Uranium hopefuls gear up after tax deal clears the decks

THE race to develop Western Australia’s first uranium mine has entered a new phase following the federal government’s scrapping of its planned resource super profits tax.

Uranium, like gold, copper and nickel, was excluded from the government’s proposed new 30 per cent mineral resource rent tax, which is to be levied on profits from coal and iron ore sales.

The exclusion is a huge relief for WA’s emerging uranium sector, which was only just building up steam after Premier Colin Barnett overturned a decade-long state ban on uranium mining.

Australia’s uranium reserves are already the world’s largest, accounting for 39 per cent of the global total. WA in its own right has the second biggest repository with almost 17 per cent of the world total in more than 20 deposits.

Two of those projects reached crucial milestones this week when the deadline passed for public comment on environmental scoping documents for Toro Energy’s Wiluna project and Mega Uranium’s proposed Lake Maitland venture nearby.

Both are slated to enter production in 2013, as is Energy & Minerals Australia’s Mulga Rock project, 250 kilometres north-east of Kalgoorlie.

Following these are the state’s two biggest projects – BHP Billiton’s Yeelirrie project near Wiluna and Cameco’s Kintyre venture in the Pilbara, slated to start by 2014 and 2018 respectively.

WA could therefore produce more than 6,500 tonnes of uranium oxide a year, more than half of Australia’s current annual output of 10,000t, by the middle of the decade. Sales would then top $1 billion a year at current prices around $US40 per pound or $1.5 billion at the long-term contract price of $US60.

The strength of demand became clear last week when Toro announced it had formally begun offtake discussions with prospective customers for its $160 million Wiluna project, 30km south of the town, which contains more than 11,000 tonnes of uranium in the Lake Way and Centipede deposits.

Acting Toro chief executive Simon Mitchell said first-round talks had begun with major utilities in Japan and the US, and would start shortly with similar groups in South Korea, China and Europe.

Toro is eyeing two alternate development options – a $160 million heap leach to produce around 730t a year, and a $260 million tank leach operation to produce 1000tpa. Which route is chosen will depend on the results of a 45,000t trial pit due to be excavated shortly.

Heap leaching is a relatively simple process whereby stockpiled rock is irrigated with acid and the pregnant solution is harvested at the bottom of the heap. In a tank leach, leaching occurs in a series of tanks. Though more costly, it generally recovers more of the target mineral.

Toro expects to submit its final environment review and management plan (ERMP) for approval by the end of this year in order to start construction late next year.

Mr Mitchell said Toro would likely sell a cornerstone stake to an offtake customer to cover its share of the development cost.

Tax uncertainty had complicated that process, he said.

“It put us in a really difficult position because we couldn’t quantify it with any certainty,” Mr Mitchell told WA Business News.

Combined with the recent market uncertainty, it was a factor in commissioning being deferred by six months to the first half of 2013.

Mr Mitchell said being WA’s first uranium miner was not Toro’s primary motivation.

“We feel we are pretty much on top of the technical questions ... but it’s not a race, we want to make sure we get it right,” he said. “We like to think of ourselves as the tortoise, not the hare.”

Canada’s Mega Uranium has also pushed its commissioning target for the 1000tpa Lake Maitland project back by a year to mid 2013.

Mega’s vice-president Australia, Richard Homsany, said while Mega’s original commissioning target was probably a bit ambitious, the RSPT had also posed an extra obstacle to development.

“It (was) just an additional hurdle to overcome in an already challenging business,” he said.

Mr Homsany said Mega expected to submit its ERMP by early 2011 in order to gain all necessary approvals by mid 2012.

Given the relatively low volumes to be produced, both Toro and Mega plan to truck the material in sealed containers to Kalgoorlie, from where it will be transported by rail to either Port Augusta or Darwin, Australia’s only licensed uranium export ports.

BHP has already outlined similar plans for its $500 million Yeelirrie project, south-west of Wiluna, which it plans to commission in 2014. Yeelirrie is Australia’s biggest untapped uranium deposit with known reserves of 52,500t.

BHP originally planned to produce about 5,000t a year from Yeelirrie, but has since scaled that back to 3,500tpa after opting against a bigger heap-leach operation. It also started a review of the project in May in light of the RSPT.

The public review of its initial scoping documents ended in February and BHP aims to submit its final ERMP documents by August next year.

Meanwhile, Energy & Minerals Australia is targeting a 2013 commissioning date for its planned 1000tpa Mulga Rock project, where it last month announced a 25 per cent increase in resources to 27,100t of uranium.

Managing director Chris Davis said the increase confirmed EMA’s belief that uranium was hosted in sandstone as well as the lignite, which hosts most of the current resource.

That not only suggested the potential for further resource increases but also the possibility of in-situ recovery (ISR).

A lower-cost, lower-impact process than conventional mining, ISR is more akin to coal seam gas extraction. Holes are drilled to allow the leach solution to be pumped into the orebody in-situ and drawn out as the uranium is leached into the solution.

Mr Davis said ISR extraction would occur first as the overlaying lignite formed a seal that enabled the process to work. Once ISR was complete, the lignite-hosted mineralisation would be mined and processed.

Despite the added complexity of the combined process, Mr Davis said both had been factored into the scoping study due for completion this month. Consequently, EMA was still targeting production in the second half of 2013.

Hundreds of kilometers north in the Pilbara, Canada’s Cameco has adopted a slow-but- steady approach at Kintyre, Rudall River National Park.

Cameco sparked the current WA uranium rush in 2007 when it and Japan’s Mitsubishi paid $US500 million to acquire the 36,000t resource from Rio Tinto, but does not expect to commence development before 2015.

It is currently drilling to reconfirm past resource estimates and is building ties with the Martu traditional owners, who will hold an official naming ceremony at the site next Wednesday.