By Keith Norbury
Three years after a massive tsunami wiped out Japan’s Fukushima Diichi nuclear power facility, the world uranium industry is still reeling from depressed prices, reduced demand and questions about uranium’s future as a baseload-power fuel. In the wake of that March 11, 2011 tsunami and earthquake, Japan not only shut down the six reactors at Fukushima Diichi, but all of the country’s other 48 reactors. Shortly after that, the German government shut down eight of its 17 reactors.
“There are about 435 nuclear power reactors worldwide, of which at the moment —predominately because of the Japanese situation — there are only 370 that are actually in operation,” said Tom Drolet, principal of Drolet & Associate Energy Service Inc. At the time of the Fukushima disaster, the worst nuclear accident since the 1986 Chernobyl disaster, the spot price of uranium oxide concentrate was about US$72 a pound. Since then it has tumbled to less than half that price, about US$35 a pound.
Mr. Drolet, who has a long history in the power industry dating back to his days at then Ontario Hydro, noted that uranium concentrate, often called yellow cake, seldom trades on the spot market. That’s because utilities don’t want to have to think about buying uranium every day. “They want to lock up a supplier for years and years,” Mr. Drolet said. The long-term price has been low as well, “and it’s mainly because there’s an oversupply on the markets because the Japanese reactors aren’t operating, and the German reactors are only partially active,” said Mr. Drolet, who has visited the aftermath of both Chernobyl and Fukushima.
Depressed price offers little incentive for miners
Such low prices don’t provide much incentive to invest in exploration and development of the uranium resources needed to fuel nuclear reactors, noted David Sadowski, a mining equity research analyst at Raymond James Ltd. in Vancouver. The priced needed to justify investing in a new mine requires a concentrate price of $US70 to $US80 a pound, he said. “We’ll need to have a uranium price rebound in order to stimulate levels of exploration and development to where they were previously,” Mr. Sadowski said, adding, “just like any other metal, you build a mine when the price is at a level that can justify the building of that mine.”
It’s important to bear in mind, however, that “there are more reactors that are under construction, proposed or planned than there were prior to Fukushima happening,” noted Rob Chang, a metals and mining analyst with Cantor Fitzgerald Canada. Figures from the World Nuclear Association bear that out. In March 2011, a total of 544 reactors were either under construction, planned or proposed in the world. In January 2014 that number stood at 555. Then, as now, a large slice of that activity is happening in China, which accounted for 29 of the world’s 71 reactors under construction in January 2014. That compared with 27 of 62 reactors under construction in March 2011. Seemingly undeterred by fears of Fukushima fallout, literally and figuratively, China now also has 58 planned reactors and another 118 proposed, up from 50 and 110 respectively before the disaster.
Chinese plans expected to spur investment eventually
China’s apparent insatiable demand for new energy represents “the bottom line question in uranium,” said Mr. Drolet, who estimated that another 370 reactors will come online within the next 30 years. At present, the world’s 370 operating reactors consume about 160 million pounds of uranium concentrate annually.
“Where are we going to get another 160 million pounds a year to fuel all the new reactors?” Mr. Drolet said. A significant share will come from uranium deposits in Canada, which is currently the world’s second largest producer of uranium after Kazakhstan in central Asia.
The prospect of all those reactors coming online makes Canada’s two largest uranium producers — Cameco Corp. and France-based Areva Resources Canada — optimistic about the prospects for their business. China’s ambitious growth plan, for example, “coincides with our target to increase annual uranium production to 36 million pounds by 2018,” said an email response from Cameco’s Manager of Media Relations, Rob Gereghty.
Much of that new production will come from the Cigar Lake mine, a joint venture with Areva (Cameco 50 per cent, Areva 37 per cent, Japanese interests 13 per cent) that is now expected to begin production by the end of the second quarter of 2014. Meanwhile, Cameco’s 69.9 per cent owned Cree-Extension Millennium project “will be advanced at a pace measured to market opportunities,” according to Cameco. The company’s flagship operation is the McArthur River Mine, the world’s largest mine of high-grade uranium ore. Like Cigar Lake and Millennium, McArthur River is in the Athabasca Lake region of northern Saskatchewan.
