|Uranium production in Kazakhstan as a potential source for covering the world uranium shortage|
Let me thank you for the opportunity to speak to such a highly distinguished audience. The report is about Kazakhstan and its potential in natural uranium production. In my report I am seeking to demonstrate that Kazakhstan can and should be one of the key sources for supplying world nuclear energy with natural uranium.
It is not the first time that I have spoken to the world nuclear community. My previous reports (presented at WNA and WNFM symposiums in 2001, 2002 and 2003) were devoted to global problems of natural uranium market development. And I tried to draw the attention of the world uranium community to three very important and quite evident facts:
Firstly, natural uranium mining capacities cannot satisfy reactor requirements.
Secondly, accumulated uranium inventories will be exhausted sooner or later.
Thirdly, the spot price does not reflect the actual problems and, on the contrary, is capable of misleading all of us about the urgency of investments to be made in the development of new mining facilities.
Judging by these facts, the conclusion is evident: one day nuclear power plants will face a natural uranium shortage and it is not necessary to be a prophet to foresee this. It is clear today that the key to the solution of the major problems of the uranium market lies with the development of the potential of the uranium producers.
What are we experiencing in the natural uranium market at this time? Once the price has gone up, the inventories holders have halted their sales, and the price goes up a bit more. Michael Connor called this situation "The Perfect Storm". Maybe some people are pleased to think that the situation in the natural uranium market is a mere coincidence of many factors. But who knows what we will have after the storm? Brightly shining sun? Or maybe the storm is caused only by anticipations of uranium shortages? And maybe the real "storm", based on the actual uranium shortages, has not yet come? I am afraid that "the real storm" may be ended with the Ice Age!
To answer the above question we estimated the capacities of all major uranium mining centres. Based on the published materials and conversations with our colleagues we tried to estimate the mining volumes which are possible under the most favorable conditions. This estimate is provided in the Table 1.
Canada: It is expected that under the high price scenario, all Canadian mines, including Cigar Lake ready for operation, will be optimally operating. We assume that Cigar Lake will start providing output in 2007. According to our model, production at McArthur River and Cigar Lake is coming up to the maximum licensed output.
Australia: The Ranger deposit can produce 3800 tonnes, its reserves would be exhausted by 2010, and this deposit should be smoothly replaced by putting Jabiluka deposit into operation. The Olympic Dam mine will achieve an annual output of 6900 tonnes of U by 2010. This is the maximum provided by the operational license. ISL Australian deposits, especially Beverley, are not in a position to produce over 1000 tonnes of uranium per year due to the lack of necessary reserves.
Production in Russia would most likely not exceed 2500 tonnes, as well-known Russian deposits would not be able to replace the reduction of output at the biggest Russian operating uranium deposit Streltsovskoye.
Ukraine: Production in Ukraine will most likely cease by 2010.
Uranium production in Niger is relatively high-cost and would not allow the expansion of the production capacities. Increase of the output above 2700 tonnes in Niger is not expected in near future.
Namibia: It was announced that production at the Rossing deposit would be shut down in 2007.
Currently, the total production of other countries (Czech Republic, Hungary, Romania, Argentine, Brazil, and Pakistan) is 1840 tonnes. Having moderate reserves, by 2010 they will keep their production at a level of 1900 tonnes at best.
Based on the above assumptions we conclude that mining of natural uranium can be increased more than 1.3 times by 2010. But will it be enough to meet the requirements of nuclear power plants?
In the Table 2 we compare our forecast of uranium production, which is higher than officially available ones, and other possible resources, with IAEA's projections of requirements in uranium.
It follows from this data that in 2010 the market would receive 5700 tonnes less uranium than reactor requirements in the same year. Total uranium shortage from 2004 to 2010 will be about 16 000 tonnes of uranium.
The disappointing conclusion follows that, if the efforts are not made, then "the perfect storm" based on expectations of uranium shortage can grow into a real storm with nuclear power plants facing an actual natural uranium shortage.
