Uranium suppliers respond to production cuts

Thursday, 7 December 2017

Recent announcements of production cuts by the world's two biggest uranium producers - Cameco and KazAtomProm - have been greeted as positive developments by mining companies.

Kazakh uranium producer NAC KazAtomProm announced on 4 December that it will reduce planned uranium production by 20% for a period of three years beginning in January 2018. The cuts are to better align output with demand, the company said. This followed Cameco's 8 November announcement of a 10-month temporary suspension of production from the McArthur River mining and Key Lake milling operations in northern Saskatchewan by the end of January "due to continued uranium price weakness".

Kazakhstan has 12% of the world's uranium resources and has been the world's leading uranium producer since 2009. Its 2015 production of 24,560 tU accounted for 39% of world production. The McArthur River and Key Lake operations together produced 11.1 million pounds of uranium (4270 tU) in the first nine months of 2017, with Cameco's share being 7.8 million pounds. Cameco is the operator of both the McArthur River mine and the Key Lake mill that processes all the ore from McArthur River, and owns 70% of McArthur River and 83% of Key Lake. Areva Resources Canada Inc. owns the remainder.

The uranium market has long been acknowledged to be in a state of oversupply, with material entering the market from commercial and government inventory, byproduct production and enrichment plant underfeeding, and producers largely shielded from falling prices by long-term contracts made when prices were higher. Many of these contracts are now coming to an end.

Mike Young, CEO of Australia's Vimy Resources, commended KazAtomProm and Cameco for their announcements, which he said indicated rapidly changing dynamics in the supply side of uranium in response to unsustainably low prices. "The industry is entering a period of re-adjustment as the disconnect between utilities and producers begins to play out," he said. In response to the announcements, Vimy has reviewed, and revised upwards, the uranium price and foreign exchange assumptions used in the definitive feasibility study (DFS) it is currently preparing for the Mulga Rock project in Western Australia. The study is now scheduled for release early in the second quarter of 2018, he said.

Positive news

Colorado-based Western Uranium Corporation described KazAtomProm's announcement as positive news. The company said that Cameco and KazAtomProm's announcements, taken together with Honeywells' 20 November announcement of a suspension of operations at the Metropolis uranium conversion facility, would effectively remove about 37 million pounds of uranium, on aggregate, from world supply in 2018. "Consequently, the aggregate effect of these production cuts, if implemented as announced, will eliminate a large portion of oversupply," the company said.

Brandon Munro, CEO of Bannerman Resources which is developing the Etango uranium project in Namibia, said KazAtomProm and Cameco's announcements alone would remove more than 25 million pounds of uranium from 2018 supply. "This is expected to put the uranium market into deficit, which follows 11 consecutive years of surplus that has driven prices to fundamentally unsustainable levels," he said. "Next year promises to be very exciting for our industry," he added.

The company is currently carrying out test work on uranium-bearing solutions from Etango using a variety of nano-filtration membranes, the first phase of which has now been completed. Early indications from the study are positive, the company said yesterday. Full results of the study are expected early next year, and confirmed cost savings will be incorporated into Etango's DFS, it said.

Commenting on Cameco's announcement in November and ahead of KazAtomProm's announcement, Steve Antony, CEO of US uranium producer Energy Fuels, said further production cuts were to be expected. "It is no secret that uranium prices have been depressed in recent years, mainly due to persistent oversupply. The uranium market has seen similar dynamics in the past. Low prices caused production to drop significantly, setting the stage for the next price recovery. We believe that history might be repeating. The bottom line is that today’s prices do not incentivize current production - much less the new production we know the World will need in the future. Therefore, we would not be surprised to see additional production cuts announced by other producers in the coming months. A healthy uranium market will benefit miners, utilities, and consumers. No one knows when this market will ultimately recover. But, the things that need to happen are happening now," he said. 

Researched and written
by World Nuclear News