The price of uranium has quietly, in a behind-the-scenes kind of way, soared elevenfold since 2000, having reached $63 a pound from about $7 previously, according to uranium industry watchers UX Consulting.
Analysts believe it could reach $70 a pound next year. The metal is not traded on the open market and only spot prices are available.
Uranium is used to generate about 16% of the world’s electricity, with nuclear power an increasingly attractive alternative.
Canada is currently the top producer, with an output of 30,23-million pounds for 2005. South Africa is the third-largest producer in Africa, producing 1,75-million pounds last year. Australia, the United States, Niger, Namibia, Russia and Kazakhstan are the other big producers.
In South Africa, uranium is mined as a byproduct of gold. AngloGold Ashanti, the country’s largest uranium producer, did not disclose uranium production figures in its latest quarterly update, but is keen to boost its uranium capacity. CE Bobby Godsell told media its production target for the metal would increase by 40% for 2007, and the group is looking to acquire other uranium assets. An AngloGold spokesperson was not available for comment this week. Harmony and Goldfields, the other major gold producers, said they were not involved in uranium production and referred queries to AngloGold.
Nuclear popularity dipped sharply after the Three Mile Island and Chernobyl accidents, but experts say prices are up sharply as fuel stockpiles dwindle and more nuclear generators are built in China and India. The International Herald Tribune reported last year that commercial stockpiles had dropped 50% between 1985 and 2003 as mines struggled to meet demand. China aims to build 27 plants by 2020, in order to raise its power-generation capacity fivefold. India has the more modest aim of tripling nuclear power capacity by 2012, and will build 17 generators towards that, said the Tribune. Likewise, Russia has since 2003 limited its fuel exports to conserve uranium for the 25 plants it wants to build by 2020. The International Atomic Energy Agency says 130 nuclear power plants may be built in the next 15 years.
The World Nuclear Association says that the cost of nuclear power generation has dropped over the past decade because, although construction costs are higher, compared to coal- or gas-fired plants, fuel, operating and maintenance costs have declined. But uranium must be processed, enriched and fabricated into fuel elements, which accounts for half of the total fuel costs.
Meanwhile, Cabinet ministers are mulling the possibility of enriching our own uranium. Though South Africa is a major exporter, Koeberg, the country’s only nuclear power plant, runs off enriched fuel that must be imported. Only 22 companies, in the US, Europe, Japan and China, currently enrich uranium, according to UX Consulting.
But not everyone thinks the present boom will last. Hedge funds have bought nearly a third of the spot uranium market this year — about eight million pounds — according to uranium specialists UX Consulting. Fortune magazine says this could be evidence of bubble behaviour. Last month, it recommended that investors looking to get exposure to uranium should buy shares in diversified mining companies such as BHP Billiton. Shares in uranium “pure plays”, such as Canadian producer Cameco, were for “those willing to risk getting burned”, warning that either speculators or another nuclear accident could send prices skidding.
From survival to growth
After fearing that it was about to lose Rössing Uranium, its oldest and largest uranium mine, the boom in uranium prices has seen Namibia welcoming two new mines, expected to start producing over the next two years.
Rössing, which celebrates its 30th year of existence this year and currently employs about 860 people (96% Namibians), faced closure two years ago due to low prices.
Instead, Rössing (owned by RTZ, the Industrial Development Corporation of South Africa, the Iranian and the Namibian government), is now looking at expanding production from adjacent ore bodies, said Rossing MD Mike Leech.
Their Life-of-Mine expectation is now being revised from 2016 to beyond 2020. “The focus has shifted from survival to growth,” Leech said.
Namibia’s Ministry of Mines and Energy has also issued about 15 new Prospecting Licenses over the past six months.
British-owned UraMin and Australia’s Paladin Resources will each develop new uranium mines. — John Grobler