Tapping into uranium’s future potential

As a vital commodity for countries that use nuclear power, Australia’s next wave of uranium miners are hoping to launch themselves into the export market to capitalise on the potential of a revival in prices.

Australia has the largest uranium resource in the world at 1.174 million tonnes or 34 per cent of the global total.

While it is the third largest producer of the commodity, there are currently only three active uranium mines in Australia as 2021 begins.

The fuel for nuclear power reactors, uranium is a cleaner source of power compared with fossil fuels such as coal and oil.

According to the World Nuclear Association, the energy density of uranium means that one kilogram of the commodity is the power equivalent to one tonne of coal, with nuclear power contributing to 10.5 per cent of the world’s electricity.

Australia, however, is the only G20 country with a federal government ban on nuclear energy, leaving uranium as an export-only commodity.

Unlike other commodities, uranium does not trade on an open market with prices published by independent market consultancies, including UxC and TradeTech.

Cameco, the world’s largest publicly-traded uranium company, calculates industry average prices guided by the data published by these consultancies.

The Canadian company reports that uranium’s spot price was US$29.70 ($40.20) in October 2020 – a far cry from the January 2011 peak of US$72.63.

With flatlining prices causing uranium demand to shrink in recent years, there is a chance the commodity will return to form, Tribeca Investment Partners commodities analyst and portfolio manager of the nuclear energy opportunities fund, Guy Keller says.

“Over the last two years, there have been a myriad of excuses for US and European utilities to do nothing to procure future supply,” Keller tells Australian Mining.

“Cameco, one of the largest uranium producers, have been physical buyers and regularly report difficulties in sourcing physical material. They will continue to buy into 2021 and may also be joined by KazAtomProm, the largest uranium producer.

“This is an unprecedented situation where the two largest miners of a commodity are not producing enough to meet their sales commitments.”

Keller says future supplies are dwindling as mines stop producing due to the volatile market conditions.

“Western utilities prefer to diversify their sources of supply so I would expect a number of countries to be interested in procuring any extra Australian pounds as they get closer to production,” he says.

“The supply (and) demand imbalance in uranium is the largest out of every commodity we model. Just the demand from China alone in the next five years is expected to result in large deficits.

“At these prices, there is no idled or new sources of uranium incentivised to come into production, so quite simply, prices have to rise.”

Nuclear’s place in the energy mix

While renewables and nuclear power are in constant debate for what is a “better” energy source, Keller believes nuclear can coexist with renewables.

He says uranium and nuclear power should complement renewables, adding that nuclear electricity should replace fossil fuel base load electricity generation.

“The federal government completed a review into the prohibition on nuclear power and recommended some longer-term sensible solutions,” he says.

“We have also observed a shift in social bias as the Australian people and the media come to accept that in order to achieve a truly carbon-free electricity grid (as opposed to a NET carbon neutral grid), nuclear power and therefore uranium, needs a seat at the table to complement renewable sources.

“After all, nuclear power is the only low-to-zero carbon source of base load (i.e 24 hours a day, seven days a week) electricity.”

Uranium mining in Australia has been a heavily debated political battle between Liberal/National and Labor governments around Australia.

In 2008, an eight-year ban on uranium mining in Western Australia was lifted after the Liberal/National Government was elected.

Current Western Australia Labor leader Mark McGowan then won the 2017 election and reinstated a ban on uranium mining in the state.

According to the Western Australian Department of Mines, Industry Regulation and Safety, there is a “no uranium” condition on future mining leases, with only the four projects that received approval from the previous Liberal/National Government allowed to proceed.

This includes Cameco’s Yeelirrie and Kintyre uranium projects, Vimy Resources’ Mulga Rock project and Toro Energy’s Wiluna project.

Keller describes Australia’s uranium resources as “extremely important” and expects the country to be favoured by United States and European utilities in the future.

“Despite some state government bans on uranium mining, Australia remains a Tier 1 mining jurisdiction and will be favoured by US and European utilities looking to secure future supply,” he says.

