Friday, February 22, 2008

Just Below the Surface

Two weeks ago in the February 15th post “Ther’s Ore in Them Thar Hills,” I mentioned an emerging uranium mining company, Powertech Uranium Corp. (PWURF: OTC/PK). Powertech plans to tap uranium deposits in Colorado, South Dakota and Wyoming with in situ mining technologies (In Situ Recovery or ISR).

Powertech is not alone in using ISR. The technique has been used widely in Australia and other regions, where it is known as In Situ Leach (ISL) or solution mining. The technique involves leaving the earth in place and recovering the mineral deposits by injecting water into the deposit areas and then pumping the mineral laden solution back to the surface for recovery. The process has appeal because there is little surface disturbance, no tailing and no waste rock.

According, to the U.S. Energy Information Administration (EIA) total production capacity of ISR plants in the U.S. is about 7,500 tons. The EIA indicates only one is producing, the Vasquez plant near Lewisville, Texas owned by Uranium Resources, Inc. (URIX: OTC/PK). Cameco Corp. (CCJ: NYSE) subsidiaries Power Resources and Crow Butte Resources and Mestena Uranium LLC (private) have other plants that are in development or are operational but not yet producing. ISR operations run by Areva NC, the French governments nuclear conglomerate, are mostly inactive or in reclamation. There are other ISR plants around the world such as Urunium One’s (UUU: TSX) Akdala plant in Kasakhstan and Heathgate Resources’ (private) Beverly plant in Australia.

According to the World Nuclear Association, ISR contributes about 26% of the world’s uranium production. Another 24% comes from open put mines. The serious uranium sources are underground mines that provide 41% of uranium supplies. Underground, Cameco is the king!

Cameco is the largest uranium producer in the world with an estimated 21% of the world’s mined uranium supply or approximately 8,300 tons of the 39,400 tons produced worldwide. Most of Cameco’s production - 18% of the world’s supply - comes from the McArthur River mine in Saskachewan, Canada. This is an underground project, which is very like other hard-rock mining operations. The ore deposits are accessed by constructing “workings” and then the ore is extracted by blasting it away from the other rock strata. Then the ore is sent to a processing mill so the uranium metal can be extracted. Typical underground uranium mine sites range from ten to twenty-five acres.

BHP Billiton (BHP: NYSE) is also in on the uranium rush with a hybrid underground operation at its Olympic Dam Operation in Australia. BHP accounts for 7% of the world’s uranium production.

There is some open-pit mining, which is essentially the same operation as underground methods - without the shafts. “Out in the open” the leader is Rio Tinto (RTP: NYSE) with its Ranger and Rossing mines in Australia. France’s Areva has several open put uranium mines: Arlit mine in Niger, and McClean Lake in Canada among others.

There are a few other producers. Paladin Energy Limited (PDN: TSX and ASX) has operations in Australia and Africa. Mega Uranium Ltd. (MGA: NYSE) has operations on five continents. Denison Mines Corp. (DNN: AMEX) has seven active uranium mines in the U.S. and Canada. UEX Corp. (UEX: TSX), a partnership of Cameco and Pioneer Metals Corp., has dozen ventures in Canada. Aurora Energy Resources, Inc. (AXU: TSX) is also focused on properties in Canada, but has not yet started production. Energy Resources of Australia Ltd. (ERA: ASX), which owned 68% by the Rio Tinto group, operates the Ranger open pit mine in Australia.

If you are adding things up here you might note there is a bit of a gap in our production contribution figures - they do not quite add to 100%. That is because, in addition to France’s Areva group, there are three other government-owned uranium mining operations that are among the top producers in the world. Russia’s TVEL Corp. produces 8% of the world supply, including the Kraznokamensk underground mine. KazAtomProm in Kazakhstan supplies another 9% and Uzbekistan’s Navoi Mining and Metallurgy accounts for 6% of the world production.

In the next post, we look at what you get when buying shares in these “hot” stocks.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

No comments: