Better tomorrow awaits province’s uranium industry
Producer remains ‘cautiously optimistic’ about what lies ahead in crucial sector
Saskatchewan’s uranium miners are looking to greener pastures even as prices for the metal remain in a six-year slump and global production has continued to rise.
Still, as the world’s second-largest producer of the key ingredient in nuclear energy, the province’s industry has remained optimistic, essentially chanting the same mantra year after year: A better tomorrow awaits.
The song remains unchanged this year.
“We feel cautiously optimistic about the future,” says Carey Hyndman, spokeswoman with Saskatoon-based Cameco, the largest publicly traded uranium producer in the world.
Production is set to decrease globally this year. That’s good news for prices, she adds. Moreover, utility companies operating reactors are expected to have an increased need for uranium.
Many have not entered into long-term contracts for uranium because of uncertain market conditions that have kept prices low since the 2011 Fukushima accident in Japan.
As a result, producers may see a slight increase in future demand.
All of this should bode well for Saskatchewan, which is home to some of the highest quality and largest reserves in the world, as well as some of the most advanced mining operations.
“We have two mines, McArthur Lake and Cigar Lake, that are the world’s two largest uranium mines and that’s an advantage,” says Cory Hughes, executive director of mineral policy for the Government of Saskatchewan.
“And they’re certainly profitable even at today’s prices.”
Production in the province has been reaching all-time highs despite the slumping prices.
“The increase is in large part because the Cigar Lake mine, which opened in 2013, has ramped up to full production,” Hughes says.
Located in the province’s north, both mines are among the most technologically advanced in the world.
Cigar Lake, for example, features an innovative jet-boring technique specifically developed for the challenging geological features of the deposits.
As for the future of uranium, Saskatchewan’s Athabasca basin is a hotbed for investment in exploration. Covering about 100,000 square kilometres of the province and already home to significant production, many exploration firms are active in the area staking out new noteworthy finds.
“There was about $130 million spent on uranium exploration last year,” Hughes says.
“That’s very high historically, and it’s been fairly consistent even since Fukushima.”
For producers, uranium remains a long game. While the spot price of about US$23 is a well above the lows of the early 2000s when it was about $7 a pound, it’s still a far cry from its heyday when it traded at more than $130 a pound.
Uranium’s price is often tied to the price of oil.
It peaked in 2007 along with oil, as major energy consumers such as China and the United States began to look for less costly ways to meet energy needs. But then the financial crisis hit in 2008-09.
Prices did bounce back along with oil, but the Fukushima accident derailed the recovery.
Japan shut down much of its nuclear energy production in the years after the meltdown.
“They have had a difficult time bringing reactors back online,” Hughes says.
“They’re hoping to bring back a few more this year and eventually get back to that 20 range, maybe as many as 30 of their reactors.”
Having those operational would significantly boost the prospects of the industry in the short term.
But it’s the long view that has fuelled exploration and hopes in Saskatchewan. Hughes says about 60 reactors are under construction around the world, and hundreds more are in the planning stages.
“The fundamentals are there for a strong and growing uranium industry, but it’s not going to happen overnight, either.”
The planning and construction phases for reactors take several years. Moreover, the province has competition, including the world’s largest producer, Kazakhstan, and other nations with major reserves, such as Australia.
Still, Saskatchewan will play a critical role in the growth of nuclear energy, especially as nations look to reduce their carbon footprint to meet emissions targets laid out in the Paris Agreement, Hughes says.
The U.S. remains the province’s largest customer, but deals are now in place with China and India, which are the largest growth stories for the industry overall.
Challenges do remain, particularly with respect to funding as investors often look at the near-term price history instead of the longterm picture, he adds. Even major producers such as Cameco have faced difficulties of late, having to decrease the size of its workforce and mothball its Rabbit Lake mine.
“Those decisions have been made to deal with the current oversupply and the challenging market, ensuring we have a strong future here,” Hyndman says.
“We are optimistic as we see future demand from utilities that need to contract fuel to keep both existing and newly built reactors running into the 2020s, 2030s and beyond,” she adds.
“We see good opportunities for well-managed companies like Cameco that can weather the current market.”
The fundamentals are there for a strong and growing uranium industry, but it’s not going to happen overnight, either.