Saturday 22nd October 2016

Resource Clips

Posts tagged ‘south australia’

Faith in uranium’s hotspot

June 12th, 2015

Low prices take another Australian casualty but Athabasca Basin optimism persists

by Greg Klein

The agonizing wait for uranium’s price breakout has taken its toll on two more Down Under-headquartered miners. ASX-listed Energy Resources of Australia plummeted 48% after abandoning a planned expansion of Northern Territory’s Ranger 3 mine. That leaves Rio Tinto NYE:RIO, which holds 68.4% of ERA, considering a post-tax impairment of about US$300 million.

Low prices take another Australian casualty but Athabasca Basin optimism persists

With uranium grades 100 times the world’s average,
Cigar Lake thrives while competitors shut down.

Explaining the decision to dump Deeps’ feasibility study, ERA’s June 11 announcement noted uranium’s lack of price improvement as well as its uncertainty for the immediate future. Additionally, economics would require operations beyond Ranger’s current permitting span, which ends in 2021.

“After careful consideration,” Rio concurred. The giant “does not support any further study or the future development of Ranger 3 Deeps due to the project’s economic challenges.”

Rio had already cut production at its majority-held Rossing mine in Namibia. A South Australia mine, Honeymoon, was taken offline by Uranium One.

The commodity has eluded positive predictions from many quarters, including ASX- and TSX-listed Paladin Energy PDN, which placed its Kayelekera mine in Malawi on care and maintenance and sold a 25% stake in its Langer Heinrich mine in Namibia to China National Nuclear Corp. Those setbacks haven’t stopped Paladin managing director/CEO John Borshoff from predicting sharp price hikes in near- and medium-term contracts.

The long-anticipated market-moving event would be Japan’s first reactor restarts, which would reduce the country’s apparent stockpile and, maybe more significantly, provide a psychological boost to a demoralized industry. Once scheduled for operation this month, the first two restarts currently face a court injunction.

But demoralization isn’t universal. Although Borshoff’s predictions are generally echoed by Tim Gitzel, the Cameco Corp TSX:CCO president/CEO speaks without Borshoff’s tone of desperation. In contrast, Cameco has been expanding production through its majority-held Cigar Lake, which achieved commercial production on May 1. The engineering marvel expects to add six to eight million pounds U3O8 to world supply this year, before hitting 18 million pounds annually by 2018.

The world will need at least four more Cigar Lakes—this in an industry not known for being quick to bring on new production. A mine can take up to 10 years when things go well.—Rachelle Girard,
IR director for Cameco Corp

Speaking at the Cantor Fitzgerald Annual Global Uranium Conference earlier this month, Cameco IR director Rachelle Girard predicted demand would rise 4% annually to about 230 million pounds U3O8 a year within the next decade, compared with today’s output of about 165 million pounds. Girard counted 63 new reactors now being built, an estimated $740-billion investment. She expects a total of 80 reactors over the next 10 years.

Girard predicts even more to come, noting that two billion people currently have very little or no access to electricity. Another two billion are expected to join them by 2050.

Her employer, she confidently maintained, could supply about 30% of global demand by 2024, up from about 16% now. “We have the pounds in the ground to support a lot of growth when the market calls for it.” But Girard insisted, “The world will need at least four more Cigar Lakes—this in an industry not known for being quick to bring on new production. A mine can take up to 10 years when things go well.”

Cigar Lake was discovered in 1981, began construction in 2005 and started production last year.

Industry executives and analysts say uranium needs to rise to a level of $65 to $80 a pound to justify new development. The most recent (June 8) price indicator publicly released by Ux Consulting floundered at a dismal $35.75.

Girard emphasized Cameco’s “especially pleased that several of our Tier 1 assets are located in the prolific Athabasca Basin.” Home to the world’s highest uranium grades, another exploration season has juniors busy, often on the Basin’s margin where they hope to find not so much the next Cigar Lake but another Patterson Lake South.

Meanwhile David Talbot sees a silver lining in ERA’s woes. Bloomberg quoted the Dundee Capital Markets senior uranium analyst stating that the decision to scuttle Deeps’ feasibility “will have a major impact to world production supply.” Talbot explained that while the expansion would have made Ranger the world’s third-largest uranium mine, its cancellation portends a “very positive” sign for uranium prices.

