| Nowhere was it more evident of battle lines | | | | which is the uranium grade at the |
| being drawn between suppliers and end users | | | | commencement of the solution mining. Newton |
| in the nuclear fuel sector than at the Platts | | | | pointed out that in the United States head |
| Second Annual Nuclear Fuel Strategies | | | | grades are about 100 parts per million (ppm) |
| conference on September 26th. Since April, | | | | of uranium. At Crowe Butte (Nebraska), Power |
| various utility consultants and fuel brokers | | | | Resources is getting 43 ppm.By comparison, |
| have routinely contacted StockInterview to | | | | the head grades in Kazakhstan reach 250ppm |
| 'talk down' the uranium price. Frequent is | | | | and are averaging over 200ppm. While the |
| the mantra about how speculators and hedge | | | | deposits are deeper, down to 1500 feet, |
| funds are driving the spot uranium price | | | | Cameco will be drilling about five times |
| higher. But spot uranium and long-term | | | | fewer wells because of those exemplary ppms. |
| contracts march higher each month. While | | | | The cost per well will be more expensive, but |
| utilities appear complacent, there is now an | | | | there will be less wells to drill. Of course, |
| underlying panic lurking beneath the | | | | there are shortages of drill rigs, which adds |
| surface.About an hour after UxC announced | | | | another frustrating twist to mining in this |
| Tuesday's weekly spot price hike - now to $54 | | | | country.To mine these deposits by the in situ |
| pound, Rajiv Kundalkar, Vice President of | | | | leach method, Cameco/Power will need about 40 |
| Nuclear Engineering for Florida Power and | | | | kilograms of sulphuric acid to produce one |
| Light took the podium in the Pavilion Room of | | | | kilogram of uranium. Newton bluntly |
| the Ronald Reagan Building in Washington, | | | | announced, "To mine 100 metric tons of |
| D.C. to pound the table as to why uranium | | | | uranium will require 40 million kilograms of |
| prices should take a dive. As Mr. Kundalkar | | | | sulphuric acid." He explained this annually |
| progressed through his presentation, many in | | | | amounted to 2200 truckloads of sulphuric acid |
| the audience wondered if he was the | | | | - about six truckloads per day. Every day |
| industry's latest sacrificial lamb. Kundalkar | | | | year 'round.From where will Cameco get this |
| galloped out of the presentation room within | | | | vast amount of sulphuric acid? Newton |
| moments after he answered the final | | | | explained there were literally mountains of |
| question.Clearly Kundalkar's audience | | | | sulphur waste remaining from the high-sulfur |
| disagreed with his conclusions of a uranium | | | | Caspian oil production. From there one could |
| price downturn, sometime in 2007. Questioning | | | | obtain sulphuric acid. He acknowledged |
| after his presentation could be summarized in | | | | Cameco, Areva or the Kazakhs would first need |
| one word: brutal. It was because Kundalkar | | | | to build several sulphuric acid plants. His |
| argued the uranium price was artificially | | | | best-case scenario for such a plant would be |
| high due to a perception of tight supply.He | | | | in five years. On the worst case scenario, |
| compared uranium's spectacular price rise | | | | Fletcher skirted the issue, explaining the |
| over the past six years to the jump in | | | | Kazaks needed to streamline their |
| palladium prices. Kundalkar concluded | | | | operations.And therein one finds the |
| palladium rose and fell, and so should | | | | headaches. The infrastructure is lacking. New |
| uranium. He particularly emphasized the | | | | roads will have to be built to replace the |
| collapse of palladium mining stocks, which | | | | 'camel trails' and truck the material from |
| fell after the underlying commodity sunk | | | | the mining operation to the processing |
| lower.He explained there was an abundant | | | | facility. The Kazaks aren't quite ready for |
| supply of uranium from Canada, Australia and | | | | all those trucks. Newton explained the |
| Kazakhstan, both now and especially in the | | | | arrival of traffic jams in this backward |
| coming years. Kundalkar pointed out that | | | | nation, adding an anecdote about a recent |
| delays in the licensing of new reactors in | | | | traffic accident resulting in a fatality. |
| China and India would suppress the demand for | | | | While we take these for granted, it is an |
| uranium. He added that Cigar Lake, Olympic | | | | unusual development in the backcountry areas |
| Dam and Kazakhstan would provide sufficient | | | | of Kazakhstan where animals are the primary |
| uranium to meet the Western World | | | | transportation mode. Yet another headache: |