Last year, Cameco shipped just over 19 million pounds of uranium concentrates, of which about one-third was exported overseas, Mr. Gereghty said. The company has commitments to supply 270 millions pounds “under long-term contracts with 52 customers worldwide,” he added.
Areva, which also has a minority stake in McArthur River and is a majority owner and operator of the McClean Lake uranium processing site, also sees strong long-term fundamentals for uranium despite the current low prices, said Jarret Adams, Vice-President of communications, who stressed that all uranium produced in Canada is used for peaceful purposes. He agreed with Mr. Gereghty and others in touting nuclear energy’s major potential for curtailing climate-changing carbon emissions.
“Nuclear energy is already one of the largest sources of low-carbon power generation,” Mr. Gereghty said. “We are pleased to see that more environmentalists are recognizing the low-carbon benefits of nuclear energy.”
Environmentalists differ on nuclear benefits and risks
Not all environmentalists see it that way. NASA’s James Hansen and Ken Caldiera of the Carnegie Institution for Science are among those arguing for expanded nuclear power as the quickest way to curb reliance on fossil fuels. On the other hand, Canada’s most famous environmentalist, David Suzuki, and the world’s most famous environmental organization, Greenpeace, argue that nuclear poses too many risks to health and the environment. They also make the case that the costs associated with designing, constructing and operating nuclear power plants are increasing while the cost of renewable power like solar and wind has been coming down in recent years. “Nuclear power creates radioactive waste for which there is no accepted method of safely managing or storing. It is also prohibitively expensive,” said a recent posting on Mr. Suzuki’s website.
On top of those reasoned arguments, the Fukushima disaster has prompted environmental alarmists to ratchet up the fear mongering. Blog posts abound about radioactive wastewater from the stricken reactors about to contaminate the shores of North America with cancer-causing radiation. One commenter even drew a dubious connection between melting starfish in B.C. waters and Fukushima radiation. As the Woods Hole Oceanographic Institution noted on its website in August, “Because of the dilution that occurs even a short distance from Fukushima, we do not have a concern about the levels of cesium and other radionuclides in fish off the West Coast of the U.S.” In Japan, though, it’s been a different story. As Scientific America reported this January, people living in and around Fukushima face real health risks.
Mr. Drolet observed those concerns first hand during his visit to Japan after the disaster. A woman who answered the door passed a Geiger counter over him to check for contamination. “Now, she wasn’t being silly,” Mr. Drolet said, adding that many people in Japan have Geiger counters. The Japanese have been exposed to a very stressful situation, exacerbated by a press that’s been very anti-nuclear, Mr. Drolet said, while also conceding “it’s hard to blame them” for that position. Nevertheless, he expects that about half of Japan’s remaining 48 reactors — six Fukushima reactors have been destroyed or will never re-start — will gradually come back online over the next five years. “And that’ll just represent the tug-of-war that will happen station-by-station where the prefecture governor and the people will have a big debate about whether their local unit sits on a fault line or is in a safe condition,” Mr. Drolet said.
Canada’s major role in the uranium world
In Canada, that tug-of-war takes other forms. For example, Dr. Dale Dewar of the University of Saskatchewan recently published a paper in Canadian Family Physician Journal that argued strongly against uranium mining. In Quebec, the provincial government has refused to authorize continued exploration at Strateco Resources Inc.’s proposed Matoush uranium mine. And in B.C., a moratorium on uranium mining and exploration has been in place for decades.
Uranium is abundant in the earth’s crust, twice as plentiful as tin, according to a fact sheet from the Canadian Nuclear Association. It typically occurs with other metals, such as zinc, tin, and cobalt. “There’s a lot of uranium in B.C. that could be mined if the moratorium were ever lifted,” Mr. Drolet said. Alberta also has abundant uranium, including in its part of the Athabasca region as well as near Lethbridge. And in the past, several uranium mines operated in Ontario, which explains the presence of Cameco’s refinery and conversion facilities in that province at Port Hope and Blind River. Nunavut and the Northwest Territories also have untapped uranium deposits.
