Hard-fought gains

Two steps forward and one step back may not equate to an ideal rate of forward momentum, but in the context of the broader mining sector malaise, uranium hopefuls aren’t complaining.
Hard-fought gains Hard-fought gains Hard-fought gains Hard-fought gains Hard-fought gains

Cameco's Kintyre project


Australia’s uranium sector has been heaving unevenly forward in recent months, with some notable setbacks offset by clear signs of broadening political and investment interest in the commodity.
On the negative side, the federal government made no mention of uranium in its energy white paper in April, dashing hopes that offhand yellowcake references from Prime Minister Tony Abbot hinted at the roots of a domestic nuclear power industry. More signs of stagnation included a price retreat from $US40 a pound in mid-March to the recent range of $35/lb as investors absorbed news Queensland would reinstate its uranium mining ban.
Sentiment among the sector’s operators, however, has remained buoyant, with an opening up of New South Wales exploration, federal efforts to tap new markets, an encouraging inquiry into the possibility of a nuclear South Australia and snowballing project development momentum in Western Australia.
Traction in these areas has recently prompted industry lobbyists to stoke more interest in reversing the legacy of the “three mine policy”, a uranium mining restriction of the 1980s and 1990s which effectively kept Australia a bronze-metal producer despite its gold-metal endowment.
Australia supplies only 11% of global uranium output while holding almost a third of the world’s resources. Canada, by comparison, counts a mere 10% of world resources, but typically contributes about 20% of global supply.
Minerals Council of Australia executive director for uranium Daniel Zavattiero says, however, that Australia’s $A600 million annual uranium revenue haul might increase to more than $1 billion if several key projects can navigate a choppy approvals process.
“We do need to remove some obstacles,” he told RESOURCESTOCKS.
“The EPBC Act defines any uranium mine as a nuclear action requiring federal environmental approval regardless of whether it triggers any of the other matters of national environmental significance. This is duplication and slows down the approval process for no environmental benefit.
“We also need to look at transportation restrictions. Currently, product is exported only through Adelaide and Darwin with other states not open to exporting uranium through their ports. This is anachronistic policy that impacts our competitiveness.”
Zavattiero acknowledges these roadblocks are not showstoppers, finding a mostly positive narrative for uranium and noting that even Queensland’s shift in sentiment suggests the possibility of positive flow-on effects.
“This is disappointing and runs against the trend of the last decade,” he said of the Sunshine State’s renewed hostility to the nuclear fuel.
“It’s clearly against the tide, and most likely just going to benefit SA, WA and other regions who are open to uranium development opportunities.”
In South Australia, operators were particularly cheered by the state government’s decision earlier this year to pursue a royal commission on nuclear power. This was interpreted as a commitment to an evidence-based assessment of the often controversial industry rather than allowing the public debate to devolve into an all-too-typical quagmire of media-driven mudslinging and hollow rhetoric.
The latest poll on this subject by the South Australian Chamber of Mines and Energy found 48% of residents were in favour of developing a local nuclear power system, with 33% opposed and 19% neutral.
“Unlike some other uranium states, South Australia potentially can be front and centre from new higher-grade uranium plays as there is a global supply squeeze coming and the uranium price is firming,” Core Exploration managing director Stephen Biggins said in May at the South Australian Resources and Energy Investment Conference in Adelaide.
“Critically, in the current challenging equities market environment where junior explorers face tough times, the prospect of a first class and low-risk exploration, mining and export jurisdiction and proven uranium gateways through Adelaide or Darwin suggest the upside for uranium juniors is more robust than it has been for some time.”
Core’s uranium projects include a few sniffs at the Yambla property in the Northern Territory and the more promising Fitton discovery, which has demonstrated grades up to 0.3% uranium oxide at surface only 25km from three of South Australia’s four operating uranium mines.
Westward expansion
It will come as little surprise that South Australians are more open to the uranium conversation than most of their neighbours, considering the community contributions realised by the operating Olympic Dam, Four Mile and Beverley mines. But some of the country’s most exciting uranium sector progress in recent weeks has come from the emerging Western Australian scene.
Notwithstanding Olympic Dam and the NT’s venerable Ranger operation, WA lays claim to some of Australia’s geologically richest uranium deposits.
