Northern Territory Facing Backlash for Plan to Help Fund 10 Exploration Projects

Energy Investing
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The Northern Territory’s government has decided to provide select resource companies with grants in order to assist them with 10 projects throughout the region. Many of them are focused on uranium.

The mining industry has been having a tough time lately, making it difficult for companies to pay for exploration programs. In response to those circumstances, the government of Australia’s Northern Territory has decided to provide select resource companies with grants. They’ll be putting the money towards 10 projects in the region, many of which are uranium-focused.

A total of AU$850,000 will be distributed to nine companies carrying out exploration projects: Emmerson Resources (ASX:ERM), Cameco (TSX:CCO,NYSE:CCJ), AREVA (EPA:AREVA), Core Exploration (ASX:CXO), Rockland Resources, Pacifico Minerals (ASX:PMY), Teck (TSX:TCK.B,NYSE:TCK), MMG (HKEX:1208) and Tom Oates. The projects cover various commodities, including gold, lead, zinc, copper, manganese, petroleum and of course uranium.

“Some sectors of the resources industry are facing challenges at the moment, but it’s still a major employer of Territorians and will be one of the long-term drivers of our future prosperity,” David Tollner, the Northern Territory’s mines and energy minister, said in a press release. “These grants give companies an incentive to get out there and discover what resources the Territory can count on in the future. Exploration is crucial to develop the deposits that will underpin the Territory’s future economy.”

The grants will be capped at AU$100,000 and are expected to fund 50 percent of the costs of drilling and undertaking geophysical programs in areas of the Northern Territory where “there is a lack of geological information.”

The program is part of a bigger initiative called “Creating Opportunities for Resource Exploration (CORE),” which is run by the Northern Territory Geological Survey. CORE is a four-year, AU$23.8-million initiative geared towards the exploration and discovery of new mineral and petroleum resources.

Program already facing backlash

While the grants are definitely a plus for the mining sector, environmental groups have already raised concerns, slamming the government for giving taxpayers’ money to global companies they see as being opposed to public interest.

For instance, Lauren Mellor, spokeswoman for the Northern Territory Environment Center (NTEC), told The Guardian, “[t[he most galling part is that it comes at the expense of the growth of an environmentally and economically sensible renewables industry which would create local jobs in clean and safe technology like solar.”

The NTEC has issues with two companies in particular receiving the funds: AREVA and Cameco. Mellor said that Cameco is under investigation by Canada’s tax agency for $800 million in tax avoidance, also noting that the company has been criticized for incompetency by the Canadian Nuclear Safety Commission.

“Both these giant multinational companies have been shown to repeatedly fail to operate in the public interest at home, and are now seeking to benefit from the misguided largesse of the NT Mines Minister at Australian tax payers expense,” Mellor told Australian Mining. “If established producers like Rio Tinto cannot make a profit from the struggling uranium sector, and companies like Areva with a government subsidized monopoly in France are near bankrupt, how can the NT Government possibly justify injecting yet more public money into subsidizing the exploration activities of this dying industry?”

Concerns have also been raised about the environmental impact of the projects, with David Morris, executive officer and principal lawyer at the Environmental Defenders Office (NT), pointing out the “poor and weak” environmental protection laws in the Northern Territory. He has also noted that if companies like Energy Resources of Australia (ASX:ERA) have been forced to fold in the current market, “why bother spending what is quite a small amount of money in terms of what is required to get one of these operations up and going?”

Energy Resources of Australia, which is 68-percent owned by Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO), decided to shelve its Ranger 3 Deeps project last week; its share price took a significant tumble after the news, hitting the lowest price it’s seen since 1980.

Company update

As mentioned, Cameco is one of the companies set to receive funding from the Northern Territory government, and while environmental groups may be trying to take a swing at it, analysts believe it’s a great time to buy shares of the company. One example is Rob Chang of Cantor Fitzgerald, who recently put together a research note on the uranium producer, pointing out that Cameco has not traded at such a compelling valuation since Fukushima.

“We view this as an excellent buying opportunity for value investors with significant leverage to a uranium market that has excellent supply and demand fundamentals,” Chang said in the note.

He hasn’t been able to pinpoint what’s causing the decrease in the company’s share price. Indeed, Cigar Lake is in production and is currently one of the only operations that could help alleviate the supply deficit expected in the uranium space in the not-so-distant future. Cameco’s share price was down 1.3 percent at end of day Friday, trading at C$18.20; it’s down 13 percent from the C$21.20 it hit on April 30.

 

Securities Disclosure: I, Kristen Moran, hold no direct investment in any of the companies mentioned in this article.

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