Putting Fukushima behind

November 13th, 2014

As commodity and share prices surge, where does uranium go from here?

by Greg Klein

A sharp climb in the commodity price accompanied by a dramatic rally in stock prices—is this the renaissance uranium-watchers have been waiting for? The metal’s spot price indicator started picking up last summer, but with no real effect on share prices. Then suddenly last week uranium climbed steeply, coinciding with sharp gains for both miners and explorers. Significantly, the commodity’s elevation preceded the November 7 news about Japanese nuclear reactor restarts.

The events provided opportune timing for the November 14 (Down Under time) Paladin Energy TSX:PDN quarterly conference call, with its usual forecasts from managing director/CEO John Borshoff.

As commodity and share prices surge, where does uranium go from here?

Hardly a voice crying in the wilderness, Borshoff has been one of many predicting a steep price hike for uranium. Back in August 2013, for example, he argued that to meet demand prices need to rise two or three years ahead of an anticipated 2016 uranium shortfall. “Price hikes will be severe,” he stressed. “Why this is not worrying the hell out of the utilities completely astounds me.”

Now, he says, “The door to the pre-Fukushima period is at long last starting to open. And those supply shortages that I have for so long been talking about will now start becoming the real issue and the fundamental catalyst driving price increases.”

Uranium began recuperating from its $28 low in early August. In late October, Cameco Corp TSX:CCO president/CEO Tim Gitzel noted the spot price indicator’s increase of about 25%. “We believe the move was largely due to trading activity and market speculation around unforeseen events like the potential impact of Russian sanctions, possible disruption in the U.S. Department of Energy inventory disposition and the labour disruption at our own McArthur River and Key Lake operations,” he said. “We’ll have to wait and see if the increase is sustainable but it has remained relatively stable thus far.”

Borshoff agrees about the trading activity. But he points out that the Cameco strike settled quickly and the potential UN sanctions against Russia never happened. Even so, prices continued to rise. In fact uranium’s trajectory entered a second, steeper phase, quickly rising from about $37 to $42 a pound. That indicates ever-increased trading that’s exposing weak supply, he says.

Nor does he agree with observers who “say that because the term market price has not similarly responded, there is a shallowness in this price recovery.” Borshoff concedes that spot volumes have already tripled those of 2013 with little effect on longer-term contracts. But he predicts additional term contracting over the next six to 12 months will start “testing those shortages we see from our own studies occurring in the post-2016 period.”

The irony is even these price rises will be totally insufficient to incentivize new uranium start-ups to accommodate the extraordinary growth that is needed in supply…. With each year that the building of new mines is delayed, the greater will be the price reaction. This is inevitable.—John Borshoff, managing director/CEO of Paladin Energy

As a result, Borshoff expects term prices to react later this year or during 2015. “The irony is even these price rises will be totally insufficient to incentivize new uranium start-ups to accommodate the extraordinary growth that is needed in supply….” he maintains. “With each year that the building of new mines is delayed, the greater will be the price reaction. This is inevitable.”

Reduced output has already started to take its toll on spot and term prices, Borshoff adds. Paladin’s Kayelekera mine in Malawi and Uranium One’s Honeymoon mine in South Australia have gone on care and maintenance. Production cuts hit Rio Tinto’s (NYE:RIO) majority-held Rossing mine in Namibia as well as American in-situ recovery operations. Kazakhstan’s growth in output, meanwhile, will fall below 2% this year. Paladin sees 2014 global production dropping from 154 million pounds in 2013 to 148 million pounds or less this year.

Additionally, another four million pounds has moved from the spot to term market, Borshoff says. As for this year’s spot market volume of 45 to 50 million pounds, “in our estimate, much of this volume is churn and it is probably only about 25 to 30 million pounds of primary production feeding this important market.” That would indicate a reduction of 40% to 50% in the uranium available to the spot market, Borshoff says.

David Talbot was among others who emphasized that uranium’s sharp increase preceded the latest announcement from Japan. “It is the utilities that are starting to enter the market, suggesting that this rally could have some sustainability,” the Dundee Capital Markets analyst stated in a November 7 note to investors.

Like Borshoff, he added, “We have always said, just like in 2006-2007, when contracting begins and the price moves, it will move fast.”

Talbot went further, however, predicting a “likely rally” in equities. Events so far have proven him right. The same day, several uranium miners and explorers saw their shares take off by at least 20%, some even surpassing 50%, before settling back a bit on November 12 or 13.

