once they’re up and running, at about 80 million pounds annually.

The price of waste

It’s worth it for enrichment facilities to pay a company like International Isotopes to take the depleted uranium.

Until now, such facilities have been required by the Nuclear Regulatory Commission to put aside huge sums of bonded money to prove they can afford to clean up after their facilities when it comes time to decommission them. But those costs can be sidestepped if the facilities aren’t storing the depleted uranium themselves.

“If we didn’t exist, there would be no other option for these enrichment plants,” Grosso said.

The second source of revenue for International Isotopes will come from companies that require pure fluorine gases in their production processes.

The value of fluorine gas varies depending on its purity, but it can sell for up to $1,000 per pound, Grosso said. The plans call for International Isotopes to make “several million pounds” of fluorine gas each year.

Next steps

Going forward, International Isotopes plans to build its New Mexico facility in three phases starting next year, with the first capable of converting up to 11 million pounds of depleted uranium hexafluoride each year.

The idea is then to let revenue from the first phase — coming both from the enrichment facilities and fluorine gas sales — help finance the second and third phases of construction, which will step the facility up to handling 39 million pounds of depleted uranium each year, Grosso said.

The first phase, which will cost about $115 million, is expected to bring in about $30.6 million annually from the contracts with enrichment facility customers and another $18.9 million from the sale of fluorine gas, according to company documents.

After phase three is done, which is expected in 2022, the New Mexico facility will be bringing in $142.3 million from enrichment facility payments and $26.2 million from gas sales each year, the company said.

International Isotopes is a public company with about 30 employees that trades on the New York Stock Exchange under the ticker “INIS.” It’s a penny stock — it was trading for about 15 cents per share last week — and is closely held, Grosso said.

The company’s market capitalization stood at about $40 million as of Wednesday.

The key to getting through the lengthy Nuclear Regulatory Commission licensing process has been finding investors with a long view, especially in an age where venture capital money seems to be about the quick profit, Grosso said.

“You need to align yourself with like-minded investors,” he said.

The good news is that, because of the same process that kept International Isotopes from bringing its technology to the market sooner, the company has no competition on the horizon.

The patents that cover the de-conversion process extend through 2029, and because of the need for a Nuclear Regulatory Commission license, there are several hurdles in the way of any firm seeking to follow International Isotopes’ business model.