Is AREVA chasing Virginia uranium?

Chatham deposit discovered in 1982 could be worth billions

[See also an earlier blog post on this topic. This post has been updated with cost estimates. The Washingtion Post had a report dated 01/02/08 which covered most of what is known about the site. On 03/02/08 the Virginia legislature killed a proposal to study uranium mining which could have led to mining at this site. The same day Areva dumped Virginia as a potential site for its uranium enrichment plant.]

In 1982 the Marline Uranium Corporation annnounced the discovery of a significant uranium deposit in Pittsylvania County that the company said was among the richest finds in the United States.

The firm said at the time about 30 million pounds of uranium lie beneath a 100-acre site the company has leased six miles northeast of Chatham. At today's prices, $90/lb, the total value in current dollars is $2.7 billion.

In the next two decades almost nothing happened with the site due to opposition from environmental groups and the more significant effect of low prices for uranium.

On Oct. 3, 2007, the Chatham Star Tribune reported that a locally owned and managed company, Virginia Uranium Inc., has been formed to mine and mill a huge uranium deposit in Pittsylvania County. The rub is whether and if, according to the company's chairman, Walter Coles, it can be done safely. Virginia has a wet climate compared to most the arid climates of most western states uranium mines. If the mine comes online the question is whether it would be the key factor in a decision by AREVA to site a uranium enrichment plant in the region.

The Tribune reports Virginia Uranium Inc. was formed by the Coles and Bowen families, who own the land where the uranium deposit was discovered 25 years ago. It includes two ore bodies and an estimated 110 million pounds of uranium worth at least $10 billion. These numbers are significantly higher, by several orders of magnitude, than the original reports issued in earlier assessments.

Currently, uranium mining is banned in Virginia though some believe it is only a matter of time until the ban is lifted. The Tribune reports Virginia Uranium hopes to convince the General Assembly to adopt a study resolution on uranium mining and milling early next year. If the state determines uranium can be mined safely, Coles hopes Virginia will lift its moratorium on uranium mining, possibly as early as 2009. It would still take about two years to develop the legal and regulatory framework for uranium mining, Coles said.

Facing the Ton/Mile Conundrum

These time frames may put the Virginia deposit out of position to meet AREVA's fast track demands [see previous blog post] for sources of uranium for its enrichment plant. Uranium ore faces a critical obstacle in terms of the cost of transport of a high bulk, high weight, and low value product over long distances by rail.

For the same reason that beer mash plants are near barley fields, uranium mills need to be near the mines that bring out the ore. The average yield of a ton of ore is about four pounds of U3O8.

It is sometimes called the ton/mile conundrum and addresses the issue of how valuable a mineral is determines how far you can ship the ore before transport costs outweigh the value on delivery. Currently, in the U.S., the major sources of uranium are in western states such as Wyoming, Colorado, and Utah. There is only one operating uranium mill in the West at Blanding, UT. It is a long way from Virginia.

The thing to keep in mind is that uranium mining is only the first step in the process. The ore has to be processed in a mill, turned into Yellowcake, and then the raw uranium has to be converted to UF6, and then enriched to be used to fabricate nuclear fuel rods.

The risks that have to be taken into account include whether there is enough uranium to support the 30-year life cycles of the mill. As a practical matter no one is going to make these kinds of investments betting on a single deposit of ore.

There are uranium fuel operations in Lynchburg, VA, which are within trucking distance of the Chatham deposit, but there is no uranium mill. Bottom line - development of the uranium deposit will require a mill within 50 miles which has at least a 500 ton-per-day capacity costing as much as $25 million. Also, the spot price of U3O8 must be at least $60/lb to be profitable and competitive at 2007 prices although some existing mines could operate at $50/lb.

Site selection criteria

More likely AREVA is not focusing exclusively in the Virginia site. In terms of how the site selection process goes for a $2 billion manufacturing facility, the issues range from cost of raw materials to the characteristics of the local labor force, as well as other economic and political factors. At this stage AREVA still could half a dozen sites in the mix and be at least a few months away from getting down to alternatives the site selection team can bring to the "C" level executives in the firm.

Timing, Ticka Ticka Ticka Timing

If the uranium in Virginia is available, it could supply AREVA's needs for a uranium enrichment plant. The problem is timing. AREVA wants its enrichment plant to be operational in 2013. An NRC license or the plants could take a year or two and then there is the risk of breaking ground in 2010 at a site where the nearby uranium supply might not be available due to state regulatory issues. That would put AREVA in the position of having to pay to ship uranium from western mines to a Virginia plant at least until the Chatham, VA, deposit was producing ore.

While it is interesting to speculate on whether there is a link between media reports AREVA is planning to site their enrichment plant in Virginia and the Chatham deposit, the timing issues raise significant issues related to risk. Uranium fever is around, based on high spot prices.

World uranium demand is up

Even if the Virginia uranium deposit isn't ready in time for the AREVA plant, demand for uranium has a long term growth curve. According to the uranium information center;

• Production from world uranium mines now supplies only 55% of the requirements of power utilities.


• Mine production is supplemented principally by ex-military material.


• World mine production needs to expand significantly.

It will be interesting to see how things play out for this resource in Virginia and whether AREVA is one of its customers.

Update May 2008

Areva chose Idaho Falls, ID, for its uranium enrichment plant. Lynchburg, VA, was dropped from consideration even before Areva short listed four other sites in addition to the Idaho location.