Australian uranium market update – Part Two

While a ban on uranium mining being lifted in Western Australia is good news for the industry, on the downside this development came just as the global economy went into freefall, and with it, opportunities for funding. So can Australia break through the uranium barrier with a fourth mine?

By Freya Purnell


Ban on uranium mining lifted
One of the major barriers to new uranium projects getting underway, in Western Australia at least, was dissolved following the Liberal/National win in the WA state election in September last year, when the Labor Party’s ban on new uranium mines was overturned.
Premier Colin Barnett said that the change would not require legislation, because the previous ban was only an administrative one on mining leases. It is now the task of the newly created Western Australian Department of Mines and Petroleum to develop the regulatory framework and guidelines for the mining, handling and export of yellowcake in WA, but the change has already cleared the way for explorers with resource projects to ramp up their activities.
Canadian uranium producer Cameco Corporation, which owns the Kintyre project in a joint venture with Mitsubishi Development Pty Ltd, has already made clear its intentions, opening a Perth office and announcing an exploration program in the coming months with the objective of confirming a resource.
In WA, uranium mining leases are currently held by only two companies – BHP Billiton, for the Yeelirrie project, and Toro Energy, for the Lake Way and Centipede deposits at Wiluna – and neither have wasted any time since the ban was overturned.
In November, BHP Billiton announced it was reactivating Yeelirrie with a drilling program to confirm the resource.
Toro Energy has completed pre-feasibility on the Wiluna project, with optimisation work currently underway. Hall said Toro hopes to make a decision by the third quarter of this year to proceed to definitive feasibility, with a decision by mid-2011 to move to mine construction, and estimated maiden production scheduled for 2012-2013.
Having acquired Wiluna with Nova Energy in late 2007, the green light came sooner than expected.
“We were reasonably prepared for a duration of two or three years before the policy changed and we were doing preparatory work. But obviously with the change in Government at that time, we increased and accelerated the timing of that,” Hall said.
One of the key components for Toro – like many of the uranium projects – is funding.
“We have been engaged in the market since September in looking at funding options for that project, so we have had a number of detailed exploratory discussions which are still ongoing,” Hall said.
Some of the other WA front-runners include Mulga Rocks (Energy and Minerals Australia) and Lake Maitland (Mega Uranium). EMA plans to proceed to an open pit scoping study this year on the Ambassador deposit at Mulga Rocks, which has a target production rate of 1,000 tonnes of uranium per year, while Mega Uranium is proceeding to a full feasibility study following the securing of a deal with Japanese group JAURD to acquire 35 per cent of the Lake Maitland project. The aim is to develop a mine and commission a plant by 2011, with an initial production rate of 750 tonnes per year.

Impact of financial crisis
The financial crisis has certainly made it more difficult for mining companies to get funding, according to Wilson.
Figures from the Australian Bureau of Statistics for the December 2008 quarter showed uranium exploration spending was $51.9 million, down from $56.7 million in the September 2008 quarter, and down $17.7 million compared with the previous corresponding period. While this represents the first decline in uranium exploration spending in around five years, Angwin said it can be attributed in part to the completion of significant exploration activity at Olympic Dam and Ranger.
“Earlier stage projects are finding it harder again than the more advanced projects to get funding. For the more advanced projects, there is less access to the equity market, but strategic investors have been filling the gap and taking a direct interest at the project level, so that has been a trend we have seen in the past six months,” Wilson said.
With the possibility of more uranium supply from Australia seemingly so close and yet so far from fruition, the impact of any new uranium mines on the global market is also an unknown.
Wilson said if any of the advanced Australian projects were to begin production, they all have potential for impact on the margin of the market, depending on scale, as some are reasonably small by world standards.
“I think if you can demonstrate economic viability and preparedness of strategic investors to back these projects then en masse you could see quite a significant impact. There are a number of larger-sized projects that have a development timetable a bit further out, which have the potential to have more impact on the market as individual operations.”
The race is on.

To read the first part of this report click here.

Update: Toro increases Centipede uranium resource
Toro Energy Limited reported that the Centipede Uranium resource, part of Toro’s Wiluna uranium project located near Wiluna, Western Australia, has increased to 9.78 million tonnes @ 553ppm (0.055 per cent) U3O8 for 5,355 tonnes (11.81 million pounds) of contained uranium oxide using a 200ppm cut off.
The resource has been prepared in accordance with the JORC code and is a 26 per cent increase in the average grade and a 6 per cent increase in the contained uranium on the previously reported resource of 11.53 million tonnes @ 438ppm U3O8 for 5,044 tonnes (11.12 million pounds).
The Wiluna uranium project also includes the Lake Way uranium deposit, for which an updated resource is presently being calculated, and when complete, will be combined with the Centipede Resource and reported as a total project resource.
The changes to the resource are due to the drilling of an additional 148 aircore and 20 sonic resource and infill holes as part of Toro’s Optimisation Study at Wiluna.
This additional drilling included detailed drilling of 25m grid spaced holes over an area of 200m square. Toro is currently awaiting approval to undertake a Resource Evaluation Pit in the area of the detailed grid drilling. This gridded area is now classified as Measured and has greatly increased Toro’s confidence in the continuity of mineralisation.
The estimated uranium grade increase and reduced tonnes processed will significantly improve the economics of the Wiluna Project, as outlined in the Pre-feasibility announced last September and highlighted in the Optimisation Study targets. The full impact of this will be calculated as part of the Optimisation Study Report in the third quarter 2009.