Saturday, October 13, 2007

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.

Organizing the world's nuclear fuel cycle

Sustainable energy supply requires reliable fuel and nuclear safeguards

Sometimes the wizards of the nuclear world are hidden from view, and when they have organized themselves on the remote, high desert of Idaho, it seems their work might be invisible. Some light was shed on the federal government's plans for the Global Nuclear Energy Partnership (GNEP) at the September monthly dinner meeting of the Idaho Section of the American Nuclear Society held in Idaho Falls, ID.

Dr. Phillip Finck, Associate Laboratory Director, Nuclear Science & Technology, at the Idaho National Laboratory, spoke to a group of about 60 people. Finck is coordinating the work of 10 DOE national laboratory organizations to work together on GNEP. This blog post is a summary of his remarks written down in real time by your faithful correspondent.

* * *

Finck said GNEP is needed to meet world energy demand and a sustainable nuclear fuel cycle is a key element. Additional issues are security threats to oil & gas supplies and the challenges of greenhouse gases increasing global warming.

Globally nuclear energy is expanding Finck said. GNEP will provide reliable nuclear fuel services while controlling the spread of plutonium. IAEA safeguards will be used to manage a global nuclear fuel bank providing reactor fuel to countries that do not have and do not build their own uranium enrichment plants.

In the U.S. industrial participation is needed in GNEP for fuel reprocessing facilities. The nation lacks the physical infrastructure to realize the GNEP vision. Eleven organizations have submitted 13 sites for GNEP facilities. Two are in Idaho. The DOE Secretary will make a decision in June 2008 on three types of GNEP facilities.
  • Advanced burner reactors
  • Consolidated fuel treatment center
  • Advanced fuel cycle facility
Closed fuel cycle yields a smaller Yucca Mountain

Finck emphasized that GNEP is a closed fuel cycle because fuel recycling is more energy efficient. Only reprocessing losses are sent to a geologic repository which is a huge reduction from the current planned volume for Yucca Mountain. Under full implementation of GNEP, the capacity of Yucca Mountain would not be reached for several centuries. Removal of minor actinides reduces the time the waste is dangerous from 250,000 years to just 300 years.

Finck also called for much better nuclear fuel simulation models to reduce the time lines for nuclear fuel R&D.

The GNEP bottom line?

He said the INL has published a GNEP technology develoment plan (link below). In response to a question at the end of his talk, he said the bottom line is this.

What GNEP is asking the world to do is to get organized about the nuclear fuel cycle.

He noted that some of the material and slides for his presentation came from the GNEP Technology Development Plan - link (large PDF file).

World Nuclear Association nuclear statistics

There are now some 439 commercial nuclear power reactors operating in 30 countries, with 372,000 MWe of total capacity. Demand for nuclear power is increasing.

They supply 16% of the world's electricity, as base-load power, and their efficiency is increasing.

The International Atomic Energy Agency has significantly increased its projection of world nuclear generating capacity. It now anticipates at least 60 new plants in the next 15 years, making 430 GWe in place in 2020 - 130 GWe more than projected in 2000 and 16% more than actually operating in 2006. The change is based on specific plans and actions in a number of countries, including China, India, Russia, Finland and France, coupled with the changed outlook due to the Kyoto Protocol. This would give nuclear power a 17% share in electricity production in 2020. The fastest growth is in Asia.

Official Profile

Dr. Phillip Finck, Associate Laboratory Director - Nuclear Science & Technology, INL

Dr. Finck is an internationally recognized expert in advanced reactor and fuel cycle systems. He is noted for his technical leadership in reactor design and analysis, code development and validation, nuclear data, and more recently, in systems analysis. Prior to joining INL, he worked at Argonne National Laboratory, where he was the associate laboratory director for Applied Science and Technology. He received his doctorate in nuclear engineering at MIT in 1982, and earned an MBA from the University of Chicago. Dr. Finck is a Fellow in the American Nuclear Society.

Friday, October 12, 2007

AREVA checks Virginia site for uranium enrichment plant

Lynchburg is already home to nuclear giant BWXT; and
a potential site in the race for new uranium enrichment plant

According to a report in the Danville, VA, Register & Bee, AREVA is negotiating for a site for a uranium enrichment plant in Lynchburg, VA.

The paper reports that Walter Coles, of Chatham, told a meeting of more than two dozen concerned residents that negotiations for a possible uranium enrichment plant in Lynchburg are “under way.” Coles said Lynchburg, which already has facilities that do some limited uranium enrichment, may soon be the site of a uranium plant.

He said the French company, AREVA, was currently talking with Virginia officials about a location for the uranium enrichment plant, of which Lynchburg was top on the list. Lynchburg also is home to nuclear industry giant BWXT.

* * *

AREVA told the NRC last May they want to put their uranium enrichment plant on a fast track to be completed by 2013. They will be competing with the National Enrichment Facility which received its license in 2006 and is currently under construction in New Mexico. A uranium enrichment plant can costs $2-3 billion and have a 30-year operational life.

