Canada-EU Trade Agreement is “New Day” for Uranium Investment

Canadian Prime Minister Stephen Harper has called the the Comprehensive Economic and Trade Agreement (CETA) the “biggest, most ambitious trade agreement” that Canada has ever embarked upon. It is also the first time a free trade agreement has been laid out between the European Union (EU) and a G8 country.

CETA will create new market access between Canada and the EU, at the same time removing 99 percent of tariffs between the two economies. The “wide-ranging agreement is expected to bolster the EU’s GDP by around €12 billion ($16.5 billion) per year,” according to World Nuclear News.

Out with the old

Canada’s trade restrictions have been in place since 1970, when Ottawa introduced the non-residential ownership policy (NROP). However, because they came about as a result of Cold War concerns relating to nuclear proliferation, they have become increasingly dated, the Financial Post states .

Of all the provinces and territories involved in the uranium industry in Canada, Saskatchewan holds the largest share. As a result, the province has missed out on some serious investment from foreign companies.

Saksatchewan welcomes new trade regulations

The new trade deal is being viewed as a win for Saskatchewan, which stands to gain billions of dollars in investment in its uranium resources. Currently, trade regulations make it so that foreign ownership in any uranium project is capped at 49 percent. Should the trade regulations change, the province could see up to $2.5 billion in investment over the next 15 years.

Saskatchewan’s premier, Brad Wall — as well as other industry players — has been lobbying for a change in foreign ownership regulations since coming into power in 2007.

As trade regulations stand, “if you’re a European company and you want to invest in a mine in Saskatchewan you need to find a majority partner who’s Canadian and for some companies that has been a comfortable proposition, like Areva.”

However, Wall expects that if given the choice, foreign companies would prefer not to have a minority ownership in their property. He believes that “the provisions will be gone for these companies … and so they’ll be able to own a mine outright in the province if they choose to develop the resource.”

Major players

With the floodgates hopefully soon to be opened, it seems that many are waiting to see whether Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) will make a move on Saskatchewan’s uranium bounty.

In January 2012, Rio Tinto acquired the Roughrider property through its takeover of Canadian junior Hathor Exploration. With the takeover, a new entity, Rio Tinto Canada Uranium, was created. However, through the bidding process, the company issued a direct challenge to Canada’s Competition Policy Review Panel with a $654-million bid for the uranium project. If Roughrider goes into production, with current regulations, Rio cannot own more than 49 percent.

According to the Canadian Press, “Rio Tinto welcomes CETA and the easing of Canadian restrictions on European Union investment in the uranium mining sector, as we believe policies that promote trade and foreign investment enhance the prosperity of Saskatchewan and other regions of Canada.”

As far as Canada’s biggest uranium player, Cameco (TSX:CCO), is concerned, changes to the NROP are welcome as long as they include “reciprocal access” with the EU.

Europe accounted for 21 percent of the company’s uranium sales last year, as per the Financial Post.

Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.