Fuel Minerals: A review and forecast of uranium and coal; URANIUM

In 1990, Canada’s uranium industry continued to face an uncertain market, plagued by oversupply and low, volatile prices. Even falling output, as production centres closed or curtailed operations, could not bolster prices. Global inventories and new sources of low-priced uranium suggest adequacy of supply through the 1990s. Prospects for a market turnaround in the near-term seem doubtful, and the need for new production capacity could be deferred beyond the mid-1990s.

In the longer term, the heightened awareness that nuclear power plants do not contribute to acid rain or global warming, and fears about another oil crisis could renew interest in nuclear power and put upward pressure on prices, in turn drawing new capacity on-stream. The growing public interest in protecting the environment will also mean that new projects must undergo intensive scrutiny. This will inevitably increase development lead times, perhaps contributing to tightened supply and a strengthening of uranium prices later in the decade.

Exploration and Resources

In September, 1990, Energy, Mines & Resources released the results of its annual assessment of domestic uranium supply capabilities. Estimates of “known” uranium resources, as of Jan. 1, 1990, were increased by 7%, to more than 580,000 tu (tonnes of elemental uranium). Additions to these discovered resources more than offset losses resulting from production in 1989.

Uranium exploration in 1989 was again concentrated in areas favorable for the occurrence of deposits associated with Proterozoic unconformities, most notably in the Athabasca Basin of northern Saskatchewan. Exploration expenditures of $58 million matched those of 1988. About 30 companies took part in 57 exploration projects, managed by 13 operators. The 10 most active of these, spending 99% of the $58 million, were Amok Ltd., Cameco Corp. (formerly known as Cameco — a Canadian Mining & Exploration Corp.) Cigar Lake Mining Corp., Cogema Canada, Denison Mines, Interuranium Canada, Minatco Ltd., PNC Exploration (Canada), Uranerz Exploration & Mining (UEM) and Urangesellschaft Canada.

In May, Cameco announced the discovery of a high-grade uranium deposit in Saskatchewan. The P2 North deposit at McArthur River, 70 km northeast of Key Lake, has been drilled along strike about two kilometres. The best intersection showed 47% U over nine metres, but grades up to 65% U have been reported; resources are estimated to exceed 77,000 tu at an average grade surpassing 3% U. Follow-up evaluation of this discovery continues, with development timing dependent on the world uranium market. The joint-venture partners include Cameco (44%) and UEM (29%).

Uranium Production

and Developments in Canada

Primary uranium production in 1990 is estimated at 8,750 tu, well down from 1989, and output could remain significantly below production capability in 1991. The decline reflects two mine closures in Ontario, and operating cutbacks in Saskatchewan. Estimated total shipments for 1990 under all active domestic and export contracts were 9,460 tu, valued at $C868 million, down from 10,995 tu, valued at $913 million, in 1989. Direct employment at Canada’s uranium production centres declined more than 40% in 1990 to less than 2,500 workers.

Rio Algom announced in January that its Quirke and Panel mines could be closed by early 1991. That date was subsequently moved up to late August. About 600 workers continue to produce uranium at the Stanleigh operation (under an Ontario Hydro contract extending until 2020) and to complete asset disposal and environmental decommissioning activities.

In March, Denison announced a reduction of about 450 workers at its Elliot Lake operation by August, the aim being to accommodate an expected 37% cut in output by 1991, and protect the livelihood of the remaining workforce. Denison’s complement of 1,200 workers produces uranium under contracts with Tokyo Electric Power Co. and Ontario Hydro, scheduled to expire in 1997 and 2012, respectively.

The closures and cutback meant the loss of more than 2,000 jobs. The Ontario government, in co-operation with the federal government, has taken several initiatives to lessen the impact of the loss of employment. Late in the year, it announced that the Elliot Lake area would receive $15 million to help diversify and revitalize its economy.

In Saskatchewan, Cameco sold Uranerz a one-third interest in its Rabbit Lake operation and associated properties (including Collins Bay deposits and Eagle Point South) in July. Each now has a share in both Key Lake and Rabbit Lake (Cameco two-thirds and uem one-third). As Uranerz already owned one-third of Eagle Point North, the Eagle Point orebody can now be developed as a single underground mine. The Rabbit Lake mill has been idle since July, 1989. Key Lake produced at nominal output capacity in 1990 despite a 6-week summer shutdown.

