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Recent Uranium Production and Market Trends

prepared by:


Wm. Paul Robinson
Research Director
Southwest Research and Information Center
P. 0. Box 4524
Albuquerque, NM USA 87106
(505) 262-1862/fax (505) 262-1864

on behalf of:


Saskatchewan Uranium Committee
c/o Box 7724
Saskatoon, Canada S7K 4R4
(306) 934-3030

for presentation to:


Joint Federal Provincial Panel on
Uranium Mining Developments in
Northern Saskatchewan
Saskatoon, Saskatchewan · June 13-14, 1996

This memo has been prepared by Wm. Paul Robinson, Research Director at Southwest Research and Information Center. A resume of my experience is attached this memo. Ibis review was conducted at the request of the Saskatchewan Uranium Committee. Saskatoon, Saskatchewan in May 1996. The memo responds to specific questions identified by Saskatchewan Uranium Committee participants.

I. Q: Why has uranium experienced an increase in its world spot market price?

A: Uranium market conditions have changed dramatically in the past six months as the spot market price for uranium has risen from $12.20 to $16.15/lb between January and April 1996. This new price range results in a near doubling of the price for uranium since 1994 when low price milestones were set for CIS uranium at $7.00 - 7.20/lb and for non-CIS uranium at $9.00-9.60/lb. (EMJ 1996 and EMJ 1995).

A review of recent trade literature provides four major reasons for the 1996 prices changes:

  1. The gap between uranium production and estimated reactor requirements of more than 70 million pounds, the largest in history and associated rapid depletion of overhanging inventories for future reactor use. (EMJ March 1996);
  2. The default of uranium trader Nuexco occurred February 1995 and the associated disruption of historic trading networks centered on liti ation .9 and unfulf'ffled contracts of involving that long-time uranium broker and its primary owner Oren Benton. As a result utilities have sought open market supplies to replace those affected by Nuexco/Benton; (NF May 20, 1996)
  3. Dramatic reduction in uranium supplies and projected supplies, from CIS nations which have been a source of the lowest spot market price uranium, as a result of factors such as generally identified "economic pressures" in the producing country and continuing limits on CIS uranium in European and North American markets-, and (NF May 20, 1996)
  4. Increasing clarity of policy regarding conversion of highly enriched uranium, including US congressional action regarding dismantling of Russian and US weapons for commercial reactors in May 1996 and recognition that significantly lower levels of diluted HEU are likely over the next twenty years. (NF, May 20, 1996)

II. Q: What uranium market conditions have changed since 1993 and why?

A: Conditions in 1993 included a maximum contribution of former CIS and Eastern European uranium to a relatively stagnant demand market. World uranium production reached a new low of 82.3 million pounds in 1994, but rebounded slightly to 85.3 million pounds, approximately 1 million pounds higher than 1993 production. 1993 was a period of declining uranium activity In terms of transactions and overall volume of uranium traded. a trend which bottomed out in 1994. 1993 showed 25 transactions totaling 29.5 million pounds and 1994 showing 86 transactions totaling 29.2 million pounds.

In 1993, uranium production from Eastern European countries appears to have been approximately 24.9 million pounds. exceeded that of Canada, the largest single producing nation, which produced a relatively steady 23.8 million pounds. For comparison, roughly 6 million pounds each was produced in Russia, Kazakhstan and Uzbekistan. (EMJ, March 1995)

Since then, projected production through 1996 from Eastern European and Asian sources has reduced rapidly, though less rapidly than predicted in 1995. Previous, 1995, projections predicted Eastern European production would be down to 16.2 million pounds in 1996, lower than the more recent, 1996, production estimates in from a projected 17.40 million pounds for the current year, 1996. If Asian supplies are stay in the 6.2 - 7.2 million pound range through 1998, Eastern European and Asian production Will have dropped from a 1993 high of approximately 24.9 million pounds to a projected 17.4 million pounds, a drop of greater than 25%. with further reduction projected down to 14.1 million pounds in 1998. If these projections are accurate, Eastern Europe sources will be producing 10.8 million pounds per year less in 1998 than they did in 1993.

The sharp decrease in projected Eastern European uranium supplies is in direct contrast to the rising production forecast of other producers world-wide which were steady-state or rising. . During this period the Australian production forecasts for 1998 ranged from 6.3 million pounds in 1995 to 10.30 million pounds in a 1996 forecast and Canada's 1998 forecast rose from 22.1 million pounds, in 1995, to 35 million pounds, in 1996. African and Other Nations forecasts remained relatively steady with Africa ranging from 18.0 in the 1995 forecast to 17.95 million pounds in 1996 and other producing nations projections for 1998 at 6.2 million pounds in 1995 and 7.2 million pounds in 1995. The US was also projected for a major statistical Increase. though small in world production terms with 1998 project production rising from 3.6 million pounds in 1995 to 5.25 minion pounds in 1996, an increase of nearly 50%. (EMJ March 1995 and EMJ March 1996).

