Mines paper # 4,
August 2005
Australia has about 30% of the world's low-cost uranium resources but in 1996 only produced about 14% of mine output. This has since increased to 19%. Canada has expanded its production to more than 30% of the world mine output*, on a lower resource base.
* with the temporary exception of 1999, due to preparation for new mine production.
Australia exports all of its uranium production, and in 2002-03 this was worth A$ 475 million in direct export revenue, and perhaps twice as much to the economy. Production and exports are increasing. See also UIC breifing paper # 1.
PROJECTIONS OF DEMAND AND SUPPLY
Present world mine output (around 48,000 t U3O8) is little more than half the level of consumption by utilities (80,000 t). The balance comes from inventories held by utilities, recycled material, and substantial amounts fed into the civil cycle from diluted ex-military material.
All scenarios assume that utility stockpiles will be substantially depleted in the next few years. Recycled material (U & Pu) from reprocessing is not expected to increase markedly, or make a major impact in the market. However, some uncertainty remains about the rate at which Russian (and later, US) military uranium will come on the market. This is high-enriched (often weapons-grade) uranium which is diluted 25:1 to 30:1 with depleted uranium or similar material to bring it to reactor-grade.
The other market factor, as with any mineral commodity, is the rate at which new low-cost producers come into the market. This includes particularly low-cost producers in Russia, Uzbekistan and especially Kazakhstan.
Prices in the medium term are greatly influenced by expectations concerning the rate at which Russian military uranium will actually come on to the Western market (despite agreements which limit it) and by the stockpile of natural uranium held by USEC (much of which was supplied against Russian ex-military uranium marketed by USEC ). They are also affected by the new low-cost production capacity in Australia and Canada.
Whereas in the 1994 study spot prices were projected to rise in real terms to almost US$ 16 per pound U3O8 by 2004 if development of further Australian mines was allowed, the price is now almost double this. (After four years of depressed prices, the September 2003 spot price was US$12.20/lb and by August 2005 it had reached $30.)
Conversely, if secondary supplies are constrained there is considerable potential for the price to rise significantly in the medium term. However, where uranium prices differ from many other commodity prices is in their dependence on a very steady and predictable demand. What is less predictable is the non-mine portion of the supply.
PROJECTIONS OF AUSTRALIAN OUTPUT
While current federal government policy gives mild encouragement to uranium production, Labor Party policy is still equivocal and there are on record threats to close down any developments which are not actually in production if a Labor government is returned. In addition, several state governments oppose uranium development. This is a disincentive to exploration and development here. Accordingly some Australian companies prefer to pursue uranium opportunities offshore, which reduces the medium-term prospects for Australian output.
This uncertainty is occurring as Canadian producers, who are vigorously expanding their production capacity, lock buyers into long-term contracts which will constrain the market for the next decade or more.
Australian production has risen from 4377 tonnes U3O8 in 1995 to 10,964 tonnes in 2004-05. Current annual capacity is some 11,000 tonnes. BHP Billiton plans to triple the uranium output from Olympic Dam to 15,000 t/yr by 2010. The timing of Jabiluka's start-up is uncertain, and in any case it will progressively replace Ranger output as that orebody is depleted, so is unlikely to add to the national total before 2010.
The impact on regional economies in the states and the Northern Territory was canvassed in the 1994 study and shown to be very significant, especially for the NT. Generally a multiplier of 2.5 is applied to indicate a mine's economic effects in the broader economy.
Sources
K. Donaldson, ABARE, Uranium Outlook to 2004-05, Australian Commodities 7,1, March 2000.
Access Economics, July 1994, A New Opportunity for Australian Uranium.
OECD-NEA & IAEA, 1998-2002, Uranium Resources, Production and Demand.
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