Paradox and promise

August 28th, 2014

Paladin’s John Borshoff still predicts an approaching end to uranium’s persistent predicament

by Greg Klein

Paladin’s John Borshoff still predicts an early end to uranium’s persistent slump

Paladin has increased its forecasted supply-demand shortfall by 13% over the estimate made a year ago.
(Graph: Paladin Energy)


“Another bleak year,” as Paladin Energy TSX:PDN managing director/CEO John Borshoff put it. But far from dampening his usual predictions of sharp price increases, the slump reinforced his views—price hikes will come soon, he maintains. The forecast “broadly aligns with Cameco’s findings, and where we differ is in the timing of recovery. We say six to 12 months. They say 12 to 18 months. Not much difference, really.”

His prognosis, sometimes expressed as a wake-up call to utilities, came as Borshoff outlined his company’s fiscal 2014 in a conference call from Western Australia broadcast during the Western Hemisphere’s August 28. Paladin had indeed undergone a bleak year.

With all dollar amounts in U.S. currency, revenue sunk to $328.8 million, a 19% decline. Not including impairments, gross loss from operations came to $3.4 million. After-tax impairments hit $296.3 million.

Production reached 7.94 million pounds U3O8, near the year’s maximum guidance but one that was lowered from an original goal of 8.3 million to 8.7 million pounds. Next year’s guidance drops to the range of 5.4 million to 5.8 million pounds, to come entirely from Paladin’s Langer Heinrich mine in Namibia. The company suspended operations at its Kayelekera mine in Malawi last May, throwing over 700 employees and contractors out of work.

Paladin’s John Borshoff still predicts an early end to uranium’s persistent slump

Paladin refinanced its Langer Heinrich mine
by selling a 25% stake to a Chinese utility.

Paladin’s stake in Langer Heinrich has been reduced to 75% following its joint venture with China National Nuclear Corp.

But Borshoff suggested uranium might have already experienced signs of recovery. This month’s price bump, from a 52-week low of $28 up to $32.50 on August 28, “has been explained away due to political issues and the possible strike.”

Strike notice did prompt Cameco Corp TSX:CCO to shut down McArthur River, the world’s largest uranium producer, on August 27. That seemed to explain why uranium’s already-rising price grew 3.2% the following day, the biggest gain since November 2011 according to Bloomberg data reported by the Globe and Mail.

“Though this may be the case, I believe there are other underlying influences at play suggesting some supply fragility even at this stage,” said Borshoff.

Longer-term fundamentals remain strong, he insisted. “China recently gave us a glimpse of its nuclear electrification targets, going from 60 gigawatts by 2020, to 150 to 200 by 2030, and then rising significantly. These are staggering numbers by any score coming from just one country and an enormous amount of uranium is going to be required to feed that expansion alone, never mind for the Middle East, India and other growing nuclear economies.”

Japan has given preliminary approval for two reactors, which could start operation by winter and begin “what is expected to be a measured reactor restart program.” As many as two-thirds of the country’s fleet could resume commercial operation over the next few years, he suggested. “Elsewhere, 72 reactors are under construction today.”

But “on the flip side of this demand optimism, producers’ response to severely depressed prices has been predictable.” Kayelekera’s on care and maintenance, as is Uranium One’s Honeymoon mine in South Australia. Rio Tinto NYE:RIO has slashed production at its majority-held Rossing mine in Namibia.

U.S. operations “are on partial production only to deliver to the few term contracts they hold,” Borshoff said. “With only half the current production able to operate at some profit under the current spot price, it’s clear no one will invest in replacing existing capacity as it runs down, never mind investing in growth of supply.”

Paladin estimates that last year almost 11 million pounds “have either been cut from annual production or deflected into term markets. We expect the impact of this to be felt strongly by the spot market in the next 12 months.”

Meanwhile, longer-term contracting of uranium sales remains behind schedule, especially in the U.S. Paladin’s figures indicate the historic contracted average reached over 150 million pounds a year. But 2013 contracts for future delivery plunged to 20 million pounds. This year has seen improvement, with mid-2014 term volume up to 60 million pounds.

“The U.S. utilities now need to act fast to fill their term contract needs for their 2016-to-2021 period. This is normally done 18 to 24 months beforehand, meaning the price reacts well before a period of actual shortage and in this current situation we would expect a positive price reaction in the next six to 12 months.”