III. Q: Where is current and future uranium production anticipated to come from?

A: 1995 Uranium Production Sites are lead by the large Canadian facilities: (EMJ. 1996a and 1995a)


Name Prod. Rate - Est. 1995 Est. 1994
Canada Key Lake 13.7 (million lb./yr.) 12.5

Rabbit Lake 8.5 7.4

Cluff Lake 3.0 2.1
Russia Krasnokmensk 5.0 6.5
Australia Olympic Dam 3.1 3.1

Ranger
3.2
US White Mesa 2.0 0.0

Miscellaneous 4.2 3.4
Africa Akouta/Niger 5.0 5.0

Arlit/Niger 2.6 2.6

Rossing/Nam 5.0 5.0

Gabon
1.4

Vaal Reefs/S Africa 2.6 2.8

Miscellaneous
1.7
Other Zafarabad/Uzb
2.2

Changes in production could come from the start-up of new producers, shutdown of aging facilities. or new production from existing unused uranium production. Noted developments recently projected include but not limited to (EMJ, 1996):

Name Prod. Rate (Est. 1996) Key Dates
Canada McClean Lake Mm + 6 million lb. /yr. 1997-2009
Cigar Lake +18 2000-2009
Key Lake - existing deposits exhausted -14 ceasing 2000
Key Lake - Production from MacArthur Lake +18 Start-up 2001
Rabbit Lake +3.5 Start-up 1997
Baker Lake +3.2 as soon as 2000
Australia Ranger + 2.0 add'l capacity
Jabiluka/NT +9.0 as soon as 2000
Yeerlirie/WA + 5.0 as soon as 2000
US Additional production capacity available at increased prices
Africa Rossing + 5.0 add'l capacity
Other Miscellaneous available Capacity - Argentina, Brazil, China, India, Mongolia, Pakistan, Portugal, Spain, France + 6.5 production used in 1989
Total potential production + 63.7 million pounds/yr.

These projected production rates will result in significantly great uranium producer income due to the recent rise in spot market price to the $15-16 US/lb range. This increase represents a greater than 50% increase in non-CIS spot market from prices in the $9.20-9.60 range in 1994. This increases means that a 1 million pound per year production rate would be worth $15 million at 1996 prices, versus $10 million at 1994 prices. The 24 million pounds per year anticipated from the McClean Mill would increase in value to $360 million per year at $15/lb. versus $240 million at $10/lb. Similarly the 18 million pounds per year anticipated from the MacArthur Lake deposits would increase in value to $270 million per year at $15/lb versus $180 million per year at $10/lb. No increased costs associated with production or distribution of the uranium from these sites has been identified during the period of this 500/o increase in spot market prices. Specific contracts involving the uranium production from these sites are not specifically set at the spot market level, the projections of uranium value estimates based on spot market prices are presented to demonstrate the enormous income projected, and Increase in value, from these Saskatchewan sites based the available spot market price.

IV. Q: What are the current sources of uranium demand and what are the likely sources in the future?

A: 1996 world uranium consumption projections were relatively steady, projecting demand in the 150 million pound range through the year 2000. The EMJ. 1996 projection shows 153.20 in 1996; a peak of 159.80 million pounds in 1997; 156.90 in 1998, a low of 149.10 In 1999 and 153.40 in 2000. These figures are. approximately 10 million pounds higher than the same publication's projection the previous year, 1995, which showed demand at projected consumption of 143.1 in 1996, 143.8 in 1997 and 149.1 in 1998.

Regarding potential future demand, projected changes in consumption by region showed Westem,Europe as the only significantly gaining region moving from 46.30 million pounds projected consumption in 1996 to 50-30 in 2600 and Eastern Europe as the only significantly dropping region falling from 26.30 in 1996 to 23-00 in 2000. Anticipated demand from growth in the reactor market in eastern Asia is not identified for the period prior to the year 2000.

Little demand in terms of new reactors or weapons use Is projected while a long-term decrease in uranium demand is likely due to reactor shutdowns. US-based projections anticipate essentially flat uranium demand through 2010, followed by a sharp drop off as reactors continue to age and replacements are not being planned. (EMJ, 1996)

As a result of this flat uranium demand picture, uranium supplies are being made up from current or future production supplemented by potential reactor fuel from "diluted" highly enriched uranium. The addition of the Identified potential production of 63.7 million pounds to existing 1995 production of 85 million pounds, for a total of 148.7 provides to leaves little or no room in the market for the addition of other potential sources of uranium, unless listed potential sources are delayed or are never realized.

Additional reactor fuel uranium available from HEU has been projected at as high as 8 million pounds from 1995-2000 and 24 million pounds from 2000-2015. Recent analyses support a potential maximum level for Russian production rate at only 10 million pounds per year. (EMJ, March 1996). These decreased expectations reduce the anticipated supply of diluted HEU by more than 200 million from previously projected levels.

Analysts' anticipate an avalanche of low cost Canadian uranium resulting in Canada increasingly dominating the uranium supply sector at the expense of other producers including those in Central Africa and Eastern Europe. Australia production from new deposits potentially available if the "three mines" policy ceases may provide alternatives Canadian for a portion of the utilities seeking uranium before 2010. This production, as well as increased in-situ leaching and conventional production in the US and other countries will have uranium cost challenges to compete with the new high grade Canadian deposits.

Projections for uranium demand beyond 2010 are not presented in the analyses reviewed, though a sharp drop off in demand is anticipated if no new reactors are ordered. (EMJ, March 1996)

V. Reference List:

EMJ, 1996 Pool, T. C., "Uranium: A Widening Supply-Demand Gap". Engineering and Mining Journal. March 1996

EMJ, 1996a "Annual Project Survey, 1996", EMJ, January 1996

EMJ, 1995 Pool, T. C., "Uranium: A Lackluster Year". Engineering and Mining Journal, March 1995

EMJ. 1995a "Annual Project Survey 1995", EMJ. January 1995

NF, May 20, 1996 "Cameco's Michel Gives Shareholders Bullish Report About Uranium Market", Nuclear Fuel. May 20, 1996

This memo has been prepared by Wm. Paul Robinson, Research Director at Southwest Research and Information Center. A resume of my experience is attached this memo. Ibis review was conducted at the request of the Saskatchewan Uranium Committee. Saskatoon, Saskatchewan in May 1996. The memo responds to specific questions identified by Saskatchewan Uranium Committee participants.



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