Opportunity For Canada In Uranium
The Megatons to Megawatts Russia/USA program is ending in November, after 20 years, and the panic button has been hit. Global powers are scrambling to secure new suppliers for their growing uranium demand. Countries like China, Saudi Arabia, India, England, France and, most importantly, the United States, are now in a strategic race to secure a long-term energy supply for their nuclear reactors.
While some of these countries are allies, make no mistake, they are looking out for numero uno, and no one else. Despite some of these countries producing a small amount of uranium within their own borders, they consume hundreds of times more. We are talking about the largest economies in the world. They are aggressively trying to secure long-term uranium supply contracts. Take, for example, the USA; it produces roughly 9% of the uranium it consumes. It imports nearly 90% of the uranium needed to power its reactors.
With roughy 80 nuclear reactors expected to be built globally in the next 9 years, pressure on uranium supply will continue to increase. The World Nuclear Association expects demand for uranium to increase considerably up to 2030, resulting in a substantial need for additional supplies of nuclear fuel. This is bullish for uranium explorers.
Battle to Control the World Uranium Market
Two of the world's largest uranium producers, both former British colonies, and long-time allies, are going head-to-head in what is becoming an economic battle over the world uranium market. Those two countries are Canada and Australia. If they were to combine forces, the two nations would be more influential over the uranium market than OPEC is for oil. Despite that potential power, they are now competing for uranium export contracts from countries all over the world.
Australia is known to have the world's largest uranium resources, at 31% of the global supply. Canada is the world's second largest uranium producer, next to Kazakhstan; and it is home to the world's highest-grade uranium deposits, and largest uranium mine, located in the prolific Athabasca Basin.
For many years Canada was the world's largest uranium producer, and it will soon retake that status.
Aside from having an abundant supply of uranium, both Canada and Australia use very little of the commodity in comparison to other large economies. In fact, Canada exports roughly 80% of the uranium it produces, while Australia exports virtually every pound it produces. This puts both countries in a unique position, primed to take advantage of the coming uranium boom.
Who Will Win this Battle for Uranium Supremacy?
Given that both countries have an abundant supply of yellowcake, the victor in this battle will be the country whose citizens back uranium production and exploration, whose government is most active in locking-up uranium trade agreements with the world's largest economies, and the country with mines that produce at the cheapest price. In respect to cost of production, both countries are pretty close, so this race will depend mainly on public support and government initiatives.
Canada is a Global Force in the Uranium Industry
When looking for quality, high-grade uranium deposits, with fierce support from the government for development, there may be no better place to mine yellowcake than in the Athabasca Basin, located in northern Saskatchewan and Alberta.
All of Canada's uranium mines are located in Saskatchewan; and every major miner in the industry is operating a mine in the region, or looking to develop one.
Canada, no matter which political party has been in power, be it the Conservatives or Liberals, views uranium and its supported products and services as a vital component to the economy. Government revenues from exporting uranium and related technologies (such as reactors) exceed $500 million annually. The nuclear industry, as of 2009, directly and indirectly employed over 150,000 people, according to the Canadian Nuclear Association. Just from the process of exporting uranium every year, there are nearly 5,000 Canadians employed from it.
In respect to nuclear energy technology, Canada is light years ahead of Australia. Australia has, for the most part, ignored nuclear power and related technologies. There is not one reactor in the country, while approximately 15% of Canada's electricity comes from nuclear. This gives Canada an edge, especially from a technological standpoint. Public support for nuclear power in Canada is strong, while Australia's population is largely against it.
Uranium Production is Deep in the Canadian Economic DNA
There is a long history of Canada and the USA working together in pursuit of meeting America's uranium demand. Just as the USA prepares to secure massive amounts of uranium from Canada today, the same move was made back in the early 1940s for the Manhattan Project. However, back in the 1940s, the USA was not competing for Canada's uranium with the rest of the world (as they are today).
The USA is more dependent on foreign uranium than foreign oil. It will increasingly depend on Canada's uranium production to keep the lights on within its own borders, and avoid another bout of rolling blackouts.
However, Canada has also been shopping its uranium supply around the globe in recent months.
