Uranium: Securing alternative energy supplies

23 March 2010

The UAE, Jordan, Egypt and Iran are all edging closer to making nuclear energy part of their power generation base. In terms of uranium production, the most active state in the region is Jordan.

According to the Jordan Atomic Energy Commission (JAEC) the country is sitting on reserves of 140,000 tonnes of uranium, making it 11th in the world, with 2 per cent of the global total. The World Nuclear Association (WNA) puts Australia top with 23 per cent, Kazakhstan next with 15 per cent. Russia has 10 per cent and South Africa and Canada follow.

“There are probably many more uranium deposits in mature uranium mining countries that could be exploited more cheaply, but it makes sense for Jordan to evaluate its options,” says Jeremy Gordon, an analyst at the WNA.

Jordan has examined its options and is now acting on the findings. In the 1980s and 1990s, it carried out extensive surveys at 15,000 measuring points and 1,700 trenches to determine that its reserves, exist in six key regions.

Uranium production by company

Leading Uranium Producers

Global leaders

The most resource rich of these is the central zone and it is here that the first mining contract was awarded in February 2010, to a joint venture of Jordan Energy Resources with French nuclear giant Areva. In terms of mining, Areva extracts 14 per cent of the world’s uranium and only UK/Australia’s Rio Tinto and Canada’s Cameco produce more.

The contract was signed following the formation of Jordan Areva Resources in January 2009, which followed the signing of an exploration agreement in September 2008.

Similar exploration agreements exist with UK/Australian Rio Tinto for the Wadi Shara Abyad, Rweished and Wadi Bahiyya areas, and with China’s Sino Uranium for areas in the north of the country. However, these have not yet been turned into mining deals.

Of the 140,000 tonnes of uranium in Jordan, less than half – 64,880 tonnes – is thought to be in the central region and according to JAEC it sits between 0.5-3 metres below the surface.  The increasing interest in extracting uranium in the Middle East reflects wider market trends as producers seek to meet increasing demand. Primary uranium ore (U3O8) production has been escalating worldwide with Kazhakstan overtaking Canada in terms of production levels in 2009.

In 2008, Canada produced 9000 tonnes of uranium compared with 8521 tonnes extracted by Kazhakstan. Although 2009 figures have not yet been released, WNA says it can confirm that Kazhakstan has taken the lead. “Overall there’s expansion across the sector. We have just got the Canadian production [figures]. They did well and are up to the same rates as they were in 2005 of about 12,000 tonnes a year,” says Gordon.

For it to have overtaken Canada, Kazhakstan must have increased production by at least 41 per cent. It is aiming for 15,000 tonnes by 2010, however the state-owned uranium producer Kazatomprom says it will tailor production to demand.

Map: Global Uranium Oxide Production (tonnes a year)

Driving demand

Primary uranium production has been increasing steadily worldwide since 2003. In 2008, 43,853 tonnes was produced compared with 41,264 tonnes in 2007 and 39,670 tonnes in 2006, representing annual growth of about 5 per cent.

A combination of factors have driven the growth, not least the high oil prices of 2007. Historically secondary supplies, which are generally classed as stockpiled or recycled materials, have played a large part in supplying fuel for reactors. This, and a tendency for utilities to stockpile uranium in the 1980s and 1990s, meant that prices for primary supplies were suppressed at less than $20 a pound for decades.

WNA also estimates that the secondary supply from dismantled US and Russian nuclear weapons has accounted for about 13 per cent of world fuel, equivalent to 10,600 tonnes of uranium oxide, for many years but this supply is diminishing and will end in 2013.

Such drivers combined with high oil prices, a renewed global push for nuclear power and a developing spot market, resulted in uranium prices soaring from 2003 to 2007. According to the US pricing specialist UX Consulting Company, the price began to climb in 2003 and peaked at $130 a pound in mid-2007. 

“Speculation by funds was a major factor in the price run-up, and this was given a boost by water problems at Energy Resources Australia’s Ranger mine in early 2007 and a second flood at Cameco’s Cigar Lake mine in the latter part of 2006,” says Jeff Combs, president at UXC.

At the same time, utilities were adding to their stocks that were at low levels following years of low and flat prices, which suggested that uranium was quite plentiful. This was often done through purchasing additional uranium under long-term fuel supply contracts.

“These contracts, signed when the price was much lower, had generous quantity flexibilities in addition to lower prices or price ceilings for market price contracts. By exercising upward quantity flexibility under these lower-price contracts, utilities could buy uranium at substantial discounts to the then market price,” says Combs.

Today, UXC says the price has stabilised at $40 a pound, however, most utilities enter long-term supply arrangements with producers with prices based on production costs. 

“Because nuclear reactors refuel every 12-18 months on known schedules, most operators have a mix of suppliers and long-term contracts allowing them to ride out price bubbles,” says Gordon. “Contracts made since the price spike are based on the higher prices, though, and uranium companies are starting to see that appear in their results.”

However, even long-term contracts are reflecting spot prices. If producers cannot satisfy the additional demands from their customers, they are forced into the spot market contributing to demand and creating an upward pressure on prices. According to Combs spot prices are quite significant even with respect to long-term contracts, as many long-term contracts reference spot prices. “Some long-term contracts reference long-term prices as well, but the referencing of spot prices is more prevalent, especially in today’s market as prices have been under downward pressure,” he says.

International assistance

The impact of the rising prices of 2006 and 2007 was an upsurge in exploration and investment. According to the Vienna-based International Atomic Energy Agency (IAEA) the price rise and resulting increased exploration has led to a 17 per cent increase in known worldwide economically recoverable reserves, which are currently 5.5 million tonnes.

In the UAE, Thani Holdings launched Uranium Arab Ventures in May 2009 when prices hovered at about $60 a pound. It intends to mine uranium to supply to local reactors and has targeted six African and one Middle East country for exploration. Abdelmajid Mahjoub, director-general of the Tunis-based Arab Atomic Energy Agency says that there is no shortage of local reserves.

“Algeria, Morocco, Egypt, Jordan, there is no shortage of countries with uranium. The question is how to mine and produce it. It is clear that foreign assistance will be required.”

That the UAE has set up a venture for sourcing fuel is not surprising. In December 2009, the Emirates Nuclear Energy Corporation signed a $20bn contract with a South Korean consortium to build four nuclear reactors in Abu Dhabi by 2020. The first is to be operational by 2017 and a long-term fuel supply contract is yet to be signed.

Although the states of the Middle East and North Africa are seeking local reserves, all except Iran are agreed on outsourcing enrichment activities. Four companies dominate the enrichment market, Areva, Urenco, with operations in the UK, Germany and Holland, Russia’s Atomergenoprom and United States Enrichment Corporation.

Regional uranium activity centres around mining operations with a view to long term fuel supply. New ventures will find opportunities, but will face tough competition for mining the most economic reserves from established firms.

Map: Global Uranium Oxide Production (tonnes a year)

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications