Nuclear minefield

Booming world prices are behind the decision to approve a fourth uranium mine, writes Michelle Wiese Bockmann
August 31, 2006

Mushrooming prospects: Sxr Uranium One's Greg Cochran surveys the Honeymoon mine site in remote South Australia. Picture: Michelle Wiese Bockmann
IT takes a boneshaking ride over a narrow, dirt access road for Greg Cochran to reach Honeymoon, the nation's next uranium mine. The sxr Uranium One chief has only been in the job for several months and this is one of his few visits to the site, just inside the South Australian border 75km northwest of Broken Hill. From his vantage point atop the mine site's ageing demonstration plant, he points to a barren landscape where all there is to be seen is flat, ochre sand and a carpet of scrubbybushes.
Within 18 months the landscape will be dotted with tiny wells, from where an acid solution will be flushed 120m underground to leach out the uranium below.
SA's outback is the new frontier for uranium and sxr Uranium One has a significant piece of the action. "Within a 50km radius there are five different uranium exploration companies," Cochran says.
Yesterday it was announced that Australia's fourth uranium mine may open as early as 2008 at Honeymoon, with owner sxr Uranium One planning further uranium mines elsewhere in the state.
The ambitious South African-Canadian owned mining company may be establishing the country's smallest mine - producing just 400 tonnes of yellowcake a year - but it's taking a much larger gamble.
Sxr Uranium One is the first company to rely on the ALP's ban on new uranium mines being overturned, freeing up billions of dollars of the energy resource that has been locked underground by the policy.
GLOWING FUTURE
Australia has three operating uranium mines: Ranger in the Northern Territory and Olympic Dam and Beverley in South Australia. A fourth is due to start operation at Honeymoon, SA, in 2008. Australia has the world's largest uranium reserves, with 24 per cent of the total. Production and exports exceed 11,000 tonnes of uranium oxide a year. Uranium is mined in about 20 countries, with Canada meeting one-third of world demand and nearly one-quarter being met by Australia. OWNERS Beverley: Heathgate Resources, an arm of US-based General Atomics Ranger: ERA, an arm of Rio Tinto, Britain-Australia Olympic Dam: BHP Billiton, Australia Honeymoon: Uranium One, South Africa-Canada PRODUCTION (CALENDAR YEAR 2005) Beverley: 11,217 tonnes Ranger: 5910 tonnes Olympic Dam: 4335 tonnes Honeymoon: estimated 400 tonnes RESERVES Beverley: At least 21,000 tonnes Ranger: 42,587 tonnes Olympic Dam: More than 1.5 million tonnes Honeymoon: 2900 tonnes PRICE It has risen dramatically from $US10 a pound (454g) in 2002 to a present spot price of $US48 a pound MARKETS Australia's mines export to the US, Japan, the European Union, South Korea and Canada Source: Uranium Information Centre; Uranium One website.
The ALP ban also binds the states, which are all Labor-held, denying them the right to approve any new mines. In a convenient political twist, however, SA Premier Mike Rann is insisting Honeymoon is not a new mine because some of its permits were approved by the previous Liberal state government.
Yesterday sxr Uranium One's board announced it had approved spending $53 million to develop the site. Work on building a new processing plant will begin by year's end with production scheduled for the first quarter of2008.
"This is a historic day for Australian mining and the uranium industry," Cochran says. The executive vic-president, in charge of operations in Australia and Asia, adds: "We are happy to be located and working in South Australia and we believe that this will be the first of a number of projects that we intend to develop in this state."
The Honeymoon development will start even though all the crucial state government licences have yet to be granted. Its mining and milling licence application was submitted to the Environment Protection Agency in June. The plan outlined procedures to use a contentious, underground acid-leaching extraction process to mine uranium, which pumps radioactive waste into aquifers.
The in-situ leaching method is a cheaper way to mine smaller uranium deposits, and is used at the nearby Beverley mine. Sxr Uranium One plans to build portable plant and equipment that can be transferred to other mine sites after the Honeymoon site is mined out, in about six years.
Rann has led a national charge to end what has been termed the anachronistic Labor policy on uranium. "Its (Honeymoon's) mining licence was issued in February 2002 (under the former Liberal government) and it can proceed under federal and state law and it can proceed under federal ALP policy," he said yesterday.
Rann was flanked by federal Opposition leader Kim Beazley, who last July called for Labor to end its ban on uranium mines. Beazley was in Adelaide yesterday to campaign in the city's marginal seats and endorsed Rann's view, denying well established party divisions.
"I want to change party policy, as you know, but the simple fact of the matter is that current party policy would contemplate the Honeymoon mine, it would be approved under existing arrangements," Beazley said.
Cochran, a South African expat and former BHP Billiton executive, welcomes what he calls Beazley's courageous decision.
"We are certainly sensitive to the political situation and we acknowledge we've had a lot of support from the South Australian Government," Cochran says. "The approval process to date has been very transparent, world class, and we are watching the great debate within the industry and at both a federal and state level, where people are getting the right information and taking that information into consideration."
Labor's three-mines policy, which has been in place for more than two decades, is likely to be officially declared dead at the party's national convention next April.
In the short term, however, uranium is shaping as a big issue for the party in the race for the national president's job. Rann, pro-uranium and backed by the party's Right, has nominated for the job and is pitted against veteran left-leaning federal Senator John Faulkner, who wants to keep the existing uranium policy.
The national ballot is viewed as a de facto referendum on uranium, with the party's 40,000 eligible members to begin voting to decide the presidency from September 1. Rann and Faulkner are also standing against former leader Simon Crean and NSW state MP Linda Burney for three, 12-month rotating terms.
Beazley has denied uranium will help decide who wins the job as party president. Federal environment spokesman Anthony Albanese disagrees. Albanese says uranium mining is one of the important issues that will be considered when members cast their vote. "I believe very strongly that the push to expand uranium mining is not a push that has come from the grassroots of the ALP," Albanese says. "I think an overwhelming majority of ALP members are very cautious about expanding Australia's involvement in the nuclear fuel cycle."
Sxr Uranium One yesterday pointed to shifting public attitudes on uranium. "The public is asking what are the economic benefits of uranium and why are we only exporting 20 per cent of the world's uranium when we possess 40 per cent of the world's resources," Cochran says. "I believe that there is an economic opportunity for Australia to increase its uranium mining and increase its position in the uranium industry in the world and I think the average Australian would think similarly."
The Honeymoon approval has also churned up debate over enrichment. Sxr Uranium One hasn't ruled out "going down that route" but stresses its immediate focus is on mining only.
And while Rann does not want a nuclear power plant in his state, he has left the door open on the issue of uranium enrichment. "As there are no proposals for an enrichment plant here, no government policy position has been reached," his spokesman said. Federal resources spokesman Martin Ferguson has also signalled enrichment is the next debate the party must face.
Meanwhile, the state minister who will sign off on Honeymoon's final but crucial commercial mining and milling licence is a member of the Left faction. Environment Minister Gail Gago ensured the Government's line was maintained last night in a posture that is likely to be at odds with some of her Left colleagues. "The Honeymoon operation is not a new mine," she says.
Honeymoon is the first uranium mine to open in Australia since the Beverley mine in 1999. Its deposit was discovered in 1972, but mining trials using acid in-situ leaching were cancelled by the state government in 1982.
The plant was mothballed after new mining trials in the late 1990s. A joint federal and state government environmental impact study was approved in November 2001. The then federal environmental minister, Robert Hill, had rejected an earlier study, amid concerns about radioactive waste management.
By the time the Rann Government was elected in 2002, uranium prices were languishing at $US10 a pound. Now soaring demand - which has seen global uranium prices increase four-fold in the past four years and double in the past 12 months - has made many smaller deposits such as Honeymoon commercially viable. The present spot price is $US48 a pound.
Labor's policy to restrict uranium mining was adopted in 1982, allowing three mines: Olympic Dam at Roxby Downs in SA, Ranger in the Northern Territory and Nabarlek, also in the territory and which has since closed.
Labor now holds power across the states where rich uranium deposits are held, and its no-new-mines policy is perceived by industry as one of the last barriers to Australia becoming the world's largest uranium supplier. But the policy has not prevented existing mine expansion: a proposed $7 billion expansion of the BHP Billiton-owned Olympic Dam copper and uranium mine is set to treble output to 15,000 tonnes a year by 2013, making it the world's largest uranium mine.
And as many as a dozen new uranium mines are predicted to open in Australia, according to the Uranium Information Centre, an industry funded lobby group.
In SA, up to a dozen companies have been granted 128 uranium exploration licences, with the state government considering a further 90 applications.
Uranium explorers, including sxr Uranium One, are bullish. "We're very optimistic about the future of uranium mining in Australia," Cochran says.
"We hold about 40 per cent of the world's resource base of uranium but that's on the back of almost zero expansion. As exploration intensifies over the coming years we can only see that our resource base in world terms will possibly increase to 50 per cent."
The other big question for sxr Uranium One is who it can sell its ore to. Forty per cent of its output has already been sold under two contracts with what it calls European and North American clients.
But Cochran sees no ethical objection to selling the estimated $45 million worth of uranium it will mine each year to China, should it get federal approval to do so.
"India would not be on our radar screen at this stage, but we are aware of the discussions that have been going on with our Government and the Chinese Government and should proper agreements be in place we would consider exporting to China."
Michelle Wiese Bockmann is The Australian's political reporter for South Australia. Additional reporting by Verity Edwards.