The Australian uranium industry might be about to join the rest of the resources sector in having a free hand to explore, mine and sell its core mineral if this weekend’s Federal ALP conference votes to lift the party’s bans on any more than three mines.
That’s looking increasingly likely with the left wing of the party conceding it doesn’t have the numbers to keep the three mine policy in place.
The stockmarket is certainly reflecting that confidence with the prices of actual and wannabe miners firming, new floats doing well and a general air of optimism.
A vote to lift the policy and perhaps replace it with a more liberal regime, but one not as unfettered as that from the Howard Government, should not be discounted.
After all it is the Labor Party, and faction deals and backroom arm twisting is a fact of life.
There are three operating uranium mines in Australia, Ranger in the Northern Territory, Olympic Dam and Beverley in South Australia while a fourth mine is cleared to start construction: Honeymoon, in South Australia once the ALP policy changes (hence the eagerness of the SA Premier, Mike Rann to have the policy changed).
There are at least 25 other identified deposits and probably as many more possible deposits being investigated. None come anywhere near the size of Olympic Dam which has the largest reserves of uranium in the world and would be the biggest mine in the world if the BHP Billiton expansion plan gets the go ahead.
Olympic Dam has a total resource of 1.6 million tines of uranium oxide, much of it low grade but which would be mined with copper, gold and sliver which means lower the production costs.
World uranium prices are currently around $US113 /lb according to US company UxC whose pricing information is now accepted around the world.
That is about to be turned into the most significant market move for the metal in years: early next month a futures market will start trading in New York which will be based on the UXC price and be financially deliverable, allowing producers, consumers and others to use the contract (see below for more details).
That new contract is due to start trading Monday week on Nymex (where oil is traded in New York)
That will provide a more transparent and liquid pricing mechanism for everyone including the ALP.
Key left-winger Anthony Albanese, has been quoted this week as saying his faction could only muster 180 of the 397 delegates scheduled to attend the conference which starts today.
The left faction will have about 177 delegates at the conference, enough to cause some controversy on industrial relations and perhaps environmental policies but not enough to stop the uranium mining policy from changing.
Leading left members including Martin Ferguson, Julia Gillard and Chris Evans, will vote against their faction to abolish the policy and support Opposition Leader Kevin Rudd.
The Labor Premiers of Queensland and Western Australia have said they will not allow uranium mining in their states if the policy is abolished but Mr Beattie has had several changes of heart on this issue and faced with pro-mining South Australia getting a couple of new projects, will quickly fold, as will the embattled WA Premier who may not be around at the end of the year.
Olympic Dam (BHP Billiton) will be the immediate beneficiary of any policy change by the ALP because it plans an enormous ramp of production if the $6 billion expansion of the massive mineral deposit in South Australia.
A vote to lift all bans will remove a small niggle in some people’s minds: that the size of the expansion at Olympic Dam might frighten anti-uranium supporters inside the ALP, especially if it manages to win Government at the Federal poll later this year.
ERA is already hunting for uranium outside of Ranger in the Northern Territory, in parts of South Australia, because it decided a new mine was more probable in that state first than anywhere else, if the ALP changed its policy.
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We saw the expectations of a change in the ALP policy set a small fire under a uranium hopeful which listed on the ASX yesterday.
Territory Uranium shares came on at 190 per cent premium to its initial public offer price of 20 cents per share. The shares opened trading at 58 cents, and reached a high of 59c before settling back to around 55c.
It is searching for uranium, gold, nickel and other base metals at nine places in the Northern Territory.
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But the big play was the swoop by Areva SA, the world’s largest nuclear power station company, to snatch a 10.46 per cent stake in Summit Resources, thereby allowing it to frustrate the takeover of the Australian uranium explorer by its bitter rival, Paladin Resources.
The swoop had the hallmarks of a lightning raid designed to position Areva ahead of the ALP vote.
It can either block the merger or allow it to go ahead and extract something in return, such as the marketing rights to the uranium to be produced by the merged company.
Areva paid $6.10 a share for the holding in Summit. The French company said in a statement it had “no current intention” of making a full bid for Summit.
Interestingly Areva yesterday was unexpectedly named as the winner of a$US5 billion deal to build two nuclear power plants in China, weeks after a U.S. rival appeared to have won a contest that had dragged on for more than two years.
The news makes the play for a say in the merged Paladin-Summit Resources more interesting.
The two plants will produce a total of 3.2 gigawatts of generating capacity in southern Guangdong province.
Westinghouse, now controlled by Toshiba of Japan, will build two reactors in the east coast province of Shandong and two in Zhejiang province, bordering Shanghai.
Also due for completion in
