Uranium hunt on for both Russia & China

Since the opening up in the mid-1990s, uranium exploration in Mongolia by international companies has not been  subject to any clear national policy or close regulation.

In the last few years, however, the Government has sought to exercise more control over the whole mining sector and earlier this year it set up MonAtom to undertake uranium exploration and mining on behalf of the state, as well as to pursue nuclear energy proposals. It will hold the state’s equity in uranium and nuclear ventures, under the Mongolian Nuclear Energy Agency.

In mid-July, after consultation with the International Atomic Energy Agency, Parliament passed a Nuclear Energy Law to regulate the exploration and mining of uranium and give the state a greater degree of ownership and control of those resources. Along with this the Government set up Dornod Uran, a joint venture company between MonAtom and Russia’s ARMZ to develop two uranium mines in Mongolia — Dornod and nearby Mardai. A Japanese partner, evidently Marubeni, is also expected to be later involved in the work of this joint venture.

The development is of particular interest to Russia due to its proximity to the Priargunsky operations, allowing possible creation of a ‘single infrastructure. At least until mid-August, Canadian based Khan Resources owned a 69% share in the Dornod project, mostly through its 58% subsidiary Central Asian Uranium (CAUC). The balance of CAUC, which holds Mongolia’s only uranium mining license, was owned by MonAtom and ARMZ, each with 21%.

A definitive feasibility study released in March 2009 showed that the $333 million project was sound, on the basis of 24,780 tons of indicated resources, including 20,340 tons of probable reserves. Annual production of 1,150 tons over 15 years from 2012 was envisaged.

However, the Nuclear Energy Agency has announced that the joint venture of MonAtom with ARMZ will develop the project to annually produce about 2000 tons. Khan is uncertain where it stands, having apparently been dispossessed as it sought to negotiate an investment agreement with the Government.

Gurvanbulag is another deposit, about 30 km away, which has been held by the Canadian Western Prospector Group. This March the company agreed to a $25 million takeover by China’s CNNC International, a 74% subsidiary of CNNC Overseas Uranium Holding and through it, of SinoU. MonAtom appears to be positive about this development.

As an aside, I think the photo above says a lot about Sino-Russ relations ….

BHP & Rio Tinto to extract billion dollar contracts as well as uranium

Australia could be looking at a new multibillion-dollar export market as China looks for a steady supply of uranium, which it needs to underpin a massive expansion in its nuclear power industry. Chinese officials this week announced they would start building five extra power plants this year on top of the 24 already under construction and 11 already in operation. Australia could add A$17 billion ($12 billion) to gross domestic product by 2030 by maximizing suppliers to meet rising global demand for nuclear energy, the Uranium Association said last month.

The acceleration of China’s nuclear programme stems from mounting concerns about climate change, energy security and the more immediate task of kick-starting the economy as part of the Government’s 4 trillion yuan stimulus plan.

Vice-Premier Zhang Dejiang announced at a Beijing conference this week that China would “accelerate the development of nuclear power and increase the ratio of clean energies like nuclear power”.

Analysts say the country’s dearth of uranium is “the tiger in the road” to fulfilling its nuclear power ambitions and that Australia is the most obvious solution.

“There are not enough uranium resources in China to support the aggressive nuclear power development plan for the next 20-30 years,” said Professor Liu Deshun, of China’s Institute of Nuclear and New Energy Technology. “Australia has the uranium resources that could be exported and in China we have the demand,”

Chinese companies are lining up to invest directly in Australian uranium mining & exploration companies and have begun signing long-term supply contracts with Australia’s established mining companies, betting on the expansion plans receiving Government approval.

Australian Minister for Resources, Martin Ferguson, indicated the Federal Government was unlikely to stand in the way, subject to environmental and investment tests. Today, ERA (Energy Resources Australia), a Rio Tinto (NYSE : RTP) subsidiary, is expected to say more about a new plant to extract uranium from low-grade ore and an exploration pit for the expansion of its Ranger Mine in Kakadu, which already produces 10% of the world’s uranium.

Next week BHP Billiton (NYSE : BHP) will move a step closer to a massive expansion of its Olympic Dam mine in South Australia, the world’s biggest proven uranium reserve , with the release of an environmental impact assessment. Extending into the Yeelirrie deposit in Western Australia, which is estimated to  have a 10 to 12-year lifespan and a resource of 35,000 tonnes of uranium, will put BHP at the head of the pack, when it comes to talks with the Chinese buyers. This as a result of the WA government lifting a siy year ban on uranium extraction in the state.

Chinese analysts have said the country’s nuclear power expansion plans will not succeed unless China secures the necessary uranium supplies. Australian analysts say the local mine expansions are unlikely to proceed without the certainty provided by long-term supply contracts to China.

“The two go hand in hand,” said John Wilson, uranium analyst at Resource Capital Research.

Uranium was trading at $41 per lb yesterday & now analysts are benchmarking the yellow cake as being able to reach the $70 per lb mark in the near future.