bloomberg

Bloomberg: Uranium-Stockpile Drop May Benefit BHP, Areva, Cameco

Uranium supply and demand dynamics could favor majors

- Edited by Stephen Heiser -

According to a report by Bloomberg, Russian and U.S. uranium stocks may supply as little as 5 percent of world needs by 2015, down from 40 percent, spurring demand for metal mined by companies such as BHP Billiton Ltd., the International Atomic Energy Agency reports.

“The most important thing that is controlling the uranium market are the secondary sources, the uranium that has been mined in the past and diverted mainly for weapons purposes,” Chaitanyamoy Ganguly, 63, head of IAEA nuclear fuel forecasts, said yesterday in an interview. “Maybe by 2015 to 2020, the secondary-source contribution will dramatically fall to 5 to 10 percent and then you’ll need a lot of uranium from the mines.”

BHP, the largest mining company, has said it may decide next year on a $15 billion expansion of its Olympic Dam mine, the world’s biggest uranium deposit, in Australia. Demand is growing as more nuclear power stations are built in India and China. The number of reactors could jump 30 percent by 2020, the World Nuclear Association estimates.

BHP, along with Cameco Corp., the world’s biggest uranium producer, and Areva SA, will benefit from increased reliance on mined uranium, Ganguly said in Vienna.

The price “should be between $50 and $100” a pound to spur exploration and output, and maintain consumption, while a drop below $40 would imperil new projects, he said. Extraction from rock phosphates in countries including Jordan, Egypt and Algeria will be attractive at prices from $50 to $60, he said.

Uranium oxide concentrate for immediate delivery cost $49 a pound, according to a recent Roswell, Georgia-based Ux Consulting Co. report. RBC Capital Markets forecasts a price in the mid-$50s by the end of 2009, after it slipped to $40 in April. AngloGold Ashanti Ltd. said last month that the price of uranium may rise to about $70 a pound in the “long-term.”

Equinox Minerals Ltd., owner of Africa’s biggest copper mine, said in May it would reassess a shelved $200 million uranium treatment plant in Zambia after prices rebounded.

The UN'S IAEA is promoting uranium exploration from China to the Democratic Republic of Congo as governments seek to generate power without adding to greenhouse gases, blamed for global warming. About 400 businesses have been set up to seek deposits since 2004, said Ganguly, a metallurgical engineer and former Chief Executive Officer of India’s Nuclear Fuel Complex.

“In the last four to five years, exploration has mushroomed all over the world,” he said. “There’s an acute shortage of uranium geologists and uranium mining engineers. Our focus is to train up these youngsters in uranium geology.”

In China, “they are desperately trying to find new uranium reserves,” he said. “On the border of Kazakhstan and Mongolia there are some deposits. The grade is very, very low. At least they have identified some low-grade uranium.”

The IAEA, which together with the Paris-based Nuclear Energy Agency publishes the bi-annual Uranium: Resources, Production and Demand guide, may boost the estimated level of known reserves when they compile new numbers this year.

“You’ll find that it’s no longer 5.5 million tons but maybe 6 or 7 million tons,” Ganguly said. “There are more than adequate uranium resources to meet demand for the next 100 years under any foreseeable growth scenario.” There may also be more than 10.5 million tons of undiscovered uranium resources, the organizations estimated in 2007