After a decade of near torpor, the uranium mining industry is being challenged to rise to a new age in nuclear power, says Chris Webb.

A doubling of spot prices in the last 12 months, coupled with a surge in demand is set to stimulate capital investment in support of new uranium ore mining initiatives. The scramble to develop new sources after a decade of flat activity stems from a long-term shift in the energy market. A growing international pro-nuclear community has propelled atomic power back onto power utilities’ agenda as climate change spurs world demand for clean electricity.

A new generation of nuclear power stations is planned for the USA and a number of Eastern Europe countries, along with India, China and other East Asian nations. Britain may also join the race with replacement nuclear power plants to offset a shortfall in capacity left by the closure of many of its older stations.

The upturn in the nuclear industry’s fortunes has raised a number of daunting questions, however. Not least of which concern the availability of the necessary skills to develop a raft of new plants worldwide, and access to uranium, whose only significant commercial use is in the nuclear power industry.

Since the early 1990s, global uranium production has satisfied only 51 per cent of worldwide demand, according to reports by the Ux Consulting Company (Ux) and the World Nuclear Association (WNA). The gap has been filled by secondary supplies, including inventories held by governments, utilities and others in the fuel cycle. They include highly enriched uranium inventories resulting from bilateral agreements between the USA and Russia to blend down nuclear warheads.

Uranium supply concerns

According to Ux, secondary sources, combined with uranium production from existing mines, will not be sufficient to meet the world’s requirements. New production will be needed, while simultaneously uranium prices will need to remain at or near those currently being experienced to stimulate the capital investment needed to finance new exploration and production.

Just like other metals, uranium is seldom sufficiently concentrated to be economically recoverable from the ground. The bulk of the Earth’s known reserves of uranium lie in countries such as Australia, which has 30 per cent of the world’s total, Kazakhstan (16 per cent), Canada, USA, South Africa, Namibia, Brazil, Niger and Russia.

Uranium ore mining is benefiting from the renewed interest in nuclear energy
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Australia’s ‘reasonably assured resources’ of uranium amount to 1,142,000 tonnes recoverable at up to $80/kg, according to the Uranium Information Centre (UIC). Canada’s are 444,000 tonnes.

Political factors mean that Canada’s production outstrips that of Australia as the main supplier of uranium to world markets. But this could soon change.

A report by the government’s Uranium Industry Framework Steering Group published in mid-November made 20 recommendations for the development of Australia’s uranium mining industry, including the removal of transport constraints and the harmonization of environmental and other regulations.

John Howard, Australia’s prime minister, set up a separate task force to carry out a review of uranium mining, the nuclear fuel cycle and the contribution of nuclear energy in Australia. The task force was due to present a draft report as PEi went to press. Howard said, he believed “very strongly” that the time had come for Australia “to look at the nuclear option”.

Latest available figures, for 2005, show that Australian exports amounted to more than 12,000 tonnes of uranium oxide (U3O8) valued at nearly A$600 million ($458 million). Production was about 23 per cent of world mine total. Canada produced almost 14,000 tonnes in 2005, a third of world total, and mostly for export.

Russia, who is a key advocate of nuclear power, said recently that it was embarking on a $54 billion two-stage nuclear energy development programme to increase nuclear’s share of electricity generation from 15.6 per cent to 18.6 per cent over the next nine years. Russia’s minister of finance Alexei Kudrin called the programme “the beginning of a renaissance” for the Russian nuclear industry. The programme, approved in principle in July, will entail the construction of a new series of units with total installed electrical capacity of at least 2 GW annually.

Nuclear fuel manufacturer TVEL and nuclear fuel cycle company Techsnabexport (Tenex) have formed a new Russian uranium mining company, uniting their efforts in prospecting and mining both at home and abroad. Sergei Kiriyenko, the head of Russia’s Federal Atomic Energy Agency (Rosatom), said the new venture is intended to assure increased production of uranium, noting that the price of U3O8than doubled this year to $27,000/t.

Earlier this year, Russia proposed the creation of a joint uranium mining corporation with Kazakhstan and Uzbekistan. The move follows the signing by Japan and Uzbekistan of an agreement to develop uranium industry in the central Asian country. According to the Organization for Economic Cooperation and Development (OECD), Uzbekistan has an estimated 75,000 tonnes of ‘reasonably assured’ uranium resources, representing about 2.3 per cent of the world’s total. In July 2006, Japan signed a similar agreement with Kazakhstan.