Canada has no qualms with selling its uranium to the USA of course and, from a logistics standpoint, it makes the most sense. However, the Canadian Government has recently learned that to rely solely on America to buy its energy is not the wisest of decisions. Just look at the Keystone XL Pipeline drama as an example.
Knowing that the world is in desperate need for more uranium, given the expansion in nuclear power plants, the Harper Government has been inking some major deals which will have huge benefits for the Athabasca Basin, and its explorers and miners.
India publicly addressed the fact that it was looking to lock-up supplies of uranium (for its growing nuclear reactors) wherever it could find a secure, safe source. Australia's Prime Minister, Tony Abott, immediately chimed in, and rumors began to swirl that the two countries would hold talks. However, it was Canada who beat Australia to the punch, and inked a major uranium export deal with India. Just last month, Canada and India finalized a nuclear cooperation agreement which allows uranium miners, such as Saskatoon-based Cameco Corporation, to export its product to the Asian nation for its energy needs. And with India expected to have 12 new reactors in operation in the next 8 years, this is a huge opportunity. "India has one of the most aggressive growth plans for nuclear energy in the world," said Tim Gitzel, Cameco's president and CEO.
While Australia and India are in talks regarding a uranium deal, nothing has been finalized in respect to commercial negotiations. Had Tony Abbot, the Prime Minister of Australia, been in power for more than a couple months (he is much more pro-mining than the country's previous leader), perhaps they may have beaten Canada to the punch. Regardless, Canada has the upper hand at the moment.
China Up For Grabs
It is no secret that China is an energy-consuming behemoth. The World Nuclear Association (WNA) reported last month that China currently has 17 reactors in operation, with 30 under construction, and more soon to start construction. In respect to China's anticipated nuclear power growth, the WNA reported: "Additional reactors are planned, including some of the world's most advanced, to give a four-fold increase in nuclear capacity to at least 58 GWe by 2020, then possibly200 GWe by2030, and 400 GWe by2050."
So what does Canada do?
In 2012, Canadian Prime Minister Stephen Harper negotiated a new agreement with the Chinese that will increase uranium exports to the country.This deal improved the previous cooperation agreement between the two countries for the peaceful use of nuclear energy through Canadian uranium exports to China.
The Business News Network reported in March of this year that Saskatchewan Premier, Brad Wall stated, "We should be moving uranium into that market very soon," Wall said, in comments to reporters that were recorded by his office. "Basically, every hurdle has been cleared." "The uranium deal is worth $1 billion at current prices, and could lead to mine expansions," Wall said.
Australia has a similar agreement in place with the Chinese. Australia is perhaps more strategically located to ship commodities to China, but that has not stopped Canada from getting a big piece of the action. And, with China and Canada inking major deals for Alberta's oil, there is reason to believe the two countries will continue to grow their business relationship.
Canada aims to be the one stop shop for major economies and their energy needs - be it China, India, the USA, and much of Europe.
Canada's Uranium Heading to Europe
In what has been called the biggest trade agreement for Canada since NAFTA, Stephen Harper and the Canadian government just inked a free trade agreement with Europe this week. The implications of this deal on the uranium sector within Canada, and more specifically the Athabasca Basin, are huge.
The Calgary Herald reported on Tuesday: "Following years of lobbying from Premier Brad Wall, the federal government has agreed to strike down foreign ownership restrictions on uranium mining in its proposed free trade deal with Europe. It opens the door for eager foreign companies like Areva SA and Rio Tinto Ltd. to make much larger investments in Saskatchewan's uranium-rich Athabasca Basin."
The Herald continued, "The investment restrictions have been in place since 1970, when Ottawa introduced the non-residential ownership policy (or NROP). The law prevents foreign companies from owning more than 49% of a uranium mine in Canada, unless they cannot find a Canadian partner. It is a direct result of Cold War-era concerns about nuclear proliferation, and has looked increasingly dated in the years since then. Saskatchewan is the only province with producing uranium mines, so it is the only one affected by the law."
This is a massive deal for the Canadian uranium industry, given that major foreign investors within the Athabasca Basin are European. As well, next to the USA, France is Canada's largest uranium customer.
There is no doubt that Canada and Australia are vying for world uranium export deals. And both nations appear to be making progress.
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