March/April 2010

A nuclear renaissance?

Uranium, geopolitics and power

By D. Zlotnikov

Like most commodities, uranium has felt the impact of the financial crisis of 2009. Spot prices fell from a peak of $136/lb in 2008 to much more modest levels of just over $40/lb today. When commodity prices dip, junior companies tend to be the first to feel the pain, but well-established projects are not immune, says Alun Richards, manager of communications at AREVA Resources Canada, a subsidiary of the French energy multinational AREVA. The company has recently ceased production at its McClean Lake Mine and is expecting to put the mine on care and maintenance around the middle of this year. “We’re running out of reserves we can economically develop at the existing price,” says Richards.

The closure, Richards emphasizes, is a temporary measure. Of the 250 staff employed at McClean Lake, AREVA Resources will be retaining about 140 to maintain the facility or be reassigned to other projects, all in an effort to keep the expertise within the company. AREVA is continuing with exploration at McClean Lake, as well as a number of surrounding properties. In fact, Richards points out, AREVA’s exploration budget has remained at the same level as it was, highlighting the company’s commitment to future operations in the region.

The McClean Lake mill has always been intended to receive the ore from the Cigar Lake Mine, in which AREVA has a 37 per cent stake. But Cameco, 50 per cent owner and the project operator, had encountered significant challenges when the unfinished mine flooded. Cameco expects to resume work at Cigar Lake later this year and, based on current information, is targeting initial production to begin in mid-2013.

McClean Lake’s startup is closely tied to that of Cigar Lake, with the high-grade circuits needed to process Cigar Lake ore already finished and in place. But after a couple of years of shutdown, Richards says, the mill will need to be ramped back up to operation.

To this end, AREVA Resources has proposed to regulatory authorities that some of the ore slurry from Cameco’s more distant McArthur River site be trucked to the McClean Lake mill for processing. The McArthur River shipments would allow AREVA Resources to restart the mill a full year before Cigar Lake is expected to begin operations, says Richards.

One thing is not in doubt: Cigar Lake will be brought on-stream. The project remains the world’s largest undeveloped uranium deposit and, like many of Canada’s other uranium deposits, boasts very high-grade ore.

Nuclear redemption

Without doubt, uranium holds the dubious honour of being the world’s most politically sensitive mineral. Its potential for use in weapons has ensured that the metal is strictly regulated, and this potential is the heart of an ongoing diplomatic row between the United Nations and Iran. But recently, uranium has been drawing another kind of attention – environmental groups and politicians seeing nuclear power as an effective way to reduce greenhouse gas emissions.

According to a report released by The Centre for International Governance Innovation (CIGI), as of January 2010, 55 nuclear reactors were at varying stages of construction around the globe. In addition to projects already under way, U.S. President Obama has recently announced $8 billion in loan guarantees for new nuclear power projects – a crucial component of the U.S. administration’s proposed high-speed, clean electric rail system. All this is good news for the suppliers – especially since existing inventories and stockpiles are beginning to run out, explains Nick Carter, vice-president of uranium consultancy firm UxC.

“For the past several years, it’s been pretty much an inventory-driven market, but it’s moved to being more of a production-driven one,” says Carter. Not all inventories have been exhausted, however, and the biggest inventory-based supplier of fuel-grade uranium is the U.S. government. Under what is known as the Highly-Enriched Uranium (HEU) agreement, Russia has been decommissioning its nuclear arsenal extracting uranium from its weapons, downblending it with either natural or depleted uranium and selling it to the U.S. for use in power generation. Signed in 1993, the 20-year-long agreement is due to end in 2013, but until then the two superpowers are keeping the market well stocked, to the tune of 24 million pounds a year. In 2008, Canadian mines produced only 19.8 million pounds.

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