Cluff Mining resumed ore processing after a shutdown, which began in August, 1989. The new Dominique-Janine open pit supplemented ore in 1990 from the Dominique-Peter mine, currently the only underground uranium operation in Saskatchewan.

Other Developments

At the Cigar Lake project in northern Saskatchewan, the 500-metre-deep shaft was completed in 1990 and lateral development from the 420-metre and 480-metre levels is continuing. At the Midwest project, northeast of Cigar Lake, test mining results have been evaluated and an environmental impact assessment has been prepared. Both projects are on schedule and within budget; start-up at either property will be contingent on regulatory and environmental approvals and on the market.

In July, Urangesellschaft, the principal owner and operator of the Kiggavik uranium project in the Northwest Territories, requested the federal Environmental Assessment and Review Process (EARP) panel to delay indefinitely its planned hearing for Kiggavik. The company indicated that more time was needed “to respond thoroughly to the request for considerable additional information,” resulting from the panel’s earlier identification of deficiencies in its environmental assessment report.

Cameco, Agra Industries and Isotope Technologies announced a joint venture in August to pursue the commercial development of a new laser isotope separation technology, known as crisla (Chemical Reaction by Isotope-selective Laser Activation). Applications include the production of enriched uranium, ultra-pure metals, pure isotopes for environmental monitoring, and high-purity pharmaceuticals. Based in Saskatoon, Crisla Technologies will focus its initial research and development efforts on the separation of uranium isotopes.

In November, Minatco, an affiliate of Total Petroleum of France, announced its acquisition of 100% of the Wolly uranium project in Saskatchewan from joint-venture partners Canadian Occidental Petroleum and Canadian Nickel Co. Situated adjacent to the Rabbit Lake property, the project hosts significant uranium mineralization, (including the Jeb, McClean, and Sue deposits). Development work at Wolly is continuing.

As a result of a spill in 1989 at its Rabbit Lake property in northern Saskatchewan, Cameco was fined $50,000 in November for discharging slightly radioactive minewater without a permit, where there was a “reasonable possibility” that the discharge could result in a change in water quality. In imposing the fine, the judge noted that the spill had caused only minimal environmental impact and that surface water near the spill never exceeded the range of natural background levels of uranium.

Early in December, Denison Mines announced the formation of a joint venture with Freeport Uranium Recovery Co. to produce uranium concentrates from two existing phosphate-processing plants owned by Freeport in Louisiana. The 50-50 joint venture was to begin operations on Jan. 1, 1991, with Freeport producing concentrates and Denison marketing them. The two Louisiana facilities have a combined annual capacity in excess of 450 tu.

In late December, Bill James (formerly of Falconbridge) was appointed president and chief executive officer of Denison; his challenge is to guide the company through a very difficult period.

Markets and Prices

The uranium market has suffered from oversupply since the late 1970s, when surplus inventories began to accumulate as a result of delays and cutbacks in reactor construction and declines in new reactor orders. Although reactor-related requirements have exceeded production since 1985, the drawdown of excess utility inventories has been slower than expected and a significant surplus still overhangs the market. Moreover, the oversupply situation has been exacerbated recently by the availability of low-priced uranium from the West Germany stockpile and from non-traditional suppliers, especially the U.S.S.R., certain Eastern European countries and China.

Brokers and traders became increasingly active during 1990, moving excess supplies into the market and thus contributing to increased price swings. Nuexco’s exchange value spot price indicator slid to $US8.70 per lb. of U3O8 in February, jumped to $11.70 in July, fell to an all-time low of $8.35 in October but recovered by year-end to $US9.70 per lb. In Canada, the average price of all export deliveries in 1990 was $C71 per kg ($US24 per lb.) of U3O8, slightly below the 1989 average.

Outlook

Canada’s uranium producers are adjusting to the volatile market of recent years and are prepared for the challenge of the 1990s.

This country has the uranium resources, infrastructure, political will and determination to remain a reliable and competitive supplier of uranium for many years to come.