Global shortage of Uranium predicted

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China’s Energy Demands Fueling Canada’s Uranium Exploration in Asia

Canadian mining companies paid close attention to recent reports that the
Central Asian republic of Kazakhstan plans to become the world’s leading
producer of uranium by 2010. With just 9.4% of global uranium production in
2004, Kazakhstan trails far behind Canada (29.2%) and Australia (22.6%) as the
world’s number three producer, but the country’s state-owned uranium mining
company, Kazatomprom, has ambitious plans. Formed by the government of
Kazakhstan in 1997, Kazatomprom has increased production by 45% to 3,719
metric tonnes since 2003. It plans to develop seven new mines over the next five
years and to reach an annual production target of 15,000 tonnes by 2010, which
would make it the world’s top producer. However, at least some Canadian
investors are not worrying about Canada’s potential slip to second place, as a
number of Canadian mining firms are themselves investing heavily in uranium
exploration and production in Kazakhstan and its Central Asian neighbours.
Leading the way is Saskatchewan-based Cameco Inc, currently the world’s
largest uranium producer. Cameco operates four mines in Canada and the US,
has another currently under development at Cigar Lake, Saskatchewan, and also
owns 60% of a joint venture in Kazakhstan, known as JV Inkai, with
Kazatomprom holding the remaining 40%. JV Inkai is developing a mine in
south-central Kazakhstan that is estimated by Cameco to hold proven and
probable reserves of 52,000 tonnes of uranium. The timing could scarcely be
better, for world uranium prices have tripled in the past 24 months, reaching a
30-year high of US$29/lb this week. While the increase is significant, Cameco
believes the price is based upon “solid market fundamentals.”
In support of this position, Fletcher Newton, the CEO of a Cameco subsidiary
called Power Resources, has predicted a global shortage of 45,000 tonnes of
uranium over the next decade. At a meeting this week of the New York Chapter
of the Society for Mining, Metallurgy and Exploration, Newton predicted that the
global demand for electricity will rise 74% by 2025. The current growth of
China’s economy will undoubtedly fuel much of that increase. Beijing aims to
boost its nuclear output to 40,000 megawatts by 2020 and plans to build 40 new
nuclear reactors in the process – a goal that will require it to break ground on an
average of two to three reactors each year. These facilities will add to the 432
reactors already operating worldwide. The need to locate additional uranium
reserves has therefore encouraged Canadian mining companies to join in the
hunt in Asia.
In the last eight months, Vancouver-based Western Prospector Group Ltd.
(WPG) has steadily acquired exploration licences totaling more than 59,000
hectares in the Saddle Hills Uranium Basin in northeastern Mongolia. Mining is
Mongolia’s largest industry, and the firm points to the country’s “progressive
mining law” and its location “on China’s doorstep” as keys to the potential
success of its operations there. This week, WPG announced that its drilling data
has revealed a “high-grade uranium core zone” below old Soviet-era drill holes
on its 100% interest property. A 60-person mining camp has been set up and the
company expects to receive permits from the Mongolian government to begin
intensive drilling early next month. Not to be outdone, Halifax-based Erdene
Gold Ltd. has recently announced a strategic alliance with Vancouver-based
International Uranium Corporation (IUC), the former of which holds licences in
uranium properties throughout Mongolia. Erdene Gold estimates that two of its
properties contain a total of 10,500 tonnes of uranium, and IUC has been given
the option to acquire a 65% interest in these assets by spending C$6M over four
years. Finally, Vancouver-based UGL Enterprises Ltd. has acquired ten uranium
properties throughout Mongolia totaling over 250,000 hectares, and its field
crews have begun exploration programs to evaluate the firm’s licences.
Mongolia and the former Soviet states of Central Asia cooperate with the
International Atomic Energy Agency (IAEA) and their modern processing
activities do not produce any highly enriched, nuclear weapons-grade uranium.
Nevertheless, many countries in the region do continue to suffer from the
environmental impact of Soviet-era uranium mining for both weapons and energy
purposes. In order to prevent a recurrence of such abuses, Mongolia’s mining
regulations require firms both to submit environmental impact assessments and
to deposit 50% of their environmental protection budget in state-held accounts.
Likewise, Kazatomprom plans to acquire the relevant ISO 14000 certification for
its many mining and processing facilities “in future.” Canadian uranium mining
firms will no doubt be paying close attention to the discussions held at next
month’s IAEA symposium on secure, economical and environmentally sound
uranium production. Supported by the UN, the OECD, the World Nuclear
Association and the Nuclear Energy Institute, the event aims to address the
coming challenges of exploring for and developing the world’s “increasingly
obscure uranium deposits.” While they may be obscure, they are still within the
sights of Canada’s mining industry.
ISSN: 1712-0195
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Asia Pacific Bulletin #210 © 2005 Asia Pacific Foundation of Canada.