AMERICAS’ RESOURCESINVESTMENT CONGRESS
IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY, 1 FEB 2011www.ObjectiveCapitalConferences.com
Outlook for uranium mining cost in the AmericasIan Hiscock – Consultant, CRU Strategies
LONDON | BEIJING | SANTIAGO | SEATTLE | SYDNEY | RIO DE JANEIRO | MINNEAPOLIS | MUMBAI
31 Mount Pleasant, London WC1X 0AD UK Tel: +44 20 7903 2000 Fax: +44 20 7278 0003
517, Tower 2, Bright China Chan An Building, 7 Jianguomennei Avenue, Beijing 100005, China
Tel: +86 10 6510 2206 Fax: +86 10 6510 2207
Augusto Leguía Norte Nº 100 of.506, Las Condes, Santiago, Chile
Tel: +56 2 231 3900 Fax: +56 2 231 4314
PO Box 1269, Langley, WA 98260 USATel: +1 360 321 4707 Fax: +1 360 3214709
2911 West 54th Street,Minneapolis, MN 55410, USA
Tel: +1 612 922 9092 Fax: +1 612 920 3225
Level 2, Kalpataru Synergy, Opp. Grand Hyatt, Santa Cruz (East), Mumbai 400055, India
Tel: +91 22 3953 7395 Fax: +91 22 3953 7200 www.crustrategies.comCRU Strategies is a division of CRU International Limited
Uranium market outlook
Ian Hiscock – Consultant, CRU Strategies
• Brief introduction to CRU
• The uranium market in 2010
• The outlook for uranium
• Uranium mining in the Americas
Presentation Outline
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• Brief introduction to CRU
• The uranium market in 2010
• The outlook for uranium
• Uranium mining in the Americas
4
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
Introduction to CRU
• Brief introduction to CRU
• The uranium market in 2010
• The outlook for uranium
• Uranium mining in the Americas
Presentation Outline
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0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Jan-
09
Feb-
09
Mar
-09
Apr-
09
May
-09
Jun-
09
Jul-0
9
Aug-
09
Sep-
09
Oct
-09
Nov
-09
Dec
-09
Jan-
10
Feb-
10
Mar
-10
Apr-
10
May
-10
Jun-
10
Jul-1
0
Aug-
10
Sep-
10
Oct
-10
Nov
-10
Dec
-10
Chinese import of more than 17,000 t U in 2010...Uranium imports, monthly, China, 2009-2010, tonnes U
7Data: CRU Analysis, GTIS
• 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
...coupled with some supply disruptions...
8
40
45
50
55
60
65
70
75
Jan
10
Feb
10
Mar
10
Apr 1
0
May
10
Jun
10
Jul 1
0
Aug
10
Sep
10
Oct
10
Nov
10
Dec
10
Jan
11
...has resulted in market deficits. Concurrently, prices have increased more than 50%...UxC weekly price, US$/lb U3O8
9Data: CRU Analysis, UxC Consulting
8587899193959799
101103105
Jan-
2009
Feb-
2009
Mar
-200
9
Apr-
2009
May
-200
9
Jun-
2009
Jul-2
009
Aug-
2009
Sep-
2009
Oct
-200
9
Nov
-200
9
Dec
-200
9
Jan-
2010
Feb-
2010
Mar
-201
0
Apr-
2010
May
-201
0
Jun-
2010
Jul-2
010
Aug-
2010
Sep-
2010
Oct
-201
0
Nov
-201
0
Dec
-201
0
...aided by further dollar depreciation. USD Trade Weighted Index, monthly, Jan ’09 = 100
10Data: CRU Analysis, US Federal Reserve
• Brief introduction to CRU
• The uranium market in 2010
• The outlook for uranium
• Uranium mining in the Americas
Presentation Outline
11
-25%
-20%
-15%
-10%
-5%
0%
5%
2009 2010 2011
Market deficits are expected to continue through 2011, lending support to recent high pricesMarket balance, percentage of primary supply requirements
12Data: CRU Analysis
• 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
Over the longer term, the market outlook is also very positive from the producer’s perspective...
13
0
100,000
200,000
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
tonn
es U
3O8
World production Net primary demand
Projected supply from mines operating in 2020
Supply gap of ~65,000 tpa U3O8
Data: CRU Analysis
...with significant investment required to meet future demandNet primary demand vs. primary production, tonnes U3O8, 2020-2030
Long-term demand drivers
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• International agreements on climate change
• Localized pollution issues
• Strategic incentives to shift patterns in energy production and consumption.
• Increased demand from developing economies.
• Higher and more volatile supply costs
• New demand in developing economies.
• Increased mechanisation.• Possible shift in usage
patterns for personal transportation. Growth in
power demand
Price of Fossil fuels
CO2emissions
Energy security
• Brief introduction to CRU
• The uranium market in 2010
• The outlook for uranium
• Uranium mining in the Americas
Presentation Outline
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The Americas produced 22% of world primary supply in 2010, more than 80% of which was from Canada
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KazakhstanCanada
USABrazil
Australia
Namibia RussiaNiger
Uzbekistan
Ukraine
RoW
Many mines and prospects in the Americas are low-cost...
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1. Very high-grade material found in the Athabasca basin in Saskatchewan, Canada.– Low unit cost, but high initial capital and mining complex
2. 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 are many exploration prospects located in Chile, Peru and Argentina.
• 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
...and located in justifications that are considered favourable towards mining.
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Site costs:Labour, fuel, power, consumables, etc.
Business costs:Site costs +
realisations costs (i.e. sales & marketing,
transportation)
Corporate costs:Business costs +
corporate overhead + remediation costs
Economic costs:Corporate costs +
capital charge
CRU’s Value-Based Costing (VBC) methodology:
Benchmarking
Long run investment
decisions, long run price
Measure free cash flow
Business efficiency
CRU assess costs at four different levels
Most uranium production in the Americas comes from one very low-cost source.Economic Cost Curve, 2009
21Data: CRU Analysis
• 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.
Production growth hinges on one large project, but exploration activity has picked up considerably.
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Thank you for listening
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CRU contacts for further information:
In LondonIan Hiscock, Consultant, CRU Strategies+44 20 7903 2244 [email protected] Macoun, Principal Consultant, CRU Strategies+44 20 7903 2200 [email protected]
In the USAIrv Adler, VP, Business Development, North America, CRU+1 260 918 3643 [email protected]
In SydneyPhilip Sewell, Business Development Manager, Australasia, CRU +61 2 9387 8842 [email protected]
In PerthAllan Trench, Regional Director, Australasia, CRU +61 (0)43 709 2466 [email protected]: www.crugroup.com
Contact details
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