Outlook for uranium cost in the Americas

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Objective Capital's Americas' Resources Investment Congress 2011
Ironmongers' Hall, City of London
1 February 2011
Speaker: Ian Hiscock, CRU Strategies

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Outlook for uranium cost in the Americas

  1. 1. AMERICAS’ RESOURCESINVESTMENT CONGRESS Outlook for uranium mining cost in the Americas Ian Hiscock – Consultant, CRU Strategies IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY, 1 FEB 2011 www.ObjectiveCapitalConferences.com
  2. 2. Uranium market outlook Ian Hiscock – Consultant, CRU StrategiesLONDON | BEIJING | SANTIAGO | SEATTLE | SYDNEY | RIO DE JANEIRO | MINNEAPOLIS | MUMBAI 31 Mount Pleasant, London WC1X 0AD UK PO Box 1269, Langley, WA 98260 USA Tel: +44 20 7903 2000 Fax: +44 20 7278 0003 Tel: +1 360 321 4707 Fax: +1 360 3214709 517, Tower 2, Bright China Chan An Building, 2911 West 54th Street, 7 Jianguomennei Avenue, Beijing 100005, China Minneapolis, MN 55410, USA Tel: +86 10 6510 2206 Fax: +86 10 6510 2207 Tel: +1 612 922 9092 Fax: +1 612 920 3225 Augusto Leguía Norte Nº 100 of.506, Level 2, Kalpataru Synergy, Opp. Grand Hyatt,CRU Strategies is a division of CRU International Limited Las Condes, Santiago, Chile Santa Cruz (East), Mumbai 400055, Indiawww.crustrategies.com Tel: +56 2 231 3900 Fax: +56 2 231 4314 Tel: +91 22 3953 7395 Fax: +91 22 3953 7200
  3. 3. Presentation Outline• Brief introduction to CRU• The uranium market in 2010• The outlook for uranium• Uranium mining in the Americas 3
  4. 4. • Brief introduction to CRU• The uranium market in 2010• The outlook for uranium• Uranium mining in the Americas 4
  5. 5. Introduction to CRU Leading research group focused on: • Mining and metals • Chemicals and fertilizers Independent, with a global presence • Established in the late 1960s • Privately owned to ensure its independence • Offices in London, Beijing, Santiago, India, Australia and North America
  6. 6. Presentation Outline• Brief introduction to CRU• The uranium market in 2010• The outlook for uranium• Uranium mining in the Americas 6
  7. 7. Chinese import of more than 17,000 t U in 2010... Uranium imports, monthly, China, 2009-2010, tonnes U 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Dec-09 Dec-10 Jan-09 Aug-09 Nov-09 Aug-10 Nov-10 Feb-09 Mar-09 Jun-09 Apr-09 May-09 Sep-09 Jan-10 Jul-09 Mar-10 Jun-10 Oct-09 Feb-10 Apr-10 May-10 Sep-10 Jul-10 Oct-10Data: CRU Analysis, GTIS 7
  8. 8. ...coupled with some supply disruptions...• Chiefly, a 28% decrease in U3O8 production at ERA’s Ranger mine. Approximately 1000 tonnes less than original target production.• Olympic Dam was still recovering from a shaft failure at the beginning of the year• Although Kazakh production rose by almost 25% year-on-year from 2009, they missed targeted production by a modest amount 8
  9. 9. ...has resulted in market deficits. Concurrently, prices have increased more than 50%... UxC weekly price, US$/lb U3O8 75 70 65 60 55 50 45 40 May 10 Apr 10 Nov 10 Mar 10 Aug 10 Sep 10 Oct 10 Dec 10 Jan 11 Feb 10 Jan 10 Jun 10 Jul 10Data: CRU Analysis, UxC Consulting 9
  10. 10. 101 103 105 85 87 89 91 93 95 97 99 Jan-2009 Feb-2009 Mar-2009 Apr-2009 Data: CRU Analysis, US Federal Reserve May-2009 Jun-2009 Jul-2009 Aug-2009 Sep-2009 Oct-2009 Nov-2009 Dec-2009 Jan-2010 USD Trade Weighted Index, monthly, Jan ’09 = 100 Feb-2010 Mar-2010 ...aided by further dollar depreciation. Apr-2010 May-2010 Jun-2010 Jul-2010 Aug-2010 Sep-2010 Oct-201010 Nov-2010 Dec-2010
  11. 11. Presentation Outline• Brief introduction to CRU• The uranium market in 2010• The outlook for uranium• Uranium mining in the Americas 11
  12. 12. Market deficits are expected to continue through 2011, lending support to recent high prices Market balance, percentage of primary supply requirements 5% 0% -5% -10% -15% -20% -25% 2009 2010 2011Data: CRU Analysis 12
  13. 13. Over the longer term, the market outlook is also verypositive from the producer’s perspective...• Fundamental supply shortages over the next 10 years – Rapid increases in demand, particularly from China – A legacy of underinvestment in exploration and mine development restricting primary supply – Declining secondary supply• An investment gap of 65,000tpa U3O8 emerges post 2020 13