As it is, few utilities have contracts beyond 2018, Borshoff added. “Few producers are participating in the term market because they’re reluctant to participate below price of replacement and create severe legacy contracts going forward.”

Since its last annual study, Paladin has increased its forecasted supply-demand shortfall by 13%. The company predicts the supply gap widening in 2016, leading to a significant supply shortfall for 2020 and beyond.

“The true supply-demand situation is obscured by the current short-term market oversupply. The paradox is, the low uranium price that this current situation has created is resulting in a total lack of incentive to initiate supply growth for the 2017-to-2025 period. This is a highly volatile state of affairs.”

“There is simply no opportunity to increase supply beyond what is currently being constructed,” which he limited to Cameco’s delay-prone Cigar Lake and the Chinese-owned Husab mine in Namibia, which might also suffer setbacks. “So the price not only has to move to support current supply, but also to support the mid-term lack of sufficient supply, a true paradox.”

By 2020, Paladin’s research points to a shortfall of about 35 million pounds per year, creating a cumulative shortfall of about 190 million pounds. “And on this basis we expect the start of positive price reaction occurring in late 2014, early 2015, just to incentivize the much-needed supply growth,” Borshoff said. “Every miner wants $65 to $75 “to start to think about the large amount of capital needed to build new greenfield uranium mines.”

“Am I missing something here, or does someone think serious mining companies or developers are going to invest just to lock in long-term financial losses? I think not.”

Paladin’s executive general manager of production Mark Chalmers told the conference the company’s Manyingee project in Western Australia might begin in-situ recovery operations in 2018. A more significant potential producer, the Michelin deposit in Labrador could come online in 2020 or 2021. Both projects depend on uranium prices, he emphasized.

Athabasca Basin and beyond

August 2nd, 2014

Uranium news from Saskatchewan and elsewhere for July 26 to August 1, 2014

by Greg Klein

Next Page 1 | 2

Fission off to a scintillating summer at Patterson Lake South

Fourteen widely mineralized holes released July 28 mark Fission Uranium’s (TSXV:FCU) first summer results from Patterson Lake South. All tested R780E, the middle and largest of five zones along a 2.24-kilometre potential strike. Two holes extended the eastern part of the zone about 50 metres north. Among other PLS news is a new technique that allows barge-based angle drilling to better determine the mineralization’s size and shape. And new technology—a scintillometer can now measure radioactive drill core up to 65,535 counts per second, replacing a model that maxed out at 9,999 cps.

Scintillometer readings, as the usual disclaimer relates, are no substitute for assays, which are pending. But the brand new gizmo shows measurements that would have been well off scale for the older device. Some examples from Fission’s multi-page chart include:

Hole PLS 14-219

  • <300 to 33,000 counts per second over 17 metres, starting at 160 metres in downhole depth
Uranium news from Saskatchewan and elsewhere for July 26 to August 1, 2014

PLS 14-220

  • <300 to 15,000 cps over 32 metres, starting at 59.5 metres

  • <300 to 30,000 cps over 14.5 metres, starting at 97 metres

  • <300 to 41,000 cps over 11 metres, starting at 163 metres

PLS 14-223

  • <300 to 41,000 cps over 13.5 metres, starting at 176.5 metres

PLS 14-224

  • <300 to 42,000 cps over 19.5 metres, starting at 128.5 metres

PLS 14-225

  • <300 to 30,000 cps over 39 metres, starting at 145.5 metres

PLS 14-229

  • <300 to 31,300 cps over 27.5 metres, starting at 96.5 metres

One interval in hole PLS 14-230 came close to maxing out the new scintillometer:

  • <300 to 65,500 cps over 24 metres, starting at 229 metres

True widths weren’t provided.

Forty-three holes of the 63-hole, 20,330-metre summer program will attack the project’s main mineralized trend in hopes of extending it north, south and along strike to the east, as well as delineating the December resource. In the meantime, the market awaits assays for the last 24 holes from 92 sunk last winter.

Denison steps out at Wheeler’s Gryphon zone

On the southeastern Athabasca Basin, step-out drill results from Denison Mines’ (TSX:DML) Wheeler River showed some strong numbers, although possibly not as strong as the company had hoped. Out of 10 holes reported July 29 from the project’s Gryphon zone, seven were 50-metre step-outs from two previously announced holes: Gryphon discovery hole WR-556, which assayed 15.3% U3O8 over 4 metres, and WR-560, which showed 21.2% over 4.5 metres.

