Brazil to open up uranium sector?

Monterrey, Mexico — Hidden under the trees of Brazil’s northeastern Sertao hinterland lies one of the world’s biggest uranium reserves, the Santa Quiteria deposit, still undisturbed three decades after its discovery.

What to countries with few natural resources might seem unthinkable neglect, for Brazil has been business as usual — as it has long failed to translate its uranium oxide into nuclear power despite severe energy shortages over the past few years. It has also cordoned off access to the yellowcake for miners in a tangle of legislation that gives the state a monopoly on its extraction and processing and bans exports.

But with the approval late last year of the construction of a third nuclear reactor, Angra 3, slated for operation in 2014, Brazil’s uranium outlook is changing, with big uranium production plans. The country’s miners Vale (RIO-N) and MMX Mineracao e Metalicos (XMM-T, MMXMY-O) are lobbying to be allowed to mine the country’s reserves and to prospect for more deposits.

Some lawmakers are even talking about opening up the sector to foreign miners. Brazil has inferred uranium resources of some 310,000 tonnes, while miners and geologists believe only a third of Brazil’s uranium reserves have been surveyed.

One big factor in the change in outlook is the price of uranium. At less than US$10 per lb. eight years ago, the silvery metal is trading at around US$93 per lb. today. With world oil prices touching US$100 a barrel, much of the industrialized world is re-evaluating nuclear power. More than 90 nuclear reactors are planned globally over the next eight years and some 220 are projected, according to the World Nuclear Association. Global uranium demand is expected to increase to up to 150,000 tonnes by 2030, compared with 64,000 tonnes last year.

Brazil, Latin America’s biggest economy, is struggling to meet its energy needs with coal and imported natural gas, while plans to flood parts of the Amazon basin to generate hydroelectricity are seen as a major threat to wildlife.

“The environmental discussion in Brazil about nuclear power has been supplanted by worries about global warming,” says Tomas Figueiredo, a lawmaker for the opposition Brazilian Social Democracy Party (PSDB). “It’s proven that, with all the necessary controls, nuclear power can be one of the world’s cleanest energy sources.”

Brazil, which has the potential to be the world’s fifth-largest uranium producer, only mines uranium today from one source, the Caetite pit in the northeastern state of Bahia. Caetite has an annual output of 400 tonnes that supplies Brazil’s two nuclear reactors, Angra 1 and 2. Brazil’s plans involve doubling annual uranium output at Caetite, and developing Santa Quiteria in northeastern Ceara state into a major mine.

Santa Quiteria, also known as Itataia, has reserves of 142.5 tonnes of phosphate-associated uranium and could produce 800 tonnes of uranium oxide a year in 2011 and 1,200 tonnes annually later.

“Although it is the country’s top uranium reserve, its economic feasibility depends on the exploration of the associated phosphate,” says a spokesman for state-run nuclear mining and fuel company Industrias Nucleares do Brasil (INB).

While Brazil is not yet ready to hand over all uranium extraction to private miners, Santa Quiteria’s phosphates mean the Brazilian government is considering granting a contract that would see another party mine the phosphates, separate them from the uranium, and hand over the yellowcake to INB.

According to sources close to INB, three Brazilian companies are vying for that contract: Brazil’s biggest miner Vale, Bunge Fertilizantes and Mineracao Galvani. The winning bidder would mine some 120,000 tonnes of phosphates a year as well as the 800 tonnes of uranium oxide, with an investment of US$110 million. The contract for Vale would mean it could add the phosphate output to its growing South American mining business, which includes the Bayovar mine in northern Peru.

“The companies that are interested in mining uranium have experience with mining the metal abroad, such as Vale, which is mining uranium in Australia,” says Paulo Camillo Vargas Penna, a director at the Brazilian Mining Institute.

Vale’s president, Roger Agnelli, says the development of nuclear energy in Brazil is an “inevitable trend,” while the International Atomic Energy Agency (IAEA) says the country could have a more ambitious nuclear program. Brazil has an official target of generating 5.7% of its energy from nuclear power in 2030, up from less than 4% today, which IAEA chief Mohamed El-Baradei said was “conservative” during a recent visit to Brazil.

Much of Brazil’s development hinges on new legislation to allow exports, given that Brazil has more uranium in the ground than it needs for even its most ambitious nuclear plans. The INB is in favour of liberalizing exports, especially as neighbouring Chile mulls the nuclear power option.

Miners do have allies in Congress, namely opposition lawmakers who hope to push the issue in February, when the assembly reconvenes after its Christmas break. Some members of Brazil’s mining and energy commission in Congress, with the support of Vale and MMX, want to take things further and end the state monopoly on prospecting for uranium.

“Legislation governing (state-run oil company) Petrobras went through a similar restructuring and today, it is a world-class success,” says lawmaker Ciro Pedrosa.

But sector analysts predict a difficult passage for any new uranium legislation.

“We have municipal elections in Brazil this year, so uranium is not a top issue, although this is certainly the beginning of something very significant,” says Rafael Schechtman, a nuclear engineer at the Brazilian Centre for Infrastructure consultancy.

“I see some difficulties because of the leftist government of President (Luiz Inacio) Lula (da Silva) and a lot of talk about resource nationalism,” he adds.

Still, Schechtman and others are optimistic that the construction of Brazil’s third reactor and plans to enrich more uranium will force the country to develop its uranium potential and allow for exports, because revenue from exports will permit more prospecting, mining and new processing units. Another four to eight nuclear plants are planned over the next 20 years via a government energy plan — barring an environmental backlash.

“With two reactors, it doesn’t make much economic sense to mine uranium on a large scale and enrich it, but with a third reactor or more, it becomes much more feasible,” Schechtman says.

— Based in Monterrey, Mexico, the author is a freelance writer specializing in mining issues.