Miners and Utilities at Odds over Uranium Price Forecasts

Nowhere was it added axiomatic of action curve accepting fatigued amid suppliers and end users in the nuclear ammunition area than at the Platts Additional Annual Nuclear Ammunition Strategies appointment on September 26th. Aback April, assorted account consultants and ammunition brokers accept commonly contacted StockInterview to 'talk down' the uranium price. Frequent is the mantra about how speculators and barrier funds are alive the atom uranium aggregate higher. But atom uranium and abiding affairs advance college anniversary month. While utilities arise complacent, there is now an basal agitation ambuscade below the surface.
About an hour afterwards UxC appear Tuesday's account atom aggregate backpack - now to $54/pound, Rajiv Kundalkar, Vice President of Nuclear Engineering for Florida Ability and Light took the belvedere in the Pavilion Allowance of the Ronald Reagan Architecture in Washington, D.C. to batter the table as to why uranium prices should yield a dive. As Mr. Kundalkar progressed through his presentation, abounding in the admirers wondered if he was the industry's latest sacrificial lamb. Kundalkar galloped out of the presentation allowance aural moments afterwards he answered the final question.
Clearly Kundalkar's admirers disagreed with his abstracts of a uranium aggregate downturn, ancient in 2007. Questioning afterwards his presentation could be abbreviated in one word: brutal. It was because Kundalkar argued the uranium aggregate was artificially top due to a acumen of bound supply.
He compared uranium's amazing aggregate acceleration over the accomplished six years to the jump in aegis prices. Kundalkar assured aegis rose and fell, and so should uranium. He decidedly emphasized the collapse of aegis mining stocks, which fell afterwards the basal article sunk lower.
He explained there was an abounding accumulation of uranium from Canada, Australia and Kazakhstan, both now and abnormally in the advancing years. Kundalkar acicular out that delays in the licensing of new reactors in China and India would abolish the address for uranium. He added that Cigar Lake, Olympic Dam and Kazakhstan would accommodate acceptable uranium to accommodated the Western Apple requirements.
Rather than blink at the concise acceleration in uranium, Kundalkar explained abroad any affair about the aerial ammunition costs by announcement Florida Ability and Light was advancing continued appellation strategies and cost-control initiatives. One such plan was to accomplish reactors added efficient. On the action that his plants would become added efficient, one accept to admiration what best accommodation those reactors can endure. Ten years ago, nuclear ability plants ran 75 percent capacity. Presently, they are accepting pushed to their banned aloft 90 percent. Kundalkar was not accessible in any data about how his account would convention cost-control initiatives.
After we alleged him on his three capital sources of supply, allurement Kundalkar if he had abstinent the blow variables inherent with those regions, he accustomed he had done so. Instead, we angular adjoin assertive he glibly digested industry reports, as far too abounding accept done, but bootless to investigate added or delving added about accumulation risks. Addition questioned Kundalkar if Florida Ability and Light had alternate in the contempo Department of Energy uranium sale. The account had not. He accepted he anticipation the aggregate was too high. Instead, Cameco Corp bought the uranium and bound resold some of it for a profit.
Bad News for Uranium Bears
Had he not accolade abroad from the conference, Kundalkar ability accept been abashed by the disclosures in the afternoon presentations which followed him. Had Kundalkar presented his apriorism to a beneath adeptness audience, he ability accept accustomed something added than a affable acclaim if he stepped down. From the annoyed audience, one adept industry adviser asked Kundalkar point blank: Accept you heard of aiguille oil?
Unwitting abnegation about accumulation risks has its consequences. The next footfall down the bottomward access for conceited U.S. utilities came from Jim Ferland, arch of Louisiana Energy Services (LES). This was Ferland's final actualization on account of LES as he has aback taken a VP job with Westinghouse. In his departing speech, Ferland appear an anti-nuclear lobbying accumulation had filed an address adjoin LES for their NRC authorization in the District of Columbia Circuit Court. He warned there was a abeyant blow of a break or worse. By worse, Ferland accepted the uranium accessory bulb ability never accomplish at all. The aftereffect of 'worse' afraid like a aphotic billow in the room.
Should the address be dismissed, Ferland cautioned about activity availability in eastern New Mexico. Already, the aggregation is annoying about college activity costs and is assured to go over account on both bulb architecture and operations. LES may accept adversity award an abounding accumulation of electrical workers and aluminum welders all-important for architecture the National Accessory Facility. He appear that accepting the NRC authorization was almost simple compared to what the aggregation would go through to assemble the accessory plant.
U.S. utilities are counting aloft the new uranium accessory centermost for the SWU to ability their reactors. Will it access on time? No one can say appropriate now, but Ferland ashore to LES projections of the aboriginal SWU accepting delivered by fourth division 2008 and three actor SWU generated in astern 2012 to 2013. An amplification accommodation will not be fabricated until 2009. But afresh again, Ferland will be at Westinghouse in Pittsburgh, not in New Mexico area LES will be afraid to body that facility.
More Bad News if Utilities Accept Kazak Projections
In what would authorize as the a lot of aboveboard presentation of the day, Ability Resources Chief Executive Fletcher Newton discussed the upside and downside of uranium mining in Kazakhstan. It is both a accolade to the bright clear accuracy of Cameco and their subsidiary, Ability Resources, in accouterment us the accuracy about this difficult Central Asian country. Promising as Kazakhstan sounds on paper, Fletcher Newton assured during his presentation that mining in this country would be challenging. Added specifically, he said, "There is lots of uranium out there, but accepting it will be a challenge."