Even absent those unexploited resources, Canada is still the second largest uranium producer in the world, next to Kazakhstan. Canada had been the world’s largest producer until 2008. In that year, Canada produced 9,000 tonnes of uranium compared to 8,521 tonnes for Kazakhstan, according to figures from the World Nuclear Organization. Canada’s uranium output declined more or less steadily from 2002, when it was 11,604 tonnes, to 8,999 tonnes in 2012, with the peak in that period occurring in 2005 at 11,628 tonnes. Meanwhile, Kazakhstan’s output has risen steeply, from 2,800 tonnes in 2002 to 21,317 tonnes in 2012.
“I think Kazakhstan will remain a dominant producer for the foreseeable future,” Mr. Sadowski said.
That’s because in-situ leach mining, or solution mining, is the predominant extraction method in Kazakhstan. It involves pumping sulphuric acid into the ore body to leach uranium from the rock. The process is very inexpensive, but not particularly environmentally friendly. “It has allowed Kazakhstan to operate at the world’s lowest cash cost,” Mr. Sadowski said. “And the mines that are operating in this way have really long mine lives.”
Kazakhstan’s future as uranium superpower debated
Mr. Drolet suspects Kazakhstan’s uranium output will soon be on the downward curve if it isn’t already. Kazakhstan has massive uranium reserves, but they are of low concentration, averaging around 0.15 per cent of the metal, he said. The highest reserves in Athabasca, in comparison, check in at 22 per cent uranium concentration. “I absolutely predict that Canada will regain its position as the biggest producer and eventually pull out way ahead of other countries like Australia, the U.S., and so forth,” Mr. Drolet said.
Australia has the largest uranium resources of any country — 1.67 million tonnes or 31 per cent of the world’s known recoverable uranium resources, according to the World Nuclear Organization. But Australia’s uranium reserves are also low grade and ultimately expensive to mine. “What nature gives on one hand, nature takes away with the other,” Mr. Drolet said. “The lower concentration reserves tend to be shallower, quicker to get into production, and yet they cost more in the long term because you’re having to move so much more material.”
Mr. Sadowski agrees that Canada “stands apart from the rest of the world” when it comes to lower production costs. “Nevertheless, it is the uranium price that is going to govern how much exploration and development occurs,” he said.
One development that might boost the uranium price is the recent ending of a 20-year $17-billion program called Megatons to Megawatts. It involved the U.S. purchasing millions of pounds of uranium from nuclear warheads in the former Soviet Union and blending them into nuclear fuel. Mr. Sadowski said the program supplied 10 to 12 per cent of global uranium demand. “With the end of that program we’re seeing a very large chunk of supply come off, which should support prices over the next many years,” he said.
Transportation of uranium products
Moving the uranium concentrate from mines to markets is where companies like TAM International and Transport Logistics International Canada Inc. come in. TAM International, which was founded about a decade ago, has its head office in Saskatoon “for a very simple reason that Saskatchewan is one of the leading producers of uranium in the world,” said TAM President Kurtis Hinz.
His company — which also has offices in Pittsburgh, Montreal, and Toronto and is opening an office in Kazakhstan — handles uranium concentrates, enriched uranium and uranium hexafluoride, or UF6, which is a gaseous compound of uranium. “So we work with companies around the world,” Mr. Hinz said.
Both TAM and TLI Canada are involved in what is called the front-end of the nuclear fuel cycle. That includes moving uranium concentrate as well as UF6, which goes to an enrichment facility for further processing. “There’s a certain level which is specified by the fabricators,” said TLI Canada President Bob Strang. “Then it gets transported as enriched UF6 to a fuel fabricator, and then that fuel fabricator converts the fuel based on the requirements of the different electric companies that run nuclear reactors.”
At the mine, uranium ore is processed into a concentrate, popularly called yellow cake, a dense, heavy powder that is packed into 55-gallon drums that in turn are placed in 20-foot containers. Uranium itself is about 10 per cent heavier than lead. And a drum of uranium concentrate weighs about 400 kilogrammes, or over 800 pounds, Mr. Strang pointed out. That’s about double the weight of a similar barrel of oil.
