Energy

In an interview with Uranium Investing News, Simon Clarke, Communication Director for the Australian Uranium Association (AUA), detailed his cautionary optimistic viewpoint for the uranium industry, “Indian investors are likely, once permitted, to look for potential investments in Australian uranium assets.”

By Dave Brown – Exclusive to Uranium Investing News

Following a difficult year in many ways for the uranium industry, Australia and India have made some progress in changing the outlook for economic prospects.

Australian prime minister, Julia Gillard is attempting to change the country’s current policy which does not permit uranium sales to India. The hope is that the initiative could further enhance Australia’s mining boom while securing some of the insatiable energy requirements of the emerging Asian powerhouse.

In an interview with Uranium Investing News, Simon Clarke, Communication Director for the Australian Uranium Association (AUA), detailed his cautionary optimistic viewpoint for the uranium industry, “It is very early days. The policy change still has to be accepted by the ALP (Australian Labor Party), then adopted formally by the Government, with a special safeguards framework and bilateral treaty to be developed between Australia and India. This is likely to take several years and, in the meantime, India will be expected to enter supply arrangements with a number of other countries.”

Positive outcomes

As a possible outcome of this trade liberalization of Australian uranium assets might be “that Indian investors are likely, once permitted, to look for potential investments in Australian uranium assets. Chinese and Japanese investors have been actively seeking investment opportunities in uranium and Indian investors are likely to follow. This would be welcomed by the Australian [uranium] industry, which is always ready to consider equity participation and potential uranium off-take arrangements with new investors.”

Capacity limitation

Australia is currently the world’s third largest producer of uranium, responsible for approximately 11 percent of global uranium production. However, investors will note that this significantly under represents the country’s estimated reserves.  Forecasting potential global implications of supply and demand shifts regarding policy changes becomes complicated for Australian uranium mining and exploration interests.

Clarke offered, “The scale of likely demand from India for Australian uranium if and when sales are permitted is therefore almost impossible to predict. However, looking at the current situation, it would be true to say the Australian industry would not be in a position now to supply uranium to India without the addition of mining and processing capacity. Considerable additional capacity is likely to be added in coming years, with proposed expansion to the Ranger and Olympic Dam mines; the prospect of new mines being brought into production in Western Australia, the Northern Territory and South Australia.”

As a longer term outlook Clarke indicated, “Our view of official forecasts and company information suggests that Australia could double its production and exports by 2020 and could be exporting as much as 30,000 tonnes per annum of uranium oxide by 2030.”

Increasing uranium demand long term 

In keeping with the megatons-to-megawatts program and current global nuclear policy context Clarke proposed, “There is unlikely to be a surplus of production capacity in the short to medium-term. Most forecasts are for a possible shortfall in supply of mined uranium for a period from 2013 onwards, after the completion of current arrangements between the USA and Russia for the downblending of former Soviet Union weapons material for use in civilian reactors and secondary supply provides less of the overall global uranium requirement. Indications are that the global nuclear fleet will continue to grow, though possibly at a slightly slower rate and to a somewhat smaller extent than forecast pre-Fukushima. Uranium producers are currently more concerned about continuing relatively low prices and the AUA notes that official and market observations suggest there is considerable room for Australian production capacity to expand to meet the forecast uranium supply gap if price signals are appropriate.”

Uranium policy changes initiated by India more favorable for uranium producers

Earlier this month, India published new rules to provide liability limitations for uranium producers and equipment suppliers in the case of a serious accident at Indian nuclear power plants.

Last year, India approved legislation to permit nuclear facilities to have a ‘right of recourse’ against equipment suppliers.  No other nuclear country includes a similar standard of exclusive liability and financial responsibility in the case of an accident.

The result of this clause so far has been that many global uranium producers have considered India to impose an extra risk premium which has led to some stagnation in the market place. While uranium producers have not indicated if these recent developments provide a more acceptable commercial structure for conducting business, there have been some industry observers that have questioned whether the unusual nature of last year’s Civil Liability for Nuclear Damages Bill might even be subject to international assessment.

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