Growing global prospects

Marenica Energy is an ASX-listed exploration company with uranium assets in Namibia and Australia.

The company’s managing director and chief executive officer Murray Hill says small modular nuclear reactors (SMRs) could prove to be an attractive investment both internationally and locally, but only if Australia shifts its tone on using nuclear power.

In late 2019, Marenica acquired a number of uranium assets across Western Australia and the Northern Territory, with the equivalent of 48 million pounds of high-grade uranium resources.

“We bought these assets at a very low price and hence we are substantially leveraged to the uranium price,” Hill says.

“From a company perspective, we built a counter cyclical strategy whereby we decided to develop a solid base for the company while the uranium price is low,” he says.

“We picked up all this ground in Namibia and we are now the largest landholder for nuclear fuels in Namibia.

“We’ve picked up these projects in Australia cheaply, which can only increase in value as the uranium price goes up.”

Marenica’s patented U-pgrade beneficiation process expects to reduce the cost of uranium processing by removing clay and carbonate materials from ore, lowering costs by 50 per cent compared with conventional processing.

The process has significantly cut its acid consumption at the Angela deposit in the Northern Territory.

“We reduced the acid consumption by close to 80 per cent so we’ve gone from 104 kilograms per tonne down to 24 kilograms per tonne,” Hill says.

“The delivered cost of acid to Alice Springs at this point is about $0.40 per kilogram. You end up with a huge reduction in costs (80 kilograms per tonne at $0.40 per kilogram) and that’s just from a $20,000 proof-of-concept program, we expect this to improve with optimisation testing.”

Hill believes there will be significant economic gains if nuclear power is adopted in Australia.

“If we replaced our ageing fossil fuel fleet in Australia with nuclear, the power cost would be lower and wouldn’t that be a fantastic stimulus for the economy,” he says.

From a global perspective, small modular reactors (SMRs) may also shake up the uranium sector due to their modularity and flexibility.

Hill says there’s a lot of money being invested by governments to develop SMRs and the industry can expect them to be available in the next 10 years.

“They’re small and they’re modular, so say you’re in a remote Australian town you could have an SMR powering that town for 30 years without refuelling,” he says.

“Large reactors, you have to have a huge amount of power consumption for them, so they’ve tended to be attractive to large cities. The SMRs can be put anywhere around Australia.

“These are really going to be an important part of nuclear power production in the coming years.

“But you’ve got to convince both sides of politics. Science says nuclear is the best, but politics is the interference.”

Despite the political noise and current global dynamics, Hill is positive about where uranium prices are heading.

“We’re excited about what the future holds and I think it’s a fantastic time to be a uranium company, and also a shareholder in a uranium company because there’s only one way for the uranium price to go, and that’s north,” he says.

Marenica Energy is exploring lithium deposits in Australia and Namibia.

 

Next steps

Boss Energy’s (formerly Boss Resources) Honeymoon uranium mine at Kalkaroo in South Australia is positioned as a frontrunner in a uranium mining revival in Australia.

The Honeymoon project is fully permitted to export 3.3 million pounds of triuranium octoxide (U3O8) equivalent per annum.

Boss managing director and chief executive officer Duncan Craib is confident the company will be Australia’s next uranium producer.

“The Honeymoon uranium project is accordingly very well positioned being located in the premier uranium state of South Australia,” Craib explains.

“We have first mover advantage and will be Australia’s next uranium producer.”

According to Craib, uranium deposits are taking longer to develop while supplies become harder to source, but the Honeymoon project has already had $170 million of historical infrastructure expenditure.

“Security of supply and the geopolitical landscape are becoming increasingly important to utilities,” he says.

“Irrespective of favourable uranium prices, uranium deposits have become more expensive to delineate and take longer to develop in the modern world.

“Adding to that, permitting and licensing remains a defining factor between a mineral deposit that is characterised as geologically competent, and mineable ore body that is jurisdictionally ready.”

This feature also appears in the February edition of Australian Mining.

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