| requirements.Rather than blink at the | | | | new transmission lines will also be required |
| short-term rise in uranium, Kundalkar | | | | to generate the electricity to run the |
| explained away any concern about the soaring | | | | operations.Newton discussed the weather. |
| fuel costs by announcing Florida Power and | | | | Similar to northern Wyoming, he called the |
| Light was pursuing long term strategies and | | | | weather "a fast changing climate." He showed |
| cost-control initiatives. One such plan was | | | | his audience a slide of tall snow drifts, |
| to make reactors more efficient. On the | | | | explaining the snowstorm produced this much |
| initiative that his plants would become more | | | | snow in 45 minutes. In the winter, Cameco has |
| efficient, one must wonder what maximum | | | | learned to keep bulldozers nearby to dig out |
| capacity those reactors can endure. Ten years | | | | of the heavy snowfall. In the summer, roads |
| ago, nuclear power plants ran 75 percent | | | | need rebuilt from the flooding.A more serious |
| capacity. Presently, they are being pushed to | | | | problem is the labor force. Newton showed a |
| their limits above 90 percent. Kundalkar was | | | | slide of a cozy Kazak peasant family during |
| not forthcoming in any details about how his | | | | his presentation. After he spoke, we talked |
| utility would institute cost-control | | | | with him, asking about the labor force. |
| initiatives.After we called him on his three | | | | Newton explained that it would be peasants |
| main sources of supply, asking Kundalkar if | | | | such as the one in the slide that would |
| he had measured the risk variables inherent | | | | provide the bulk of labor for Cameco's Kazak |
| with those regions, he acknowledged he had | | | | operations. Again, during his presentation he |
| done so. Instead, we lean toward believing he | | | | referred to most of the country as having |
| glibly digested industry reports, as far too | | | | one's foot back in the eighteenth or |
| many have done, but failed to investigate | | | | nineteenth centuries. We dared not ask him if |
| further or probe deeper about supply risks. | | | | they still played polo with the heads of |
| Another questioned Kundalkar if Florida Power | | | | their enemies as they did in the movie, "The |
| and Light had participated in the recent | | | | Man Who Would Be King."What will materialize |
| Department of Energy uranium sale. The | | | | when the Kazak labor force discovers they |
| utility had not. He admitted he thought the | | | | need to share in the uranium profiteering? |
| price was too high. Instead, Cameco Corp | | | | Chilean miners struck in August at BHP's |
| bought the uranium and quickly resold some of | | | | Escondida copper mine, the world's largest, |
| it for a profit.Bad News for Uranium BearsHad | | | | this past August, citing the steep rise in |
| he not scrambled away from the conference, | | | | copper prices. BHP hopes to avert another |
| Kundalkar might have been shocked by the | | | | strike at the nearby Spence project. Teck |
| disclosures in the afternoon presentations | | | | Cominco averted a strike Sunday night at the |
| which followed him. Had Kundalkar presented | | | | Highland Valley copper mine in British |
| his thesis to a less savvy audience, he might | | | | Columbia by reaching a tentative contract |
| have received something more than a polite | | | | with the miner's union. As utilities and |
| applause when he stepped down. From the | | | | other uranium bears explain that uranium will |
| disgruntled audience, one long-time industry | | | | become more abundant as more companies bring |
| consultant asked Kundalkar point blank: Have | | | | on more projects, few are factoring in the |
| you heard of peak oil?Unwitting denial about | | | | rising labor costs, the variables inherent |
| supply risks has its consequences. The next | | | | with developing new infrastructure and the |
| step down the descending staircase for | | | | likelihood of delays. Environmentalists have |
| complacent U.S. utilities came from Jim | | | | also begun rearing their heads over various |
| Ferland, head of Louisiana Energy Services | | | | projects. Few are factoring in this risk. The |
| (LES). This was Ferland's final appearance on | | | | more active these anti-nuclear groups become, |
| behalf of LES as he has since taken a VP job | | | | the greater they abet the rising uranium |
| with Westinghouse. In his parting speech, | | | | price.The Milk AnecdoteBusiness in Kazakhstan |
| Ferland announced an anti-nuclear lobbying | | | | is not what one finds in the West. Newton |
| group had filed an appeal against LES for | | | | admitted during his presentation that the |
| their NRC license in the District of Columbia | | | | Kazaks don't report their uranium production |
