Uranium market struggle with low prices, oversupply

Canada’s uranium industry faced renewed uncertainty in 1991 as market opportunities faded. In October, the Nuexco exchange value spot price indicator fell to US$7.25 per lb. U3O8, an all-time low in constant dollar terms. (At Jan. 31, 1992, the spot price was US$8.)

Despite mine closures and worldwide output cuts, excess supply prevailed as inventories were high and new sources emerged, most notably from the former Soviet republics. Without a near-term price recovery, new production capacity could be deferred to the late 1990s.

Government reaction to society’s environmental concerns means that new uranium mining projects will undergo intensive public scrutiny. In Canada, the referral of six such projects in Saskatchewan for review will increase the lead times needed to bring them on stream.

Canadian primary output in 1991 was 8,100 tonnes of elemental uranium (tU), down from 8,729 tU in 1990. Ontario’s production decline was not offset by Saskatchewan’s increase. Estimated 1991 shipments under all domestic and export contracts were 7,813 tU, valued at $472 million, down sharply from 9,720 tU worth $888 million in 1990.

In April, Denison Mines (TSE) announced that Ontario Hydro would terminate its uranium supply contract on Jan. 1, 1993, and that Denison would permanently close its operation. Subsequently, Denison and Hydro agreed to accelerate deliveries to permit production and workforce levels to be maintained until closure in mid-1992.

Ontario Hydro announced in June that it would continue the current Stanleigh mine contract of Rio Algom (TSE) only until 1996, as opposed to the original 2020 date. Workers at Stanleigh are also involved in asset disposal and environmental decommissioning related to the Quirke and Panel mine closures. In August, Cameco (TSE) resumed ore processing at Rabbit Lake, Sask., after a 2-year shutdown; ore stockpiled from the Collins Bay B deposit provides the feed. Licensed by the Atomic Energy Control Board at 5,400 tU annually, Rabbit Lake was expected to produce in excess of 700 tU in 1991, and to reach nominal capacity of 4,600 tU by 1996.

In late 1990, Cluff Mining submitted an Environmental Impact Statement (EIS) for approval to extend its DJ pit southward, thereby prolonging surface mining by seven years. As operations would extend 100 metres into Cluff Lake and require construction of a dam, the proposal was referred for environmental review. The DJ North pit was mined out in mid-December. In April, six proposals for new uranium mines in Saskatchewan were referred for public review by an independent panel, pursuant to the federal government’s Environmental Assessment and Review Process (EARP) guidelines. A joint federal-provincial panel will review Cluff Mining’s extension of the D-J deposit, Denison’s Midwest project, the Cigar Lake project of Cigar Lake Mining, the McClean Lake project of Minatco and Cameco’s McArthur River project. The sixth proposal, Cameco’s Rabbit Lake expansion at the Eagle Point-Collins Bay A & D deposits, will be reviewed by a federal-only panel because conditional approval has already been granted by Saskatchewan authorities.

At Cigar Lake, mining tests of high-grade ore were successful. Entering the orebody from below and extracting about 50 tonnes of ore, a remote-controlled boring machine performed well. Mined-out areas were filled with concrete, radiation levels were below expectations, and ore grading 14% U was hoisted to surface in shielded containers and placed in a concrete storage facility. Test mining results at the Midwest project have been evaluated and an EIS was submitted in early 1991. Denison, which owns 45% of it, operates the joint venture.

Cameco’s McArthur River strike, 70 km northeast of Key Lake, has been the only significant new uranium discovery announced in the past two years. In December, Cameco revealed that reserve estimates had risen to 100,000 tU at an average grade of about 4% U. Follow-up evaluations continue, with the feasibility study and EIS to be completed in 1992.

Minatco’s Wolly property, adjacent to Rabbit Lake, hosts

the McClean-Jeb-Sue deposits, which are minable by a combination of underground and open pit methods. Exploration and development work continues at Wolly, and Minatco has completed an EIS in preparation for a production decision. Given favorable markets and timely environmental approvals, construction could start in 1993, with full production by mid-1995. In July, 1990, Urangesellschaft Canada requested that the EARP review of its Kiggavik project in the Northwest Territories be delayed indefinitely. Continuation of the project may also be affected by recommendations of the Nunavut Planning Commission, an independent body established to develop a land use plan for the Inuit land claims settlement area.

— R.T. Whillans is with the Energy Sector of Energy, Mines and Resources Canada.