UF6 meanwhile is moved around in pressurized cylinders. A 48Y cylinder, so named because it is 48 inches in diameter, carries the unenriched UF6, while the enriched version goes in a smaller 30B cylinder, Mr. Strang said.
“UF6 is shipped internationally,” Mr. Hinz said. “The majority of it is shipped in 48Y cylinders, specialized cylinders that are shipped with flat racks.” All UF6 from Canada is exported to other countries for use in light-water reactors, according to Natural Resources Canada. Canada’s Candu reactors, which are heavy water reactors, use fuel fabricated from uranium oxide produced from concentrate at the Port Hope conversion facility.
Like anything to do with uranium products, transporting those materials is highly regulated. They are class 7 hazardous materials because of their radioactivity. And in the case of UF6, it is also rated as class 8 for its corrosive properties. Meeting the requirements of Transport Canada and other jurisdictions for handling such materials means “a lot of things that we do are not done quickly,” said Mr. Strang, who is based in Winnipeg.
All modes of transport — road, rail, and ocean — are used to ship uranium. It even travels by air on occasion. The latter would primarily be used for moving test samples, Mr. Strang said. The chosen mode would depend on the urgency of a shipment and what the authorities and the companies involved require, including whether or not they are prepared to carry radioactive materials. Uranium is also considered a marine pollutant under International Maritime Dangerous Goods standards, Mr. Strang said.
Despite those stringent regulations, uranium isn’t as hazardous as other items transported on a regular basis, such as fluorides and ammonias, he said. He might also have added crude oil to the list, as last summer’s tragedy at Lac-Megantic, Que., illustrated. “Uranium is not explosive,” Mr. Strang said, referring to the natural uranium used in nuclear power, not the bomb-grade version for nuclear weapons. “It’s a heavy metal. About all it will do is fall to the ground and stay where it is.”
Trade agreements open up markets
In early 2012 Canada signed a trade deal with China to allow exports of uranium concentrate directly from Canada to China. So far, TAM International hasn’t shipped any uranium to China, although Mr. Strang said that his company was in the process of preparing for shipments into and out of China. Canada signed a similar deal with India in 2013.
Mr. Sadowski said the Chinese deal wasn’t a big one for Canadian uranium producers that have operations outside of Canada. For him, a bigger development was the Comprehensive Economic and Trade Agreement, or CETA, that Canada reached with the European Union in October 2013. Among the provisions of that tentative deal is to allow European-based companies to own more that 49 per cent of an operating uranium mine in Canada, which would enable companies like Rio Tinto and Areva to greatly expand their Canadian presence. It would also improve the prospects for smaller Canadian uranium producers, such as Denison Mines Corp., to attract European investors for their Canadian projects, he said.
For Cameco, though, the rules change the game. “My reading of the situation is that it’s not great for Cameco in the long run because potentially they will be competing with foreign companies that may come in and start their own uranium mines,” Mr. Sadowski said. For its part, Cameco is putting on a brave face. “The European Union trade deal may encourage new investment in the uranium industry in Saskatchewan and what’s good for the industry is good for Cameco,” Mr. Gereghty said. “Increased activity and investment in northern Saskatchewan is certainly welcome.”
Valuable metal comes in small dense, packages
Compared with other minerals, such as coal, iron ore, or even copper, the volumes of uranium products shipped worldwide in any year are tiny. According to Mr. Drolet, all the uranium used in a year in all the world’s nuclear reactors would fit in just 50 railroad cars. “The thing to note is the transportation of uranium is done in barrels,” Mr. Chang said. “So the amount transported isn’t massive. It’s also one of the most regulated materials in the world.”
Despite those strict regulations, the small volumes and high value of uranium mean that transportation costs are minuscule when compared with the cost of moving bulkier commodities. “Generally speaking, once it’s mined, uranium has some of the highest dollar-per-pound values,” Mr. Sadowski said. “It’s more like transporting gold or something rather than transporting bulk commodities.”