rio’s love-hate uranium relationship

figuring some of you will not be subscribed to this,

from today's
http://www.miningnewspremium.net/StoryView.asp?StoryID=2491604

Rio’s love-hate uranium relationship
Tuesday, 8 November 2011

THE nuclear reverberations in Japan caused by the Fukushima accident have spooked uranium investors worldwide. Rio Tinto, in contrast, has found a new passion for the radioactive fuel, judged by recent deals. The Metal Detective by Stephen Bell

One industry player suggested to MD the other day that Rio Tinto has often exhibited “schizophrenic” symptoms in relation to uranium.

It either loves the stuff or hates it, depending on whims of management, the market, and prevailing politics.

In 2000 Rio tried to flog its controlling stake in ERA, inherited via the iron ore-driven takeover of North Ltd.

The sale never eventuated, perhaps to Rio’s regret, as ERA endures another tough year at the Ranger mine due to wastewater problems.

And three years ago Rio lost patience with its Kintyre deposit in Western Australia’s Pilbara region, flogging the deposit to a joint venture led by Canada’s Cameco.

Rio became frustrated with WA Labour’s anti-uranium policy and felt that Kintyre wasn’t quite big enough to justify the Tier 1 label. So it was happy to put Kintyre on the chopping block as part of its post-Alcan cash drive.

Rio wasn’t quite as cheerful when, just weeks after closing the sale, Colin Barnett’s Liberal coalition government scraped into office and WA uranium politics changed from a red light to green.

At the moment, though, Rio seems to be reverting to its love phase.

Last month it ploughed $340 million into ERA’s steeply discounted rights issue – a solid show of faith in the Ranger 3 Deeps expansion project.

Around the same time, Rio launched a C$578 million friendly bid for Canada’s Hathor Exploration, and hitched its wagon to a promising exploration venture alongside BHP Billiton’s Olympic Dam mine in South Australia.

Ironically, Rio’s bid for Hathor, owner of the Roughrider deposit in Canada’s productive Athabasca Basin of Northern Saskatchewan, is a bit like Kintyre in reverse.

This time Rio has trumped Cameco in the race to secure Roughrider, which lies near several big processing plants run by Cameco and France’s Areva Corp.

Funnily enough, Roughrider has estimated resources of 57 million pounds of uranium oxide, almost exactly the same as contained at Kintyre based on recent drilling by Cameco.

The similarity ends there, though.

Roughrider is a high-grade underground play while Kintyre is a relatively low-grade open cut.

And the Hathor deposit is surrounded by working uranium infrastructure whereas Kintyre is starting from scratch in a remote part of the eastern Pilbara.

Rio, meanwhile, is also trying to muscle into another uranium province, namely the highly prospective desert to the north of Olympic Dam in SA.

Its recent deal to farm in to Tasman Resources’ Vulcan prospect, via an initial $10 million payment, gives it an option on a copper-uranium underground play just 30km from BHP Billiton’s giant mine.

Rio is certainly bullish on these latest love interests: Hathor and Vulcan were highlighted by CEO Tom Albanese in a presentation to Sydney analysts two weeks ago.

So why the sudden yellowcake appetite?

Rio says it is preparing for rising energy demand in the next two decades, much of it arising from providing reliable electricity to communities for the first time.

Uranium will play a “significant role” in the world's energy growth over this time, a Rio Tinto spokesperson told the Metal Detective.

“Rio Tinto's strategy is to invest in the primary uranium producing regions of the world to develop long-life, low-cost operations,” she said.

The way MD sees it, uranium is a currently unpopular (i.e. cheap) facet of the broader Chinese growth story.

After all, most of the new nuclear reactors under construction are in China, and Rio also has a Chinese shareholder on board, in the form of Chinalco.

And the Chinese connection may soon become more visible in another part of the world, namely Rio’s Rossing mine in Namibia.

For some years now, several major players have been jockeying for pole position at Extract Resources’ Husab project, which lies adjacent to Rossing.

Earlier this year Rio started talks with Extract over potentially combining Husab with Rossing in a joint venture.

But those talks were sidelined by China Guangdong Nuclear Power Holding Co’s on-again/off-again cash bid for Extract's 43% shareholder, UK-based Kalahari Minerals.

CGNPC resurfaced last month in new talks and, if the deal proceeds, would likely be required to make a takeover offer for Extract.

That may leave Rio dealing directly with one of China’s biggest nuclear power generators on development options for Husab.

Back in Australia, meanwhile, Rio will be watching with interest Cameco’s progress as it gears up for lodgement early next year of Kintyre’s environmental review and management program.

Cameco now has two WA offices, one in West Perth for the Kintyre project team and a new exploration hub in Osborne Park, following the recent relocation from Darwin.

The group’s roughly 30 exploration staff may be expanded to 40 in the next six months or so as Cameco beefs up work on its 15 active projects in the Northern Territory, WA and SA.

So it is not only Rio that is enthusiastic about prospects for the yellow, powdery stuff that Greens love to hate.