Uranium industry in crisis of confidence

Sunday, August 11, 2013

While Australia’s mining sector shows signs of resilience, there is one mineral whose outlook may be terminal. 

There are five significant events that have occurred recently that send a clear message about the future of the uranium sector and the wider nuclear industry.

The uranium price dropped to US$34.50 a pound Energy Resources of Australia, the operator of the Ranger uranium mine in Kakadu, announced a $54 million loss.

Perth-based uranium miner Paladin Energy failed to sell a stake in its Langer Heinrich mine in Namibia. French nuclear giant EDF announced its exit from nuclear power in the US and Duke Energy cancelled two proposed reactors in Florida. 

These incidents are neither isolated nor unrelated — they are significant indicators about the health of nuclear industry. The uranium price was around US$20 through much of the 1980s and 1990s. It increased dramatically around 2005 with the promise of a “nuclear renaissance” but began a steady drop in 2007 through to the end of 2010.

Since the Fukushima disaster — a continuing nuclear crisis fuelled by Australian uranium — the price has been in free fall. 

Industry advocates remain adamant or delusional that there will be a commodity price recovery but, looking at the sector’s vital signs, we find a weak pulse.

Rio Tinto’s subsidiary ERA has returned a loss at the ageing Ranger mine for the third year in a row, after a series of shut downs and setbacks. 

Paladin has been plagued with issues at its two operating mines in Africa. It is dogged by industrial disputes, corruption allegations and an inability to run a profitable mining operation despite securing uranium deals above the current spot price.

Every year their shareholders get more irate as Paladin's board promise a bounce back of the uranium price. Their latest problem is the failure to sell a stake in their operating mine in Namibia.

This has been viewed as a clear vote of no confidence which indicates people outside of the uranium industry do not share the optimism about a uranium price recovery.

Paladin’s share price is currently the lowest it has been in eight years. Even John Borshoff, the bullish managing director of Paladin, seems to be losing faith, telling a uranium conference in Fremantle last month that the “uranium industry is definitely in crisis and is showing all the signs of a mid-term paralysis if this situation doesn't demonstrably change." 

The move by EDF to exit from nuclear power in the US is perhaps the most significant of these recent events as it was prompted by the high cost of nuclear power.

International Energy Agency commentator Dennis Volke put the issue plainly saying: "It is simply not easy to invest in nuclear and recover your money there."

Instead EDF — the world’s biggest operator of nuclear reactors — is increasingly turning its attention to renewable energy, particularly solar and wind. 

This shift from nuclear to renewables is also evidenced in the current BP statistical review of energy, which shows that nuclear energy declined by 6.7%, while solar grew by 58% and wind by 18%. 

Duke Energy’s decision to abandon two nuclear reactors Vogtle 3 and 4 in Florida has also been driven by economic considerations. After a prolonged series of cost and schedule blowouts Duke decided the best option was to walk away.

Unfortunately Florida tax payers will foot a $1 billion bill for the project that will never deliver a single watt of electricity — much like Western Australian's are footing the $102 million bill for failed plans at the ancient Muja coal-fired power plant near Collie. 

In response to Duke’s decision, former Nuclear Regulatory Commission commissioner Peter Bradford said the nuclear renaissance "was just this artificial gold rush... And yes, it does show the renaissance is dead."

With cheaper and more popular renewable energy technology coming online and contributing to global energy supply nuclear has simply become too expensive. 

These five events are simply a reminder that the “nuclear renaissance” was more about spinning media lines than spinning turbines. On top of rising costs and falling public support, the sector continues to be plagued by weapons proliferation and security concerns and the unresolved issue of radioactive waste. 

For new comers like WA uranium hopeful Toro Energy this does not bode well.

When a small inexperienced company like Toro are competing with existing operating mines for scant finance and market access, the $260 million needed to start the proposed Wiluna mine and the further $150-$260 million in upfront bonds looks more and more like “the dream that failed” a term coined by The Economist

[Mia Pepper is the Nuclear Free Campaigner with the Conservation Council of WA.]

From GLW issue 977

Comments

Uranium Industry Crisis Of Confidence

To cut to the chase, any article discussion the future of energy or purporting to discuss the future of energy, is wholly incomplete without a mention, at the very least, of peak oil.

Also, renewable may be "cheaper" but certainly are not cheap.

Also, a fall back of 7% in nuclear could probable be explained by the shut down of the the vast majority of nuclear power plants in Japan. Although if wrong, I would like to be corrected.

Regards,

Jimmy