The best efforts of the mining industry do not always run smoothly. Canada’s uranium mining industry suffered a severe blow recently with the flooding of Cameco’s Cigar Lake mine in northern Saskatchewan. Uranium prices jumped seven per cent in the week following the news and shares in potential alternative suppliers rose steeply.

Production at the mine, originally due to start in 2008, has been set back at least a year. It is one of the most important discoveries in the history of uranium mining, and Cameco’s second major high-grade deposit site. It is also one of the most difficult to exploit. At 450 m deep, in difficult ground conditions, it uses high pressure water jetting to extract the ore and widespread freezing is required to stabilize the grouns. It was to have supplied 8200 t/yr U3O8 (7000 tU/yr), building up over a three year period.

For almost a decade, quantitatively at least, mining operations have remained generally flat. Lately, however, the worldwide market for uranium has experienced a sudden and pronounced transition from being inventory-driven to market-driven. While presently known resources of uranium are enough to last for half a century, further exploration and higher prices will certainly, on the basis of present geological knowledge, yield further resources as present ones are depleted. A doubling of price from present contract levels could be expected to create a tenfold increase in measured resources, according to the American Association of Petroleum Geologists’ (AAPG) energy minerals division.

Funding for exploration was difficult to find between 1996 and 2002 when uranium prices languished. Virtually no exploration was being conducted, but higher prices are now reversing the trend, and exploration activity has begun to increase. Most of the large exploration projects being conducted are outside the USA on prospects that have proven shows, but were not fully explored before the spot price fell again in the 1990s.

Investment sorely needed

At the unveiling of its World Energy Outlook, the IEA executive director Claude Mandil painted a gloomy scenario of a world without investment in nuclear power. “The energy future we are facing today, based on projections of current trends, is dirty, insecure and expensive. But it also shows how new government policies can create an alternative energy future which is clean, clever and competitive – the challenge posed to the IEA by the G8 leaders and IEA ministers”.

In the absence of new government measures to alter underlying energy trends, Mandil said, global primary energy demand will increase by 53 per cent between to 2030. Over 70 per cent of this increase will come from developing countries, led by China and India. Imports of oil and gas in the OECD and developing Asia will grow even faster than demand.

World oil demand will reach 116 mb/d in 2030, up from 84 mb/d in 2005. Most of the increase in oil supply will be met by a small number of major OPEC producers, while non-OPEC conventional crude oil output will peak by the middle of the next decade. Global carbon dioxide (CO2) emissions will reach 40 Gt by 2030, a 55 per cent increase over today’s level, with China overtaking the USA as the world’s biggest emitter of CO2 before 2010. These trends would accentuate consuming countries’ vulnerability to a severe supply disruption and resulting price shock. They would also amplify the magnitude of global climate change.

Reports from WNA indicate how sensitive economic recoverability is to market-led prices. Measured resources of uranium are also dependent on the intensity of exploration effort. In other words, changes in costs or prices, or further exploration, may alter measured resource figures markedly. There are other factors that have the potential to cause volatility in the market, however.

The world’s power reactors, with combined capacity of 350 GW, require some 75,000 tonnes of U3O8 concentrate from mines or stockpiles each year, according to the UIC. While this capacity is being run more productively, the uranium fuel requirement is increasing, but not necessarily at the same rate. Factors increasing fuel demand are offset by a trend towards higher burnup of fuel and other efficiencies, leading to a steady demand. It is likely that the annual uranium demand will grow only slightly to 2010.

There is an undoubted trend within the energy industry to turn its attention once more to revitalize nuclear power as a substitute for fossil fuels in order to mitigate the environmental impact of coal and the economic impact of unreliable overseas oil and gas resources. Nuclear energy is one of the few readily available technologies that does not produce greenhouse gases in significant volumes. Nuclear power is also one of the principal sources of inexpensive hydrogen to fuel any future ‘Hydrogen Economy’.

Given the present buoyancy within nuclear energy industry circles, it seems unthinkable that uranium mining can fail to attract significant investment. Experience has shown, however, that uncertainty over the industry’s ability to deliver large capital projects such as nuclear power stations on time, and on budget, is a major issue. And that remains to be resolved.

*Uranium statistics taken from: Uranium 2005: Resources, Production and Demand, also known as the Red Book, which is prepared by the OECD Nuclear Energy Agency (NEA) and the International Atomic Energy Agency (IAEA).