| Circuit Court. He warned there was a | | | | as other countries do. For example, he |
| potential risk of a stay or worse. By worse, | | | | discovered from a border guard that |
| Ferland inferred the uranium enrichment plant | | | | Kazakhstan had been shipping about 50 metric |
| might never operate at all. The consequence | | | | tons of uranium oxide to China every month |
| of 'worse' hung like a dark cloud in the | | | | for several months. But, nothing of that had |
| room.Should the appeal be dismissed, Ferland | | | | been reported in the media or to |
| cautioned about labor availability in eastern | | | | organizations, such as the World Nuclear |
| New Mexico. Already, the company is worrying | | | | Association, which track mining production |
| about higher labor costs and is expecting to | | | | for each country.One can not be certain of |
| go over budget on both plant construction and | | | | what to believe when KazAtomProm issues a |
| operations. LES may have difficulty finding | | | | forecast. Yet, many utilities, such as |
| an ample supply of electrical workers and | | | | Florida Power and Light, swallow these |
| aluminum welders necessary for building the | | | | predictions without a second thought. |
| National Enrichment Facility. He announced | | | | Questioned about Kazak production forecasts, |
| that getting the NRC license was relatively | | | | Newton responded there were those who had |
| easy compared to what the company would go | | | | "big thoughts." In the presentation which |
| through to construct the enrichment | | | | followed, by Patricia Mohr, Vice President |
| plant.U.S. utilities are counting upon the | | | | for Economics at Canada's Scotiabank, she |
| new uranium enrichment center for the SWU to | | | | said while the Kazaks have extremely |
| power their reactors. Will it arrive on time? | | | | ambitious plans, their timeline was |
| No one can say right now, but Ferland stuck | | | | "unrealistic."Newton deftly provided the |
| to LES projections of the first SWU being | | | | "milk anecdote" for his audience while |
| delivered by fourth quarter 2008 and three | | | | avoiding a direct answer to the question |
| million SWU generated in late 2012 to 2013. | | | | about KazAtomProm's robust production |
| An expansion decision won't be made until | | | | forecasts. He explained that this reminded |
| 2009. But then again, Ferland will be at | | | | him of the old Soviet Union, when a top |
| Westinghouse in Pittsburgh, not in New Mexico | | | | Communist party official met with the general |
| where LES will be sweating to build that | | | | manager of a Russian dairy cooperative. The |
| facility.More Bad News if Utilities Believe | | | | party official asked the manager if he could |
| Kazak ProjectionsIn what would qualify as the | | | | quadruple last year's milk production. Of |
| most sincere presentation of the day, Power | | | | course, the manager promised he would, vowing |
| Resources Chief Executive Fletcher Newton | | | | that he would do this for the Politburo and |
| discussed the upside and downside of uranium | | | | so forth. Then, the official asked the |
| mining in Kazakhstan. It is both a tribute to | | | | manager if he could increase production by |
| the crystal clear transparency of Cameco and | | | | eight times. The manager announced it could |
| their subsidiary, Power Resources, in | | | | be done and that he would do it for the glory |
| providing us the truth about this difficult | | | | of the Fatherland. Finally, the party |
| Central Asian country. Promising as | | | | official asked the manager if he could |
| Kazakhstan sounds on paper, Fletcher Newton | | | | increase milk production by 16 times over the |
| concluded during his presentation that mining | | | | previous year. Exasperated, the manager |
| in this country would be challenging. More | | | | declared that he would achieve this target, |
| specifically, he said, "There is lots of | | | | saying, "I can do it, but the milk is going |
| uranium out there, but getting it will be a | | | | to look a lot like water."Perhaps this |
| challenge."Newton described the Inkai | | | | anecdote will help Florida Power and other |
| solution mining project in Kazakhstan, of | | | | utilities become more cautious when readily |
| which one section is 600 feet long by 300 | | | | factoring in Kazak uranium production into |
| feet wide. It will be the largest solution | | | | their fuel supply expectations.James Finch |
| mining project in the world - producing about | | | | contributes to and other publications. Visit |
| 2000 tons annually, roughly 5 million pounds. | | | | to read all of his archived articles on |
| The deposit has extraordinary head grades, | | | | uranium and the nuclear fuel cycle. |