  14. 14. ...with significant investment required to meet future demand Net primary demand vs. primary production, tonnes U3O8, 2020-2030 200,000 Supply gap of ~65,000 tpa U3O8tonnes U3O8 100,000 Projected supply from mines operating in 2020 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Data: CRU Analysis World production Net primary demand
  15. 15. Long-term demand drivers • New demand in developing • Increased demand from economies. developing economies. • Increased mechanisation. • Higher and more volatile • Possible shift in usage supply costs patterns for personal Growth in transportation. Price of power Fossil fuels demand Energy CO2 security emissions • International • Strategic incentives to agreements on climate shift patterns in energy change production and • Localized pollution consumption. issues 15
  16. 16. Presentation Outline• Brief introduction to CRU• The uranium market in 2010• The outlook for uranium• Uranium mining in the Americas 16
  17. 17. The Americas produced 22% of world primary supply in2010, more than 80% of which was from Canada Namibia Niger Russia Uzbekistan Australia Brazil Ukraine USA RoW Canada Kazakhstan 17
  18. 18. Many mines and prospects in the Americas are low-cost...1. Very high-grade material found in the Athabasca basin in Saskatchewan, Canada. – Low unit cost, but high initial capital and mining complex2. Small ISL operations/projects in the USA, mostly in Wyoming but also in Nebraska, Utah and Texas.In Latin America, only brazil produces uranium. Although there aremany exploration prospects located in Chile, Peru and Argentina. 18
  19. 19. ...and located in justifications that are consideredfavourable towards mining.• Fraser Institute Survey of Mining Companies, The policy potential index, 2010 mid-year update, covering 51 jurisdictions• Alberta (ranked number 1), Quebec, Yukon and Saskatchewan are all ranked in the top 5.• In the USA, Alaska, Arizona, Nevada, Utah and Wyoming all feature in the top 20.• Chile the most favourable in South America. Columbia, Mexico at and Peru are in the top 20.• By contrast ranks for the principle mining districts in Australia (South and Western Australia) have fallen dramatically since last year. Average rank for Australian States is now 31 19
  20. 20. CRU assess costs at four different levels CRU’s Value-Based Costing (VBC) methodology: Economic costs: Corporate costs + capital charge Corporate costs: Business costs + corporate overhead + Long run remediation costs investment Business costs: decisions, long Site costs + run price realisations costs (i.e. sales & marketing, Business efficiency Site costs: transportation)Labour, fuel, power, consumables, etc. Measure free cash flow Benchmarking 20
  21. 21. Most uranium production in the Americas comes from one very low-cost source. Economic Cost Curve, 2009Data: CRU Analysis 21
  22. 22. Production growth hinges on one large project, butexploration activity has picked up considerably.• Canada’s Athabasca basin in Saskatchewan is the focus for existing uranium production and exploration, however there is also exploration under way in Labrador, Quebec, Ontario and British Columbia.• The USA has a few advanced projects, but involve only small tonnages• Most projects in Latin America are currently at the very early stages of development.• There are 100s of projects at the grass roots and advanced exploration stages but only a handful at the prefeasibility/ feasibility study stages...• This is not unique to the Americas there are only about 100 in the world compared with more than 400 copper projects and 900 gold projects. 22
  23. 23. Thank you for listening 23
  24. 24. Contact details CRU contacts for further information: In London Ian Hiscock, Consultant, CRU Strategies +44 20 7903 2244  ian.hiscock@crugroup.com Philip Macoun, Principal Consultant, CRU Strategies +44 20 7903 2200  philip.macoun@crugroup.com In the USA Irv Adler, VP, Business Development, North America, CRU +1 260 918 3643  irv.adler@crugroup.com In Sydney Philip Sewell, Business Development Manager, Australasia, CRU +61 2 9387 8842  philip.sewell@crugroup.com In Perth Allan Trench, Regional Director, Australasia, CRU +61 (0)43 709 2466  allan.trench@crugroup.com Website: www.crugroup.com 24

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