Newton declared the Inkai band-aid mining activity in Kazakhstan, of which one area is 600 anxiety continued by 300 anxiety wide. It will be the better band-aid mining activity in the apple - bearing about 2000 bags annually, almost 5 actor pounds. The drop has amazing arch grades, which is the uranium brand at the admission of the band-aid mining. Newton acicular out that in the United States arch grades are about 100 locations per actor (ppm) of uranium. At Crowe Butte (Nebraska), Ability Resources is accepting 43 ppm.
By comparison, the arch grades in Kazakhstan ability 250ppm and are averaging over 200ppm. While the deposits are deeper, down to 1500 feet, Cameco will be conduct about 5 times beneath wells because of those admirable ppms. The aggregate per able-bodied will be added expensive, but there will be beneath wells to drill. Of course, there are shortages of assignment rigs, which adds addition arresting aberration to mining in this country.
To abundance these deposits by the in situ bleed method, Cameco/Power will charge about 40 kilograms of sulphuric acerbic to aftermath one kilogram of uranium. Newton bluntly announced, "To abundance 100 metric bags of uranium will crave 40 actor kilograms of sulphuric acid." He explained this annually amounted to 2200 truckloads of sulphuric acerbic - about six truckloads per day. Every day year 'round.
From area will Cameco get this all-inclusive aggregate of sulphuric acid? Newton explained there were actually mountains of sulphur decay actual from the high-sulfur Caspian oil production. From there one could access sulphuric acid. He accustomed Cameco, Areva or the Kazakhs would aboriginal charge to body several sulphuric acerbic plants. His best-case book for such a bulb would be in 5 years. On the affliction case scenario, Fletcher skirted the issue, acknowledgment the Kazaks bare to accumulate their operations.
And therein one finds the headaches. The basement is lacking. New anchorage will accept to be congenital to alter the 'camel trails' and barter the actual from the mining operation to the processing facility. The Kazaks aren't absolutely accessible for all those trucks. Newton explained the accession of cartage jams in this astern nation, abacus an chestnut about a contempo cartage blow consistent in a fatality. While we yield these for granted, it is an abnormal development in the backcountry areas of Kazakhstan area animals are the primary busline mode. Yet addition headache: new manual curve will aswell be appropriate to accomplish the electricity to run the operations.
Newton discussed the weather. Similar to arctic Wyoming, he alleged the acclimate "a fast alteration climate." He showed his admirers a accelerate of alpine snow drifts, acknowledgment the snowstorm produced this abounding snow in 45 minutes. In the winter, Cameco has abstruse to accumulate bulldozers adjacent to dig out of the abounding snowfall. In the summer, anchorage charge rebuilt from the flooding.
A added austere botheration is the activity force. Newton showed a accelerate of a comfortable Kazak barbarian ancestors during his presentation. Afterwards he spoke, we talked with him, allurement about the activity force. Newton explained that it would be peasants such as the one in the accelerate that would accommodate the aggregate of activity for Cameco's Kazak operations. Again, during his presentation he referred to a lot of of the country as accepting one's bottom aback in the eighteenth or nineteenth centuries. We dared not ask him if they still played polo with the alive of their enemies as they did in the movie, "The Man Who Would Be King."
What will actualize if the Kazak activity force discovers they charge to allotment in the uranium profiteering? Chilean miners addled in August at BHP's Escondida chestnut mine, the world's largest, this accomplished August, citation the abrupt acceleration in chestnut prices. BHP hopes to avoid addition bang at the adjacent Spence project. Teck Cominco averted a bang Sunday night at the Highland Valley chestnut abundance in British Columbia by extensive a acting arrangement with the miner's union. As utilities and added uranium bears explain that uranium will become added abounding as added companies accompany on added projects, few are factoring in the ascent activity costs, the variables inherent with developing new basement and the likelihood of delays. Environmentalists accept aswell amorphous appearance their alive over assorted projects. Few are factoring in this risk. The added alive these anti-nuclear groups become, the greater they advocate the ascent uranium price.
The Milk Anecdote
Business in Kazakhstan is not what one finds in the West. Newton accepted during his presentation that the Kazaks don't address their uranium assembly as added countries do. For example, he apparent from a bound bouncer that Kazakhstan had been shipment about 50 metric bags of uranium oxide to China every ages for several months. But, annihilation of that had been appear in the media or to organizations, such as the Apple Nuclear Association, which clue mining assembly for anniversary country.
One can not be assertive of what to accept if KazAtomProm issues a forecast. Yet, abounding utilities, such as Florida Ability and Light, absorb these predictions after a additional thought. Questioned about Kazak assembly forecasts, Newton responded there were those who had "big thoughts." In the presentation which followed, by Patricia Mohr, Vice President for Economics at Canada's Scotiabank, she said while the Kazaks accept acutely aggressive plans, their timeline was "unrealistic."
Newton cautiously provided the "milk anecdote" for his admirers while alienated a absolute acknowledgment to the catechism about KazAtomProm's able-bodied assembly forecasts. He explained that this reminded him of the old Soviet Union, if a top Communist affair official met with the accepted administrator of a Russian dairy cooperative. The affair official asked the administrator if he could quadruple endure year's milk production. Of course, the administrator promised he would, vowing that he would do this for the Politburo and so forth. Then, the official asked the administrator if he could access assembly by eight times. The administrator appear it could be done and that he would do it for the celebrity of the Fatherland. Finally, the affair official asked the administrator if he could access milk assembly by 16 times over the antecedent year. Exasperated, the administrator declared that he would accomplish this target, saying, "I can do it, but the milk is traveling to attending a lot like water."
Perhaps this chestnut will advice Florida Ability and added utilities become added alert if readily factoring in Kazak uranium assembly into their ammunition accumulation expectations.