Australian uranium projects not economically viable – Kintyre, Yeelirrie, Olympic Dam
Uranium prices halt Sandy Desert project, BY: BARRY FITZGERALD The Australian July 29, THE most likely of Australia’s next big uranium mine developments – the Kintyre project in Western Australia’s Great Sandy desert – has fallen victim to sluggish demand and prices for the nuclear fuel, and WA’s “hot” construction market for resource projects.
Project operator and 70 per cent owner, Canada’s Cameco, has revealed that the economics of the project are “challenging” in that a development would not be profitable at current uranium prices. Prices are 34 per cent below where they need to be for a viable project.
The sluggish demand backdrop has implications for BHP Billiton which must find a home for the additional uranium it will produce with the planned $30 billion expansion of its Olympic Dam copper/uranium/gold mine in South Australia’s outback.
The expansion would see uranium output at Olympic Dam grow massively from 9.6 million pounds a year to 40.6 million pounds a year – 17 per cent of forecast global mine output in 2020.
But the Weekend Australian revealed that BHP plans to defer a decision on the project for two years.
Sluggish uranium demand has already reported to have led to BHP becoming disinterested in moving towards developing its Yeelirrie uranium deposit in WA.
Cameco chief executive Tim Gitzel told analysts that Cameco was “not going to develop Kintyre at any cost An eventual development of the
mine is dependent on improved uranium prices, or a substantial
increase in the project’s resource base.
A recently completed prefeasibility study in to a development
confirmed the challenging economics. It means that Cameco and its 30
per cent partner, Japan’s Mitsubishi Development, will not begin
development of what would have been WA’s first uranium mine in early
2014 as first planned.
A 2014 start to production would have meant first production in 2016.
Discovered more than 25 years ago, the contemplation of Kintyre’s
development only became possible with the election of the pro-uranium
mining Barnett government in 2008.
It was in the same year that Rio Tinto, struggling to raise cash in
the wake of the global financial crisis and its ill-timed acquisition
of Alcan, sold Kintyre to Cameco/Mitsubishi for $US495 million.
Cameco said that despite Kintyre being one of the world’s biggest
undeveloped uranium deposits (59.7 million pounds), a planned 7-year
mine life that would recover 40 million pounds of uranium faced
challenging economics “current uranium prices” and because of
“continued cost escalation” in WA.
“To break even, the prefeasibility study indicates the project would
require an average realised price of about $US67 or about 62 million
pounds of packaged production using a uranium price similar to today’s
spot price ($US50 a pound),” Cameco said.
Spot uranium prices have fallen by more than 10 per cent in the last
year, due mainly to the closure of the nuclear power industry in Japan
following the Fukushima disaster.
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