In my previous speeches I emphasized that I am not pleased by the prospect of a uranium shortage situation. Mining enterprises do not have any other consumers but nuclear power plants and the problems of nuclear power plants will finally become our problems as well. Producers will have to increase their production, because otherwise, in order to balance out demand and supply, the nuclear power plants will have to reduce power generation, and that is not what we want.
Let us now look at the potential of Kazakhstan, since I believe that this potential is enough to cover the oncoming shortage. Figure 1
Kazakhstan is situated in the centre of Eurasian continent and it has an area of more than 2.7 million square kilometers. It is among the ten richest countries in the world in natural resources.
Kazakhstan is the third country in the world for uranium production volumes, and Kazatomprom is the fourth largest uranium producer in the world.
At present, the economy of Kazakhstan displays growth in production, increase in foreign investments and currency reserves. The positive economic development of Kazakhstan is closely tied to the steady banking system with its deposit insurance mechanisms, effective structural reforms, fiscal policy and improved budget planning quality. The National Fund was created with a basic function to decrease the Kazakh economic dependence on the impact of negative external factors caused by variations of the world prices for raw material resources.
By the end of 2004, the total public debt is estimated to remain at a generally acceptable level of 12.3% of GDP, and within the next several years to continue to be decreased by 1.5-2.0% of GDP annually. At the same time, macroeconomic stabilization will go on, and in 2004 the price increase will comprise 6.4% and the economy growth rate will be 8.8%.
The fact that in May 2004 the International Rating Agency "Standard & Poor's" awarded Kazakhstan the second rating of investment class is confirmation of the country's strengthening financial position, the improvement of management and business spheres and the acceleration of structural reforms. In September 2002, the International Rating Agency "Moody's Investors Service" increased the sovereign rating of Kazakhstan up to the investment level. Kazakhstan is the first State among CIS countries to obtain investment rating from two international rating agencies. Table 3 Figure 2
Let us now have a look at Kazatomprom and its plan for uranium mining.
Approximately one-fifth of world uranium reserves are deposited in Kazakhstan. Total resources and reserves of uranium are over 1.5 million tonnes, over 1.1 million tonnes of which can be mined by the in-situ leaching method. Figure 3
State owned National Nuclear Company KAZATOMPROM is the sole organization for uranium mining, reprocessing, export and import operations on the territory of the Republic of Kazakhstan. Today Kazatomprom is a Holding Company with the following affiliates: Figure 4
Over 15 000 employees work for the Company and its annual turnover is above US$300 million.
At present natural uranium is mined by In-Situ Leaching method in two uranium ore provinces. Figure 5
Shu-Sarysu uranium ore province with uranium reserves of RAR, EAR-I and EAR-II categories of about 900 000 tonnes. The uranium production in the Shu- Shu-Sarysu uranium ore province is carried out in the Uvanas, Eastern Mynkuduk, Kanzhugan and Southern Moinkum deposits by Kazatomprom, and at the Inkai and Moinkum deposits by our Joint Ventures with our Canadian and French partners respectively.
Syrdarya uranium ore province with uranium reserves of RAR, EAR-I and EAR-II categories of about 230 000 tonnes. In this uranium province Kazatomprom mines uranium in the Northern and Southern Karamurun deposits and a Joint Venture with our Russian partner is starting its work at Zarechnoye deposit.
Dynamics of uranium production at our mines is as follows: Figure 6
After the crisis in 1996-1997, we managed to stabilize the situation and to provide sustainable production growth. As you see, we succeeded in increasing production volumes in spite of a steep fall in prices, the minimum point of which was in 2000. We owe these achievements mostly to one of the most advanced mining technologies – to the In-Situ Leaching method.
In-Situ Leaching is a method of ore deposits development without having to bring up the ore to the surface by selective transfer of natural uranium ions into the pregnant solution in place. Figure 7
This method is implemented through drilling wells through the uranium ore bodies, injecting leaching solution into the ore bodies, bringing the uranium loaded solutions to the surface and extracting uranium in the sorption IX (Ion-Exchange) vessels, then adding acid to the barren solutions and their injection back in the ground.
