Kontent Review

 Richard Owen
11mar06

URANIUM re-emerged as the hot political topic during the past week with India pleading for access to Australia's bountiful reserves to feed an expanding nuclear power industry as investors swamped yet another alluring yellowcake float.

Market reaction to the Toro Energy uranium exploration float in South Australia demonstrates just how hot the uranium sector has become amid speculation about the imminent death of Labor's anachronistic "three mines" policy.

Joint venture vendors Minotaur Exploration and Oxiana were forced to roll down the shutters four days early after receiving applications for $52.5 million worth of stock almost three times the $18 million being sought.

Australia hosts 30 per cent of the world's known uranium reserves and in the five years to June 2005 exported 46,600 tonnes of the stuff worth some $2.1 billion to 11 countries.

Talk of sales to China and possibly India has prompted Queensland's three Liberal senators Russell Trood, George Brandis and Brett Mason to fly to Mt Isa next week to visit Valhalla one of the state's most promising uranium prospects held by West Australian junior Summit Resources.

Although keen to see new uranium mines developed in Australia, the Federal Government is sticking for now to a policy of not sanctioning uranium sales to countries such as India and Pakistan, which have not signed the Nuclear Non-Proliferation Treaty.

Canberra generated a great deal of excitement last year by taking over responsibility for approving new uranium mines in the Northern Territory, but Labor regimes running the uranium-rich states of Queensland, Western Australia and South Australia are continuing to adhere to the ALP's "three mines policy" until it is changed.

The push is on in Queensland though for policy reform since right-wing ALP powerbroker and Australian Workers Union secretary Bill Ludwig took a lead role in urging the State Government to end its opposition to mining.

However, Premier Peter Beattie tried to fend off the latest mid-week plea for a rethink on uranium policy from Mount Isa MP and Speaker Tony McGrady with the almost absurd suggestion that yellowcake production in Queensland would undermine the state's $11.5 billion export coal industry.

The Queensland Resources Council quickly put paid to this argument by pointing out the majority of coal exported from Queensland was coking coal used to make steel  not thermal coal used to generate electricity.

Summit Resources chief geologist Peter Rolley said the recent change in political sentiment toward uranium at both state and federal levels had been "most intriguing" against the background of Kyoto and the greenhouse gas debate.

"We certainly haven't been lobbying any parliamentarians or environmental groups so we're finding it all very encouraging in that it's not just us pushing the wheelbarrow," he said.

"It was very interesting to see Mr McGrady's comments."

Summit needs to raise $10 million to fund a feasibility study on the viability of developing a $400 million mining operation at Valhalla just 40km from Mount Isa.

"We are quietly confident, but we certainly can't commit to spending that sort of money which we would have to raise from our shareholders until there is a change in policy," Mr Rolley said.

Queensland's three Liberal Party senators, he said, had arranged to inspect the potential mine site on Wednesday to get a better feel for the proposed project and publicly demonstrate their support.

In a recent speech, QRC chief executive Michael Roche referred to uranium as "an unusual blind spot" in the Beattie Government's resource policy.

"The State Labor Government's position on uranium is all the more difficult to fathom when not even Queensland's coal sector accepts the argument that keeping Queensland's uranium in the ground is somehow protecting the state's coal industry," he said.

"The message from the Queensland coal industry is that there is room for the full energy source mix. The reality is that there is global demand for Australia's uranium and it seems odd that our State Government is happy for South Australia and the Northern Territory to benefit from the resultant investment, jobs and royalties."

Queensland has not exported a pound of uranium oxide since the Rio Tinto-controlled Mary Kathleen mine near Mount Isa was shut down back in 1982 after producing almost 9000 tonnes.

Uranium, however, is one of those commodities which punches well above its economic weight due to the broader political issues relating to safety, the potential impact of an accident on the environment and, perhaps more importantly, security.

A quick flick through the latest Australian Bureau of Agricultural and Resource Economics report on commodities though will convince most readers that current constraints on uranium mining are hardly denying the country the immediate benefit of a new financial El Dorado.

ABARE estimates Australia's mineral and energy export revenues will jump $7.7 billion or 8 per cent next financial year to $100.64 billion and peak at $103.8 billion three years later before edging down to $101.9 billion in 2010-11 as prices retrace.

However, while revenue from uranium oxide exports is expected to double next financial year to $712 million due to soaring prices, this will account for less than 1 per cent of Australia's total resource sector export receipts.

Exports from the three existing mines – Ranger (in the Northern Territory), and Beverley and Olympic Dam (both in South Australia) – are also forecast to plateau in 2008 at 11,284 tonnes before edging down to about 10,000 tonnes by 2010-11.

To put this all in context there are now some 440 nuclear-reactors around the world which require 77,000 tonnes of uranium oxide concentrate containing 66,000 tonnes of uranium from mines (or the equivalent from stockpiles or secondary sources such as decommissioned weaponry) each year.

There are also now plans to build over the next 15 years another 113 reactors, including 24 in India, 19 in China and 24 in South Africa. This would increase global consumption by about 25 per cent or almost 20,000 tonnes.

The OECD's International Energy Agency also expects electricity demand to more than double by 2030, leaving plenty of scope for further growth in nuclear capacity in a greenhouse-conscious world.

To put India's needs in context, there are now 15 reactors operating in the country and another eight under construction. A similar but less aggressive expansion story is under way in China which is negotiating for access to our uranium supply as a signatory to the non-proliferation treaty.

India's consumption of uranium for power generation is expected to more than double from about 1334 tonnes a year to 3100 tonnes by 2010 – an extra 1800 tonnes a year worth about $200 million at current prices.

Queensland could be in a position to meet some or all of that additional demand from Valhalla.

Given a green light, Mr Rolley believes Summit could be exporting yellowcake from Queensland within three years and contributing royalties to help the Government fund the provision of crucial social services such as health and education.

Summit is targeting output of at least 2500 tonnes of uranium oxide a year from Valhalla and a number of other nearby deposits estimated to contain more than 30,000 tonnes of uranium.

In 1983, the Hawke government's election to power resulted in the deferment of plans to develop up to eight new uranium mines around the country.

They included the Ben Lomond project near Townsville which had completed a bankable feasibility study for a 6800-tonne resource from which French company Total planned to produce 500 tonnes of uranium oxide and 250 tonnes of molybdenum a year.

The project was recently acquired by Canada's Mega Uranium which also owns the Maureen uranium deposit near Georgetown, containing measured and indicated resources totalling 3000 tonnes.

Mega has budgeted to spend $C100,000 ($A117,000) on Ben Lomond this year and a further $C500,000 at Maureen on drilling and an airborne survey to identify other targets.

Another Canadian company called Larimide owns Queensland's other uranium prospect Westmoreland which boasts an inferred resource of 21,000 tonnes. Both companies are gambling on a change in ALP policy.

There are another 15 known deposits scattered around the Northern Territory, South Australia and Western Australia – most of which are now the subject of speculative investment on the back of renewed exploration interest.

However, BHP Billiton's plan to expand Olympic Dam and boost uranium output by as much as 10,000 tonnes to 15,000 tonnes a year is likely to ensure that the world's largest mining company emerges as the chief beneficiary of any sustained lift in global demand for yellowcake well into the future.