Stanleigh still open but Rio closing other Elliot Lake mines

Rio Algom (TSE) will consider selling its Quirke and Panel uranium mines in Elliot Lake, Ont., — scheduled to close in mid-1991 — if suitable offers are made, a company spokesman told The Northern Miner.

However, he cautioned that finding a buyer in the currently depressed uranium market is unlikely. A buyer would have to have long- term uranium sales contracts in hand to justify reopening the mines, he added.

Rio Algom was forced to announce the closing of the mines after an intensive sales effort designed to secure new long-term contracts failed. Current contracts expire in 1991.

Mining ore grading about 0.1% uranium oxide per ton, the Elliot Lake operations of both Rio Algom and rival Denison Mines (TSE) are high-cost mining operations. Uranium mines in northern Saskatchewan, for example, mine ore grading from 1% to 12%.

Combined with record low uranium prices, around US$9 per lb., mines in Elliot Lake only exist because of long-term fuel contracts signed in the late 1970s, principally with Ontario Hydro. At Rio Algom’s Stanleigh mine, which will not be closing, the company receives its costs plus $5 per lb. from Ontario Hydro, the mine’s only customer.

Although he would not disclose mining costs at Stanleigh, John Sparks, Rio’s manager of communications, said that costs “are in excess of three times spot prices.” Ontario Hydro is then buying a pound of uranium from Stanleigh for about $32 or more than three times the spot price. The Quirke and Panel mines are known to be less efficient than Stanleigh. As a result, costs to produce a pound of uranium from these mines are much higher.

In 1990, Rio’s three mines are expected to produce approximately six million pounds of uranium. After Quirke and Panel are closed, Stanleigh will continue servicing its hydro contracts, well past the year 2020. “The contract calls for two million pounds per year,” Sparks said. “However, Rio and Hydro have agreed to defer 28% of production for future delivery.”

The closure of the two mines will affect 1,600 employees in Elliot Lake. Also, Rio Algom will make a provision of $85 million against 1989 earnings to cover the shutdown costs.