A little bit of U news.Interesting timing that Australian...

A little bit of U news.

Interesting timing that Australian Resources and Energy Minister Martin Ferguson went on the radio this week and explicitly stated that the rate of mining of uranium in Australia would increase over the coming years, as would the amount of uranium that Australia exports to China. That statement came almost immediately after the Chinese state media announced that plans are afoot in the Chinese energy sector for a doubling of nuclear power capacity by 2020. It seems that anyone who might have thought that the recent love-in between US-dollar rich Chinese customers and resource-rich Australian miners and suppliers was over needs to think again. The Australians may have rocked the boat by blocking China Minmetals’ first pass at OZ Minerals, but the Chinese seem reconciled to coming round at OZ for a second pass, with the proviso that the key Prominent Hill asset is no longer part of the package.
So the relationship between the Chinese and the Australians is still definitely still on, and that ought to bode well for the plethora of Aussie uranium miners because in addition to the stated desire for increased nuclear power production comes a general injunction to Chinese miners and resource houses to acquire uranium abroad to build a fuel reserve. The first Australian uranium was exported to China in 2008, under two sets of rules called The Nuclear Material Transfer Agreement and the Nuclear Cooperation Agreement, which ensure that the uranium is used solely for power generation. And since Australia hosts around a third of global uranium resources it seems that the China-Australia relationship ought to be one major beneficiary of the increasingly fashionable nature of nuclear.

Currently China relies on coal-fired power generation to secure around two thirds of its energy needs. But in the current global climate, and with China’s severe pollution concerns, an increasing trend towards nuclear looks inevitable. In the past year China has approved the building of 40 new nuclear reactors. If those all get built it will add considerably to the current nuclear generating capacity of 9,100 megawatts from 11 power stations at four sites. That current capacity accounts for some two per cent of the country’s current total power requirement, but under the new plans the percentage of power China derives from nuclear will likely rise to around five per cent by 2020 and 16 per cent by 2030. That’s a long way to be looking out, but then again, construction on some of the planned new power stations has started already started.

The amount of uranium that China will require if the new plans go through isn’t yet clear, and given the Chinese track record on issuing strategic information it may never be. There could be some sticking points however, before this relationship can develop in perfect harmony. The Chinese would very much like to build a stockpile in order to avert shortages, and presumably also to allow it to have some say in future price negotiations. But under the provisions of Australia’s uranium export rules the country won’t sell uranium to China for the purposes of stockpiling. From a Chinese point of view that may not be an insuperable problem, as its buyers can just look elsewhere – one suspects that Africa would be a first point of call. Whether or not the Australians will enjoy watching that market slip away remains to be seen.

Certainly the Australians under the Rudd government have thus far shown themselves not to be overly precious about Chinese involvement in its uranium sector. Chinese interests already own stakes in Australian uranium miners and such relationships are unlikely to be discouraged any time soon. Australian opposition leader Malcolm Turnbull is also in favour of exporting uranium to the Chinese, providing the appropriate safeguards are in place.

Last year’s official data for Australia shows that it exported 10,139 tonnes of uranium. None was consumed on home turf, since Australia, rather paradoxically in the view of most outsiders, does not have a nuclear power generation programme of its own. In that simple context, the Australians and the Chinese are a perfect match.

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