Japanese stake claim in uranium sector

AFTER decades in the doldrums under the weight of political obstacles, Western Australia's nascent uranium sector is poised to become a significant player on the world stage.

While no significant uranium projects feature in this year's survey of major projects, at least five world-class uranium mines are in the advanced planning stage.

Their development has the potential to make WA Australia's leading producer within five years, overtaking both South Australia and the Northern Territory.

The catalyst has been the election of Colin Barnett's coalition government at last year's state election, which swept away the previous government's ban on uranium mining, and the federal Labor government's support for the industry.

No wonder, then, that Mines Minister Norman Moore was so chuffed in July when a Japanese consortium locked in a $US49 million deal to buy in to the Lake Maitland uranium project near Wiluna.

"It is satisfying to see that in the nine months since the state government lifted the uranium mining ban, foreign investors have recognised the enormous potential of WA's uranium resources," Mr Moore said.

"This deal is a clear indication that WA's uranium sector is highly valuable and has great potential to generate jobs and enhance the state's economy."

Those claims certainly stack up against the steady flow of offshore funding into the sector since 2005, including almost $1 billion to acquire and consolidate WA uranium assets.

Driving this investment are the simple fundamentals of geology, supply and demand.

According to official figures from government forecaster Abare, WA boasts known uranium resources of almost 190,000 tonnes in 28 deposits. That equates to almost two and a half times 2009 world demand of 81,000t. And that does not include the dozens of potential new resources likely to be drilled and confirmed over the coming years.

More important are forecasts that global demand will surge by 22 per cent by 2014 to 98,200t as more countries turn to nuclear power in a bid to provide reliable, cost effective, low-emission electricity.

As with most commodities, China is the main factor in this massive rise in forecast demand. China is planning for an eight-fold increase in nuclear power generation to 86 gigawatts by 2020, with 11 reactors already under construction, 35 more scheduled and a further 80 on the drawing board.

No wonder Japan - always determined to shore up its own needs and ever wary of China's global quest to lock up dwindling natural resources - has led the current charge into WA.

Just as Japanese energy utilities have underpinned development of the state's LNG industry by signing long-term foundation offtake contracts, so they are now underwriting WA's uranium sector.

Mitsubishi was the first to move last year when, in partnership with Canadian uranium miner Cameco, it paid $520 million to acquire Rio Tinto's huge Kintyre deposit in the Pilbara.

Significantly, the deal was struck three months before the anti-uranium state Labor government was voted out of office.

Reckoning that change was inevitable, Mitsubishi and Cameco's early move allowed them to secure WA's third largest uranium resource. The project hosts about 36,000t of uranium, which former owner Rio Tinto had previously estimated could yield up to 1,500t a year.

Cameco has subsequently fast-tracked prefeasibility work at the project in a bid to potentially develop the project within five years.

Similarly, three major Japanese power utilities plus trader Itochu Corporation are backing the Lake Maitland project near Wiluna, which hosts about 10,700t. The project's Canadian operator Mega Uranium believes it can be WA's first uranium mine as early as 2011, with a $US85 million investment to produce 750t a year.

Competing with Mega to become WA's first producer are Toro Energy and Energy and Minerals Australia (EMA) at their Lake Way and Mulga Rock projects respectively.

Toro believes a $160 million mine at Lake Way, near Wiluna, could produce a similar volume of uranium from late 2012.

Meanwhile, EMA is targeting a 2013 production start for a 1,000t per annum mine at Mulga Rock, north-east of Kalgoorlie deposit, which hosts more than 40,000t of uranium.

But WA's flagship operation will be BHP's massive Yeelirrie project, near Wiluna. BHP submitted its environmental assessment application for the 52,000t resource in July and hopes to be producing 5,000t a year from 2014. At that rate, the mine would rival BHP's current output at Olympic Dam in South Australia, Australia's biggest uranium producer.