02/08/2005 - 22:00

Political will missing on uranium

02/08/2005 - 22:00

Bookmark

Save articles for future reference.

Investors have been pouring money into uranium companies despite continued political opposition to mining in WA, price uncertainty, and exploration risk. Mark Beyer and Joe Poprzeczny take a closer look at a controversial business.

Political will missing on uranium

The passion that is often ignited by the nuclear debate was on show for all to see when Premier Geoff Gallop appeared at a WA Business News breakfast forum about a month ago.

After delivering a stock-standard speech on his business agenda, Dr Gallop became unusually forceful and heartfelt when University of WA Graduate School of Management academic, Professor Ken Morgan, asked him where nuclear energy sat in the Government’s vision.

“Well, you’re looking at an unreconstructed opponent of nuclear energy,” Dr Gallop replied.

“In fact, I went away on the weekend and pulled out a number of books on this subject.

“This would be a disaster for Australia.

“To make a decision as a nation to [put] a huge amount of resources into developing nuclear energy would be a mistake of monumental proportions.”

Dr Gallop’s strong opposition to uranium as an energy source is shared by Labor premiers in all states except South Australia, where the Rann Labor Government supports the expansion of uranium mining.

This political opposition is just one of the issues facing the uranium industry, which has become Australia’s hottest investment sector this year, led by the likes of Paladin Resources and Summit Resources.

Investors have responded to a growing view that existing sources of uranium will fall short of predicted demand over the next decade.

To some extent this is nothing new – for the past 20 years, global production has been only about two thirds of consumption.

The balance has been made up of secondary sources, such as Russian military stockpiles, but these sources are running down.

There has also been a growing view that nuclear energy, which does not produce greenhouse gases, will attract increased use after a long period of stagnation.

Canadian producer Cameco, in a submission to the federal parliamentary inquiry into uranium mining currently under way, asserted that “2004 saw a shift in the global perception of nuclear energy”.

“Realistic assessment shows that nuclear energy is indispensable in abating the intensification of greenhouse gases,” Cameco said.

The net result of these supply-and-demand pressures has been a sharp spike in the uranium price from $US10 per pound in 2003 to about $US28/pound currently.

A recent survey by Access Economics concluded the price will top $US30/pound next year, but anybody planning projects on this basis could be in for a rude shock.

The Access survey concluded the “long term” price would be $US18.50 per pound, which is high by the standards of the 1990s but well below some of the bullish forecasts.

The actual price will depend on supply and demand trends.

On the demand side, opinion is widely divided.

Environmental group Friends of the Earth, in its submission to the parliamentary inquiry, said “previous expectations of significant growth in nuclear power have proven to be highly inaccurate”.

It concluded that “it is doubtful whether new reactors will keep pace with shutdowns”.

In contrast, Cameco – which has an active exploration program in Australia – predicts the number of nuclear reactors in use worldwide will grow from 440 to about 470 by the year 2015.

“Beyond this, steady growth in demand for nuclear power, there are prospects for accelerated growth,” it said, noting nuclear programs under way in China, India, the US, France and Finland.

The Australian Bureau of Agricultural and Resource Economics cited research by the International Energy Agency, which expects nuclear capacity to “increase moderately over the medium to longer term”.

ABARE said substantial new capacity in Asia and Russia would be largely offset by reactor retirements, particularly in Belgium, Germany and Sweden, which plan to phase out nuclear power.

On the supply side, ABARE said there were real constraints on higher output.

“It takes a long time to develop a uranium deposit into an operating mine because of increasingly stringent environmental standards and handling requirements,” it said.

One beneficiary of this situation is Paladin Resources, which is about to commence development of the Langer Heinrich deposit in Namibia.

Paladin said it will be the first new supplier to enter the market since 1983 and claims it is the only company able to bring “new” production to the market in the next three to five years.

While Paladin’s claims are technically correct, the reality is that existing producers have opened new mines, such as Heathgate Resources’ Beverley mine in South Australia, which commenced production in 2001.

Existing producers around the globe are also making incremental additions to output from their current operations.

Nonetheless, a rapidly expanding number of Australian and international companies are lining up to get a share of the uranium market (see next page).

Ron Matthews, Cameco Australia’s exploration manager, told a mining conference last week the number of companies active in uranium exploration in Australia has risen from eight in 2003 to 40 presently.

However, finding deposits is just the start.

In fact, Australia already has several large, undeveloped uranium deposits, such as Jabiluka and Koongarra in the Northern Territory, Kintyre and Yeelirrie in WA, and Honeymoon in SA.

Development of some of these deposits was blocked in the 1980s by the former Labor government’s ‘three mine’ policy, which has since become Labor’s ‘no new mines policy’ (see page 12).

The Howard Government supports expansion of uranium mining, but its view has not found much support among state and territory leaders.

In WA, Dr Gallop remains implacably opposed, arguing it would be better to improve efficiencies in energy use.

“Indeed, when you actually look at the figures in terms of the energy efficiency, you can create and the savings you can make to assist in greenhouse reductions – a dollar spent in nuclear energy development versus a dollar spent in developing efficiency in our current economy – there’s no comparison,” he said.

The prospect of nuclear proliferation and the difficulties in dealing with waste were added issues.

“Finally, of course, Australia has huge reserves of natural gas, which is a transition fuel,” Dr Gallop said.

“Why would we, here in WA, be wanting to promote and develop an industry to compete with what’s been a very successful effort on our part to get LNG into China and now the US is seeing its potential.

“So for a whole lot of reasons nuclear energy for Australia [would be] a big mistake, and I am totally opposed to it.”

Opposition leader Matt Birney has been cautious in his approach, saying he is “uncomfortable” with uranium mining and would only back it if the public supported it.

A Westpoll held in July sought to clarify that very point and found the public of WA remains divided: 48 per cent support lifting the ban on uranium mining and 44 per cent want it retained.

Clearing political hurdles is not the end of the issue.

Gaining consent from traditional owners is also needed before uranium mines can proceed, as illustrated by the fate of the massive Jabiluka deposit, located 20 kilometres from the Ranger mine.

Jabiluka was discovered in the 1970s, mining and environmental approvals were gained in the early 1980s, and development commenced in 1998.

However the mine owner, Rio Tinto subsidiary Energy Resources of Australia, has never secured Aboriginal approval to truck the ore to Ranger and consequently has put the project on a long-term care and maintenance basis.

An agreement signed in February with the Mirarr Gundjeihmi Aboriginal people and the Northern Land Council obliges ERA to secure Mirarr consent prior to any future development.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options