The latest batch was provided as radiometric-equivalent uranium from a downhole probe. Lab assays are pending. Some highlights showed:

Hole WR-564

  • 0.8% uranium oxide-equivalent (eU3O8) over 20.5 metres, starting at 736.3 metres in downhole depth
  • (including 3% over 2.3 metres)
  • (also including 4.5% over 1 metre)


  • 1.1% over 2.7 metres, starting at 727.2 metres


  • 3.1% over 3 metres, starting at 662.6 metres

  • 9.4% over 3.7 metres, starting at 679.3 metres

  • 8.1% over 1.1 metres, starting at 692.3 metres

  • 5.3% over 5.9 metres, starting at 702.1 metres

  • 3% over 2 metres, starting at 724 metres


  • 2.3% over 6.5 metres, starting at 755.8 metres
  • (including 10.9% over 1 metre)
  • (also including 1.9% over 1.1 metres)

True widths were estimated at approximately 75%. Three other step-outs failed to find significant mineralization, as did two extensions of historic holes.

Denison described the area as a zone of mineralization above 1% eU3O8 enveloped by lower-grade stuff. “The higher-grade mineralization plunges to the northeast and has now been drilled over 150 metres in the along-plunge direction and over 50 metres across the plunge,” the company added. “Mineralization is open down plunge to the northeast, up plunge to the southwest and across the plunge at depth.”

Last March’s Gryphon discovery diverted attention from Wheeler River’s Phoenix deposit three kilometres southeast. Nevertheless, in June Denison announced a 34% increase in Phoenix indicated resources.

Wheeler’s agenda calls for another 10 holes at Gryphon this summer. Denison acts as operator and holds 60% of the 12,333-hectare property, along with Cameco Corp TSX:CCO (30%) and JCU Canada Exploration (10%).

The previous week Denison announced a $13.04-million bought deal that’s expected to close around August 12. In June the company closed its acquisition of International Enexco. Denison plans to spend $15 million on Canadian exploration this year.

Next Page 1 | 2

Australia’s promise to assist BHP with its Olympic Dam expansion a “cruel hoax”

December 17th, 2013

by Cecilia Jamasmie | December 16, 2013 | Reprinted by permission of

The Australian government has vowed to help BHP Billiton NYE:BHP, the world’s largest mining company, go ahead with an estimated $33-billion expansion of its Olympic Dam copper-uranium mine, shelved last year as metal prices sank and costs rose.

“I want to ensure that as far as is humanly possible everything that government does is directed towards making it easier, not harder, for this iconic project to go ahead,” Bloomberg quotes Prime Minister Tony Abbott.

Australia’s promise to assist BHP with its Olympic Dam expansion a cruel hoax

The mine expansion was cancelled in 2012
with sinking metal prices and rising costs.
(Photo: BHP Billiton)

But South Australian Premier Jay Weatherill is calling Abbott’s comments “a cruel hoax” as Weatherill claims to have spoken with BHP management last week and there was no indication of any plans to resume expansion of the mine.

His state is facing massive job losses as General Motors’ NYE:GM Holden unit will stop production in 2017 after 69 years, laying off about 2,900 workers in the state and in neighbouring Victoria.

“The impracticality and the illusion of that is a bit of an unfair thing to hold in front of those workers right at this moment,” Weatherill told the Herald Sun Monday.

“We need to work with those businesses which do have the capacity to expand their operations to ensure that they do that more quickly,” he added.

In September, chief executive Andrew Mackenzie said BHP would provide an update on the shelved $30-billion project in 2014, but any expanded mine site at Roxby Downs in South Australia’s far north was unlikely without a technological breakthrough.

Doubts about the lauded project first emerged in early 2012 when BHP told markets of its intention to cut back an $80-billion capex programme. A JP Morgan research note a few weeks later also suggested the Olympic Dam would not go ahead “for at least three or four years, if at all.”

The ambitious project in South Australia’s outback is expected to become the world’s largest uranium mine. It included the construction of 270 kilometres of powerlines, a 400-kilometre pipeline, a new desalination plant and a 105-kilometre railway.

The Olympic Dam, Australia’s largest underground mine, currently employs over 3,500 people.

Reprinted by permission of

Graphite Digest

April 27th, 2012

This article has moved. Click here to read it.