Uranium mining is fast becoming a prairie operation

Saskatchewan is Canada’s premier, but not the country’s only, uranium producing province. By 1993, however, the prairie province will likely be responsible for almost all of the nation’s uranium output.

Canada, which produces about 30% of the non-communist world’s uranium, for years has supplied buyers from mining operations in two provinces, Saskatchewan and Ontario. Last year the split in production was about 65% Saskatchewan — 35% Ontario, but with mine shutdowns in the latter province, that ratio within two years should change to about 95%-5%.

As the German consulting and information services company NUKEM pointed out in a recent monthly report, the six production facilities (four in Ontario) that operated inside the country in 1990 may by 1993 be reduced to four (one in Ontario).

Rio Algom (TSE) closed two of its three Elliot Lake production plants west of Sudbury, Ont., last year and Denison Mines (TSE) will likely have closed its Elliot Lake plant by mid-1992. Rio will continue to honor its long-term contract with provincial utility Ontario Hydro from its Elliot Lake plant. Denison made its decision during a period of low cash prices (in the US$10-per-lb. U3O8 range) and correspondingly high production costs. The company’s Elliot Lake operation, which Denison describes as the largest underground uranium mine in Canada, has turned out uranium oxide for more than 33 years. Until mid-1990, it also produced yttrium oxide in concentrates. Denison also has a second long-term supply contract with Tokyo Electric Power Co. and, according to NUKEM, Denison plans to continue meeting that commitment through its joint-venture Freeport uranium operation in the U.S. NUKEM reported that 1990 was quite a year for uranium, with the elimination of distinct East and West trading blocks and the establishment of a real global market. The total world spot market volume last year was about double the record level of 1989, it said, and producers purchased more uranium in 1990 than they had during all of the 5-year period 1985-89.

“Producers, buying low-priced uranium rather than using their own higher-cost output to fill contract commitments, show how much the market has changed,” NUKEM reported. “Production costs or original purchase prices are no longer relevant in terms of the spot market price.”

Spot prices for uranium in the United States in the late 1970s topped US$43 per lb., a level not achieved since.

One of the world’s largest uranium producers, Cameco of Saskatoon, Sask., recently informed shareholders in a quarterly report that while it “has not sold uranium in the spot market since 1988, negotiations and prices in long-term contracts are influenced by the prevailing spot price.” In Canada, with the swing in the national production ratio to the west, it is understandable that Saskatchewan has become the focus of exploration for the mineral, which is used around the globe as a fuel for nuclear power plants. The Athabasca Basin area of the northern part of the province continues to yield new finds; Cameco is reported to control about half of the basin’s 350,000 tons of reserves uncovered to date.

NUEXCO, a U.S. trader and consultant, wrote in a monthly report that Cameco drilled less than 50 holes in 1990 but proved up a 200-million-lb. deposit averaging 4% U3O2 at McArthur River, about 40 miles northeast of the company’s Key Lake mining and milling operation. Cameco, owned by the Saskatchewan and federal governments, is the project operator. Elsewhere in northern Saskatchewan, Cameco is helping to prepare the ambitious Cigar Lake project for production. Cameco has voting control in the joint-venture company set up to operate Cigar Lake, which, with reserves of 385 million lb. grading slightly better than 9%, is called the world’s richest known uranium deposit.

The promising Midwest project, in which Denison has a 45% interest, in the Athabasca area was allowed to flood last year following completion of a test mining program a year earlier. Other companies with interests in Midwest are Uranerz Exploration and Mining, Bow Valley Industries (TSE), PNC Exploration (Canada) and Numac Oil & Gas.

The Wolly project (known formerly as the McClean Lake project) in northern Saskatchewan is undergoing feasibility. Owner (having bought out its partners) of Wolly is Minatco, a subsidiary of the French company Total. In the Northwest Territories, close to the western shore of Hudson Bay, three firms were named by NUEXCO as being active last year in the Thelon Basin: German-owned Urangesellschaft Canada, PNC and Power Resources (known formerly as CEGB Exploration, of the United Kingdom). Development of

Urangesellschaft’s Kiggavik project, with reserves of 45 million lb. and open-pit potential, has been stalled by market conditions and aboriginal land claims.

A recent report by research firm Roskill of London focused on the changing nature of the world uranium industry. Future demand for electricity, and the future role of nuclear power in electricity generation, Roskill said, will determine uranium demand.