Published on Monday October 07 2013 (AEST)
Power utilities need to boost orders of uranium by 2015 or face potentially soaring prices as new atomic plants come on line in addition to reactivated reactors in Japan, Olivier Wantz, who heads Areva’s mining division, said in an interview.
“It would be wise for buyers to make decisions in 2015 at
the latest,” he said at the company’s headquarters near Paris.
Uranium prices in August plunged to the lowest level in
more than seven years, still suffering from a drop in demand
following the March 2011 meltdown of the Fukushima Dai-Ichi
plant that was caused by an earthquake and a tsunami. Even with
some western nations such as Germany shutting nuclear plants,
new reactors in emerging markets such as China and India are now
reversing that trend, Areva said.
“All new nuclear plants will significantly boost demand in
coming years, even taking into account the phasing out of German
plants” by 2022 and other possible closures,Wantz said. “We
see first a stabilisation of prices, with the start of a pick-up
as soon as 2014.”
Global uranium demand will probably rise by 48 percent by
2023, according to the World Nuclear Association. Sixty-eight
reactors are under construction, including 28 in China, 10 in
Russia, 7 in India and 5 in South Korea, according to the WNA.
About 435 reactors around the world with combined capacity of
more than 370 gigawatts already consume about 78,000 tons of
uranium concentrate annually, the association said.
Nuclear Disaster
In the wake of the nuclear disaster, Japan idled its 50
remaining reactors and Germany immediately shut some of its 17
plants.
The spot price of uranium, which climbed as high as $138
per pound in June 2007, dropped as low as $34.5 two months ago
and recently held at $35.75, according to the Metal Bulletin.
“That doesn’t seem to reflect a lasting market trend as
prices for long-term contracts are higher,” at about $54, Wantz
said. Prices will also get a boost as uranium supplied from
reprocessed nuclear weapons under a U.S.-Russian agreement will
no longer be available.
Highly-enriched uranium from weapons stockpiles supplied
about 9,720 tons of U3O8, its tradable form, each year,
representing about 13 percent of global reactor requirement,
according to the WNA.
Weapons Stockpiles
Areva shares dropped 61 percent since the Fukushima
disaster, valuing the company at 5.4 billion euros. Canadian
rival Cameco Corp. (CCO), the world’s third-largest uranium producer,
declined 48 percent. Kazakhstan’s state-owned Kazatomprom is the
world’s largest producer.
To reflect falling uranium prices and delayed production,
Areva wrote down the value of its mines by a total of 1.62
billion euros in the 2011 to 2012 period, following the $2.5
billion acquisition of Toronto-listed UraMin in 2007. Areva,
which also faced construction delays at a nuclear plant in
Finland, sold 1.2 billion euros of assets last year and plans to
cut costs by 1 billion euros between 2012 and 2015.
“We’re certainly not considering new asset writedowns” in
mines, Wantz said. The company also has “no reason to consider
selling a stake” in the mining division, as the turnaround plan
is “well underway” and demand is rising, he said.
Long Game
In the first half, earnings before interest, taxes,
depreciation, amortization and divestments climbed 41 percent to
315 million euros at Areva’s mining unit, representing 39
percent of the division’s revenue, and 66 percent of the group’s
total profit.
Areva benefited from increasing prices and the end of some
“less favorable contracts,” Wantz said. “It will be slightly
less favorable in the second half, without being problematic.
We’re among producers that are least exposed to spot prices,
we’re rather strongly exposed to long-term prices.”
Last year, the company’s output of uranium concentrate
known as yellowcake, which is later converted, enriched and
fabricated into fuel rods, reached a record 9,760 tons,
including 3,661 tons at a joint-venture in Kazakhstan, and 3,065
tons at Areva’s Somair mine in Niger.
Wantz predicts Areva will produce a similar amount of
uranium concentrate this year as in 2012, as increased
production in Kazakhstan will make up for a shortfall at the
Somair mine in Niger where processing was temporarily curbed
after a terrorist attack in May.
Niger Mine
Canada’s Cigar Lake mine, in which Cameco owns 50 percent
and Areva 37 percent, is due to open next year.
“Cigar Lake will operate for at least 15 years, and maybe
longer because we’ll probably find additional resources,” Wantz
said. “It will be an extremely profitable mine. The output will
be 6,900 tons per year when the ramp-up is completed in several
years.”
Areva is also considering creating a venture with Japan’s
Mitsubishi Corp. (8058) and the government of Mongolia this year to
operate mines in the region, following investments of about $120
million in exploration works over the past 15 years.
The new mines will allow the company to meet rising demand,
the executive said.
“We’ll be totally in line with the demand curve of the
market,” he said.
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