Saskatch-uranium

December 05, 2012

In 2012 uranium prices have faltered. Yet most prognosticators see rising prices in 2013 and more developments in northern Saskatchewan.

There are about 438 nuclear reactors in the world now (104 in the US) and this will rise to 527 in the next 6 years. In fact, there are more reactors planned or under construction today than before the Fukushima Daiichi disaster. Emerging markets are going to be the real growth story, specifically China, India and Russia. China’s currently has 15 reactors in operation, 26 under construction and 51 planned, according to the World Nuclear Association.

Excess short-term uranium supply and low discretionary demand mainly from utilities resulted in U3O8 prices slipping from $53 to $43 /lb. over the past year. For much of the summer, China was not buying uranium on the spot market, and many utilities were covered for 2013 requirements.

Canada was the world’s largest uranium producer for many years, accounting for about 22% of world output, but in 2009 was overtaken by Kazakhstan. Production comes mainly from the McArthur River mine in northern Saskatchewan province, which is the largest in the world. Production is expected to increase significantly from 2013 as the new Cigar Lake mine comes into operation. The two largest projects are Cameco’s Cigar Lake mine and Areva’s Midwest mine. The mill at McClean Lake has been modified to process ore from both mines. The Rabbit Lake mill will also be modified to take ore from Cigar Lake. Total production is expected to be 8,200 t/yr U3O8 from Cigar Lake and 2,600 t/yr from Midwest.

• The McArthur River uranium mine is the world’s largest, with enormous reserves (about 175,000 tonnes U3O8, 148,300 tU) of high grade ore (16.5% U3O8 after allowance for dilution) located 600 metres underground. Remote control raise boring methods are used to mine the ore, which is then trucked 80 km south to be milled at Key Lake. At the mill, which has been modified for the McArthur River ore, the ore is blended with ‘special waste rock’ and processed to produce U3O8. Tailings are deposited in a mined-out pit. The licensed capacity of the Key Lake mill is basically 8,500 t/yr U3O8, but after Cameco applied for an increase to 10,000 t/yr permission was given for production up to 9,250 t/yr to catch up earlier year shortfalls.  Cameco is the majority owner and operator of McArthur River mine (69.8%) as well as the Key Lake Mill (Areva is a 30.2% and 16.7% partner, respectively).
• McClean Lake produces about 3640 t/yr. Operations have comprised three open pits, with an underground mine from Sue B pit planned for the future. McClean Lake also has high-quality new plant and infrastructure. McClean Lake is majority-owned (70%) and operated by Areva Resources. Denison Mines (22.5%) and the Japanese company Overseas Uranium Resources Development (OURD, 7.5%). 
• Indicated resources at Midwest are 19,500 tonnes of U3O8 with an average ore grade of 5.50%. (Probable reserves in this comprise 18,870 t at 5.47%.) The Midwest project is being managed by Areva Resources, which owns 69.16%. Denison Mines has a 25.17% stake and OURD Canada 5.67%.Areva
• The proven and probable ore reserves at Cigar Lake are extremely large and very high grade. A 480-metre-deep underground mine is being developed in very poor ground conditions - the orebody is actually in the soft Athabasca sandstone. Hence it will use ground freezing and high pressure water jets at this level to excavate the ore. The average feed grade will be 20.7% U3O8. The project is owned 50% by Cameco Corp. (CCO:TSX or CCJ:NYSE)and 37% by Areva (state-owned by the French government).
• Denison Mines (DML:TSX) Denison is actively exploring the Wheeler River deposit half way between Key Lake and McArthur River. It is a long strike from the latter and geologically very similar, with some high-grade uranium mineralisation. Denison has a 60% interest, Cameco 30%.
• UEX (UEX:TSX) is also exploring the Horseshoe and Raven deposits at Hidden Bay in the eastern Athabasca basin (5 km from Rabbit Lake and 12 km from McClean Lake). The Horseshoe deposit has indicated resources of 10,400 tonnes of U3O8 at a grade of 0.20% at 100 to 400 m depth.UEX Corp.

Commentary

The uranium industry directly employs approximately 2,595 people in Saskatchewan and industry contractors employ an additional 2,567 people. The operations for the industry are centered in the Athabasca Basin.

Sources

• a)http://oilprice.com/Finance/investing-and-trading-reports/Expect-a-Uranium-Supply-Shortage-in-2013-An-Interview-with-David-Talbot.html



• b) http://www.world-nuclear.org/info/inf49.html



• c)http://www.infomine.com/investment/metal-prices/uranium-oxide/



• d)http://www.cameco.com/uranium_101/uranium_sask/