Published on Thursday February 02 2012 (AEST)
Neal Froneman
Last year’s disaster resulting from Japan’s ill-advised siting of its Fukushima nuclear power station near five earthquake fault lines jolted not only nuclear power producers around the world but the entire industry pipeline, including uranium miners.
For the biggest projects, though, it was merely pause for soul-searching. The scale of investment in nuclear power by countries like China, India and Russia and the pressure to find an alternative to fossil fuels for power generation is forecast to lead to increasing deficits of uranium in the next decades, unless new sources are developed now.
According to International Atomic Energy Agency (IAEA) statistics, in 2009 SA had the world’s fourth-largest reserves of uranium but was only the 10th- largest producer. Namibia, with the ninth-largest reserves, was the fourth-biggest producer. Several of its more explored deposits have recently attracted interest from Chinese investors.
The IAEA’s “Analysis of Uranium Supply to 2050” report says that in the event of medium economic growth and ecologically driven energy policies, 5,4Mt of uranium will be needed between 2000 and 2050. Because of issues like the timing and cost of new developments, the IAEA suggests there will be a total shortfall of almost 1Mt. That means it is necessary to invest in exploration now, because it can take 8-10 years from discovery to bring a new mine into production.
An e-mailed presentation by Intierra executive director Glen Jones at the Vancouver Resource Investment Conference last week showed there were only 117 uranium mines operating around the world. This compares with 1211 gold mines. The number of uranium exploration projects was only one-sixth of gold projects. Australia, Canada, the US and Namibia had the largest number of exploration projects.
Jones says there are 434 nuclear reactors in service around the world, with another 560 proposed or under construction up to 2030. Current demand for uranium is about 180mlb annually, but only 141mlb is mined and the remainder is sourced from stockpiles. By 2030 the mid range forecast for demand suggests a 100mlb deficit. At current prices, projects are likely to be delayed, Jones says .
RBC Capital Markets said in a recent report that rising uranium deficits in future years would be a result of the current low prices, difficulties in obtaining permits for new mines and the end of the Highly Enriched Uranium (HEU) Agreement next year.
This was Russia’s agreement with the US to sell it 500t/year of weapons-grade uranium from stockpiles for 20 years, equivalent to about 18% of current mine production, according to The Energy Report.
RBC forecasts the uranium price will average about US$77/lb this year and $80/lb after 2013.
Spot uranium is currently trading around $53,45/lb , having fallen from above $70 when Fukushima started to leak. The spot price is not a good reflection of what the big miners receive as they sell around 80% of production on long-term contracts. New producers are more reliant on spot prices.
Says Gold One International CEO Neal Froneman : “ I agree there is a shortage of uranium looming, as Russian stockpiles come to an end next year and nuclear energy remains a viable option, despite Fukushima. Obviously perception issues need to be overcome.”
Last week he signed a memorandum of understanding with Gold Fields to look jointly at exploiting Gold Fields’ West Rand mine tailings, which contain about 4,5moz of gold and 53,6mlb of uranium.
Froneman says the project will break even at uranium prices lower than now because of the gold credits. For long- term planning, Gold One is using conservative uranium prices of $60/lb and gold at $1300/oz.
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