The bigger plays out here include Toro Energy’s 76-million-pound Wiluna project (already approved to be the state’s first uranium mine) and Cameco Australia’s 55Mlb Kintyre property, which received federal environmental clearance in April for a proposed seven-year open pit operation.
Meanwhile, Paladin Energy fortified its WA holdings with acquisition of Energia Minerals’ 16Mlb Carley Bore project in June and Vimy Resources scored a $A30 million funding package in May for the 73Mlb Mulga Rock deposit.
Vimy boss Mike Young said the fact that nuclear power providers were sensitive to security of fuel supply over long timeframes worked in favour of a reputable mining leader like WA – especially with familiar Asian resources customers expected to drive future uranium demand.
“They’ve had some hiccups and run into Clive Palmer, but the Chinese like doing business in WA, and they see it as a very secure place to source resources, as does Korea and Japan,” he said.
“So the key thing is that WA is a stable democracy and these guys need 5-10 year contracts.
“My dream is that we don’t sell uranium to offshore countries but we lease it. We effectively sell them the energy but not the fuel. We bring it back to Western Australia, store it safely, and when the technology changes, we would then have another source of fuel for the world.”
Asian waves
As with other commodities, the stirrings of China are at the heart of WA’s uranium momentum. After a few years of Fukushima-inspired hiatus, the country’s 23 unfinished reactors are back under construction, and more than half of them are expected to be completed within two years.
The scenario has been painted by uranium proponents many times, but has so far failed to fire up the retail investment market. Whether or not Beijing has a sincere environmental agenda may as well be irrelevant: coal-burning particulates are an expensive public health issue for China, and this fact is what will incentivise uranium investment to come.
Japan, unsurprisingly, has dominated the conversation about Asian uranium demand since the Fukushima disaster. Public resistance to the restart of the country’s 43 idled reactors has been stubborn and dramatic, with one protester making headlines by managing to land a drone with an infinitesimal amount of radioactive material on the prime minister’s roof in April.
Cameco Australia managing director Brian Reilly offered RESOURCESTOCKS a reserved outlook on the country’s return to nuclear energy.
“The process of evaluating reactor restarts in Japan is new and challenging. We believe about two-thirds of Japan’s reactors will return to service over time.”
However, Japanese stockpiles amount to only one year’s worth of the world’s nuclear fuel needs and the country was never a major uranium customer on a global scale. Any sign of a turnaround in Japan may be cheerfully amplified by uranium believers, but in the hard numbers of supply and demand, the country is only a marginal concern.
Young described Japan as more of a pubic perception bellwether rather than a true indicator of practical global market momentum.
“It’s more important in sentiment than it is in reality and in terms of math, particularly in the long term,” he said.
“From a metric point of view, Japan is not that important. It’s a user and they took 50 reactors offline, but they continued to buy. I think Japan is far more important from an optics point of view.”
As it turns out, the role of the invisible giant in Asian resources demand is being reprised for the uranium sector by India. Despite controversy surrounding India’s refusal to sign the nuclear non-proliferation treaty, the country – along with China – is quietly setting the stage for an environment of increased uranium mining competition.
“Around half of the reactors under construction in the world are in those two countries,” Zavattiero said.
“They have massive populations and are energy deficient. They need more electricity generating capacity and nuclear offers reliable, competitive, low emissions power. So they are clearly going to continue expanding their nuclear power sector.
“The uranium market is competitive and customers and investors will not wait for us if they can find competitive options elsewhere.”
The major players already producing the bulk of world supply, including BHP, Rio Tinto and Cameco are likely to reap the biggest rewards in any upcoming expansion of uranium markets. The problem for retail investors is that it can be difficult to get exposure to uranium via these companies.
Down a tier, to the junior and mid-cap space, there are a substantial number of uranium explorers with a decent story to tell, but not many of them are on a clear path to a foreseeable production scenario. Outside of Toro and Vimy, Australian explorers targeting production in the medium term include US-focused Peninsula Energy and Turkey-focused Anatolia Energy, which last month announced plans to merge with NASDAQ-listed Uranium Resources.
“When this market goes – and it will go – you want exposure to a company that’s going to be producing,” Young said.
“And when you look around the world, it’s a very small group of people. It’s not like the gold space or the copper-nickel space. We could all have dinner together in a restaurant.”

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