Supply struggles to meet nuclear tide
Many nations have revised their nuclear energy policies and are seeking uranium supplies to feed their energy needs, writes Robin Bromby
CHINA is looking to throw billions of dollars into Canadian uranium exploration, Russia is preparing to help boost Namibia’s exploration program and India — denied uranium by Australia — is looking to Africa to help keep its nuclear power plants going.
The nuclear arms race may be well over, but there is now a new race — one to find enough uranium to keep the world’s rapidly growing nuclear power industry going.
India’s failure to join the non- proliferation agreement has cut it off from supplies from Australia and other signatory nations, and now it is turning to countries outside the agreement — particularly Niger and Namibia — to source uranium so that it can meet its goal of boosting nuclear generation by 2020.
This race to nuclear energy, initially given impetus in recent years by the need to build base load power using clean energy rather than burning fossil fuels, is now being given further urgency by the growing shortages of those fossil fuels.
Oil prices are soaring, edging up to $ US112 ($ 101) a barrel by the second week of April; that same week, Japanese utility Chubu Electric agreed to pay 125 per cent more for its thermal coal supplied by Xstrata.
All signs point to growing gaps between production and demand for both oil and coal.
Australia is one of the few countries to have set its face against nuclear power, despite its appeal as a form of clean energy, while the rest of the world rushes to embrace it.
Now, in addition to its environmental appeal, nuclear is seeing the gap in capital and generating costs between it and thermal power stations closing.
Australia has 263 listed companies ( at last count) which have some involvement with uranium exploration. Canada has 285 listed companies with at least one or two uranium projects, according to Sydney- based Resource Capital Research, which publishes quarterly reports on the sector.
And yet we have only three mines, with a fourth under construction.
Another handful of projects in South Australia and the Northern Territory could be brought into production within two to four years, but more advanced ones in Queensland and Western Australia are frozen by state bans on uranium mining.
In 2006- 07, Australia produced 9577 tonnes of U3O8. This country has the world’s largest uranium resource, but it is rapidly being overtaken by other nations that do not have similar political barriers.
Kazakhstan, for example, exported 6600 tonnes last year and plans to produce 9600 tonnes this year and by 2010 become the world’s leading uranium producer.
The US has been lifting output. A total of 1800 tonnes was mined in 2007, a 14 per cent increase on the 2006 figure.
Longer term — when state government policies change and more projects reach mining development — Australia will be able to ride the uranium tide.
And prices are unlikely to return to the depths they reached in the late 1990s — nor the dizzy heights reached in the early 2007 uranium speculative frenzy.
While the spot price hit $ US138 a pound last year, that was seen as a speculative bubble. By early April, uranium spot was sitting at $ US71/ lb but US forecasts show a longer term price settling at around $ US90/ lb and supply contracts are being negotiated around that level. At $ US90/ lb, many of the proposed Australian projects could be economically viable.
But, in the meantime, a number of Australian companies have promising or advanced projects outside this country — in places where uranium mining is encouraged — and it is these companies that provide more short- term exposure to uranium for investors.
Paladin Energy, with its operating mine in Namibia ( which produced 490,800 lbs in the March quarter) and its advanced project in Malawi, has been one favoured investment.
But there is Equinox Minerals, which is in the feasibility study stage at its uranium project in Zambia. And Contact Uranium is working toward a pre- feasibility study at Corachapi in Peru, where it has an inferred resource of 9.2 million pounds with another 190 holes now being drilled to enlarge that resource.
Other companies with advanced projects overseas include Extract Resources and West Australian Metals ( Namibia) and Greenland Minerals which, fortunately, has rare earths at its project there which should allow it to develop a mine — both Greenland and Denmark allow uranium production only if it is a by- product of a mine.
The domestic scene is more problematic. There are many juniors with what the more sceptical observers call ‘‘ moose pasture’’ — the Canadian term for ground that has little chance of yielding a large, high grade resource. Others have come up with low- grade drilling assays. Many will run out of money this year as investor sentiment turns against the more speculative end of the market.
But others have made considerable progress and come up with results. To take a handful ( at random), there is Curnamona Energy, which is now seeking approvals to start trial leach mining at its Oban deposit in South Australia; also in that state, Alliance Resources has come up with a resource and has recently set itself the task of finding up to 47 million pounds of uranium at its Four Mile East tenement.
Across the border in the Northern Territory, Energy Metals recently boosted the resource at the Bigrlyi deposit to 23.4 million pounds. The demand will certainly be there. Resource Capital Research’s count shows that there were 222 nuclear reactors for power generation on the planned and proposed list at start of 2007; by January this year, that had risen to 315 reactors. There are 439 reactors in operation and 34 under construction around the world.
Britain, which only a few years ago looked as if it were poised to run down its nuclear generating capacity, has now turned 180 degrees on policy and is to invest in new reactors.
China has recently announced plans to further accelerate building of nuclear power stations and it plans to start stockpiling uranium for future use. Russia plans to double capacity by 2020.
Taiwan is assessing whether to build more nuclear plants while two reactors are to go ahead in the US state of Georgia.
Romania now gets 20 per cent of its electricity from nuclear power and two more reactors are being planned.
The tide is running nuclear’s way. The only question is whether uranium supply will be able to keep up.
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