Western Australia Opens Doors for Uranium Mining after Government Lifts Six-Year Ban

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Australian government recently lifted the six-year ban on uranium mining in the state of Western Australia. The ban was imposed by the government in 2002. Uranium mining is allowed in Northern Territory and southern Australia, but banned in Queensland state and Western Australia. Australia has no nuclear power plants but has huge uranium deposits, making it the second-largest uranium producer in the world. Australia's uranium deposits could account for 36% of the world's demand, but until recently, because of the ban, the supply accounted for only 23% of global demand.

The country has three operating mines in Australia: the Ranger mine in Northern Territory, owned by Energy Resources of Australia Limited (ASX:ERA), a subsidiary of Rio Tinto (NYSE:RTP) (London); BHP Billiton Limited's (NYSE:BHP) (Melbourne, Australia) Olympic Dam deposit; and the Beverly mines in southern Australia, owned by General Atomics (San Diego, California). Western Australia has been at the center of the global natural-resources boom. This region, rich in ores, minerals and resource deposits, accounts for one-third of the $650 billion Australian economy. Australia could gain up to $11 billion in GDP over the next 20 years through uranium mining. In Western Australia, eight potential mines have been identified for immediate development. Globally, countries are embracing nuclear technology as an alternate, environmentally friendly source of power. Consequently, the demand for uranium is set to increase 50% to 100% over the next 25 years.

In the wake of the recent development, BHP Billiton is planning to reactivate the 35,000-ton Yeelirrie mine in Western Australia. The company is setting up a project team in Perth to review and evaluate mining and exploration procedures in Yeelirrie and has indicated that after the feasibility and environmental studies, mining would begin in three to four years. BHP Billiton also owns the 2.3 million-ton Olympic Dam deposit, considered to be the world's largest recoverable uranium deposit. A five-stage Olympic Dam expansion plan has been proposed by BHP Billiton. The first phase is expected to be complete and operational by 2013, which will increase the uranium production to 4,500 tons per year. An estimated 19,000 tons per year of uranium will be mined from this deposit after the completion of all stages of expansion. Government clearances are pending. BHP Billiton acquired this mine from Western Mining Corporation (Victoria, Australia) in 2005 for $9.2 billion.

Some of the other uranium mining projects in Western Australia include the Lake Maitland project, owned by Mega Uranium Limited (TSX:MGA) (Toronto, Ontario). The Kintyre project, which is a joint venture between Cameco (NYSE:CCJ) (Saskatoon, Saskatchewan) and Mitsubishi Development Proprietary Limited (Sydney, Australia), is in the advanced stages of exploration. Mitsubishi Development owns a 30% share in this project. Cameco bought a 70% stake in Kintyre from Rio Tinto for $346.5 million. The mine has the potential to produce between 1,800 and 2,000 tons per year of uranium.

Western Australia has a possible reserve of 95,000 tons of uranium. The weekly spot price for uranium on November 24, 2008 was $55 per pound, an increase of $2 over the spot price for the week ending November 17, 2008. Between 2004 and 2007, the price of uranium increased to more than $140 per pound and then plunged to less than $80. According to a report published by UxC Consulting Company LLC (Bethesda, Maryland), the price of one pound of uranium dropped from $105 in August 2007 to $55 in November 2008. UxC Consulting indicates that there will be price volatility until a clear view of long term demand and supply emerges.

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