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