Australia could be looking at a new multibillion-dollar export market as China looks for a steady supply of uranium, which it needs to underpin a massive expansion in its nuclear power industry. Chinese officials this week announced they would start building five extra power plants this year on top of the 24 already under construction and 11 already in operation. Australia could add A$17 billion ($12 billion) to gross domestic product by 2030 by maximizing suppliers to meet rising global demand for nuclear energy, the Uranium Association said last month.
The acceleration of China’s nuclear programme stems from mounting concerns about climate change, energy security and the more immediate task of kick-starting the economy as part of the Government’s 4 trillion yuan stimulus plan.
Vice-Premier Zhang Dejiang announced at a Beijing conference this week that China would “accelerate the development of nuclear power and increase the ratio of clean energies like nuclear power”.
Analysts say the country’s dearth of uranium is “the tiger in the road” to fulfilling its nuclear power ambitions and that Australia is the most obvious solution.
“There are not enough uranium resources in China to support the aggressive nuclear power development plan for the next 20-30 years,” said Professor Liu Deshun, of China’s Institute of Nuclear and New Energy Technology. “Australia has the uranium resources that could be exported and in China we have the demand.”
Chinese companies are lining up to invest directly in Australian uranium mining and exploration companies and have begun signing long-term supply contracts with Australia’s established mining companies, betting on the expansion plans receiving Government approval.
Australian Minister for Resources, Martin Ferguson, indicated the Federal Government was unlikely to stand in the way, subject to environmental and investment tests. ERA (Energy Resources Australia), a Rio Tinto (RTP) subsidiary, is expected to say more about a new plant to extract uranium from low-grade ore and an exploration pit for the expansion of its Ranger Mine in Kakadu, which already produces 10% of the world’s uranium.
Next week BHP Billiton (NYSE:BHP) will move a step closer to a massive expansion of its Olympic Dam mine in South Australia, the world’s biggest proven uranium reserve , with the release of an environmental impact assessment. Extending into the Yeelirrie deposit in Western Australia, which is estimated to have a 10 to 12-year lifespan and a resource of 35,000 tonnes of uranium, will put BHP at the head of the pack when it comes to talks with the Chinese buyers. This is a result of the WA government lifting a six year ban on uranium extraction in the state.
Chinese analysts have said the country’s nuclear power expansion plans will not succeed unless China secures the necessary uranium supplies. Australian analysts say the local mine expansions are unlikely to proceed without the certainty provided by long-term supply contracts to China.
“The two go hand in hand,” said John Wilson, uranium analyst at Resource Capital Research.
Uranium was trading at $41 per lb Monday and now analysts are benchmarking the yellow cake as being able to reach the $70 per lb mark in the near future.
Disclosure: Author holds no positions in any stocks mentioned.