In-Situ Leaching is the most attractive method of uranium production from the standpoint of operational simplicity. In-Situ Leaching does not affect geological conditions of the subsurface resources since the ore mass is not extracted. Total area of an ISL facility with processing plant for 500mtU3O8/year, is 3-4 times less than the area of a standard hydrometallurgical plant of the same capacity.
In the course of the In-Situ Leaching process, less than 5% of radioactive elements are mobilized and moved out to the surface, compared to 100% in the conventional uranium mining. Therefore, it is not necessary to build tailing ponds to store high level radiation waste. It has been unambiguously determined that the natural hydrogeochemical environment in the South Kazakhstan uranium deposits has a unique capacity of self-restoration from the industrial impact. Due to the gradual restoration of natural oxidation-reduction conditions, groundwater of the ore-bearing aquifers are slowly but irreversibly restored to the pre-production state. We have also developed a method of substantial intensification of this process, which would accelerate the restoration ten times.
A result of 13-year monitoring at the Irkol deposit may serve as an example of natural demineralization of residual solutions. Figure 8
Thus, the In-Situ Leaching method, which we use in Southern Kazakhstan, is literally the lowest-cost and most environmentally safe mining technology among all known.
Reserves in place and effective technologies are potentialities of Kazakhstan. Is it possible to realize them in order to reduce the natural uranium shortage in the world market? Let me turn from our potentialities to our plans. Especially as before starting realization of our plans, we should get the appraisal of the world community in respect of their urgency.
The main point of the plan is rather simple – to increase production by another 7000 tonnes by 2010. For this purpose we plan to divide our best deposits, Mynkuduk, Budenovskoye and Kharsan into several claims approximately with 30 000 tonnes of uranium reserves in each. We will then plan to have a mine at each claim with a capacity of 1000 tonnes, similar to the one which we are already building at the eastern flank of Mynkuduk deposit. We also plan to set one more plant in the southern flank of Inkai deposit. You can see the scheme of sites location in the following figure. Figure 9 Figure 10 Figure 11
Each of the above claims is an independent unit for investment. The geographical proximity of the properties makes it possible to adjust the number of employees, maintain a common service centre and share the costs of infrastructure and logistics between investors. Development of all seven claims will reduce the investments to be made in the construction of electric power lines, water lines and the construction of roads, refinery plants, etc.
Approximate costs for each mine on average will be US$70 million. US$420 million will be required to put mines into operation and additional US$70 million will be needed for infrastructure development – construction of roads, electric power lines, etc. The approximate pay-back period is 8 years.
The economics of such undertaking, analysis of the financial possibilities as well as risk assessment show that we should not start the program without guaranteed sales. Before we can start working we must know whether our customers are interested in it.
We suggest the following types of financing:
The next question is quite logical: Why only seven claims? You can see that the potential of the prospected deposits for double and even triple increase. We carefully analyzed our capabilities and can assure you that for the next six years we will be limited to this extent in human resources, materials supply, and infrastructure capacities.
We are not limited in financial resources. In fact we plan to finance one claim from our own funds, and the rest shall be financed by our partners and loans. Our partners are China, Russia, South Korea, US and European companies. Simultaneously we plan to develop a strategic partnership with our partners for the joint development of nuclear fuel production at Ulba Metallurgical Plant.
Despite the fact that all the mentioned claims have their owners, I think that participation of other companies is also possible through the establishment of pools with the consent of our existing partners. While the potential production from the four mines already has their consumers, the uranium from the rest of the claims is still uncommitted. And as I have repeatedly argued, we do not have any confidence in the existing mechanism of spot pricing and I believe that we cannot start investing with no long-term contracts providing us with an estimated pay-back period.
In Figure 12, you can see how much the uranium shortage will be decreased through realization of our proposed program.
As you can see, by uniting our efforts we will be able to reduce the natural uranium shortage and I kindly ask you to consider this report not as a storm warning but a specific suggestion of joint development of the program that I have described. Its implementation, as you can see from this diagram, will enable us to postpone the real uranium shortage until 2010-2012, so that we will have more time to stimulate uranium production at other deposits.
© copyright The World Nuclear Association 2004