AREVA may be negotiating for multiple sites rather than putting all its eggs in one basket. Sites reportedly under consideration include Virginia where AREVA already operates a nuclear fuel facility at Lynchburg, New Mexico, Texas, South Carolina and Idaho. AREVA NC Inc. President Mike McMurphy told the news media last July. "We're looking for places where the geology and seismic conditions are correct and public acceptance is good."

With most of the nation's uranium mining in western states including Utah, Colorado, and Wyoming, transport issues could make one of these states a more logical choice than Virginia.

The race for uranium enrichment market share

Anyone who doubts that a nuclear renaissance is gaining ground in the U.S. needs to take a closer look at what is going on in its domestic uranium enrichment market. The NRC says more than two dozen new nuclear power reactors are coming off the drawing boards. Going by a USEC figure that it takes about 100,000 SWU per year to fuel a 1000-MW reactor, these new reactors could add at least another 2.4 million SWU annually to the current estimated U.S. enrichment demand of about 12.7 million SWU, assuming all are functioning within ten years.

This rapidly expanding demand for enriched uranium has triggered the starting gun in a race to capture U.S. market share for uranium enrichment sales. With the recent unveiling of AREVA’s ambitious plan to build a U.S. plant, three horses are now on the track, all aiming to cross the finish line within the next six years. Their owners are betting billions on the outcome.

Front-Runner: Urenco

Although the targeted opening date for its plant recently retreated from the end of 2008 to mid-2009, the current front runner is Urenco, which is building its $1.5- billion National Enrichment Facility in New Mexico. At peak production, expected by 2013, the plant will produce 3 million SWU per year, about 25% of current U.S. demand over a facility lifespan of 30 years. Having received its NRC license in June 2006, Urenco went into its groundbreaking ceremony with more than $3 billion in fuel-supply contracts. Urenco has a healthy balance sheet. In its 2006 annual report to investors the firm states the current cash generated from operations, €549 million ($748 million), is expected to be able to support construction of the New Mexico plant. The financial statement shows the company’s net profit in 2006 increased by 26% to €209 ($285 million).

Walking Wounded: USEC

Limping behind in the race is the American Centrifuge Plant, which USEC plans to open in Piketon, Ohio, by 2009. In a recent statement USEC said it expected to have a lead cascade of centrifuge machines up and running by the end of this summer. After it opens the plant will ramp up to its full production capacity of 3.8 million SWU per year by 2012, with about 11,500 machines on line. now projected to cost $2.3 billion.

USEC’s financial situation is precarious, due in large part to the high cost of operating its gaseous diffusion plant in Paducah, Ky., while trying to fund the construction of the ACP, now estimated to cost $2.3 billion. Its critics note that over the last several years the company spent more than $100 million on enrichment technologies it later abandoned and shelled out more millions in severance packages for dismissed high-level executives. Yet the company continued to pay out a costly dividend to its investors, which it finally ended last year. Add to that the lengthy delays in its testing and construction schedule, which have propelled USEC’s costs upward, it is easy to understand why many analysts think the company’s problems are not over yet.

USEC recently asked the federal government to transfer title of 25 million kg UF6 (55 million pounds U3O8) at the Paducah plant. The New York Times reported on May 29 that USEC’s request spurred “furious lobbying…over who should end up with the prize, which [has an estimated value ranging from] $750 million to $3 billion... .” Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, called the USEC request a “bailout,” charging that USEC had “squandered” its resources and did not deserve more handouts. A June 12 New York Times story was so negative that the USEC’s stock price dropped more than 16% and the company issued a press release denying that it was “struggling to survive.”

The share price has since rebounded somewhat, but USEC is clearly struggling both with financial problems and major credibility issues. Rumored merger talks and other negotiations have not been successful.

The New Horse: AREVA

AREVA’s recent entry in the race is just leaving the gate. In briefing NRC staff on licensing issues on May 21, AREVA executives indicated that the company wants to put its plant on the fast track to be operational by 2013. But it still must select a location and obtain a license before it can break ground—and according to the official summary of the meeting, agency staff rather bluntly told the presenters that they were not likely to get everything done within the schedule they had laid out (See FCW News Flash, June 27). Why has AREVA chosen to enter the race—and why now? In its presentation AREVA argued that U.S. demand for enriched uranium is larger than the combined capacities of the NEF and ACP. The French nuclear giant also pointed out that the U.S. imports 90% of its current enrichment requirements.

At full capacity NEF is expected to produce 3.0 million SWU a year, which the firm estimates will fill 25% of current U.S. demand. By comparison USEC says its full-scale plant will have a capacity of 3.8 million SWU. At present USEC supplies 53% of U.S. enrichment needs, along with 27% of world enrichment needs. It is not yet clear if those proportions will change when the new centrifuge plant opens. Meanwhile, under its old low-enrichment uranium agreement with the U.S. Russia supplies at what is now way below market price 50% of the enriched uranium that USEC sells at premium prices. But time is running out on that great deal, which has helped keep USEC afloat. That is why all three of the enrichment plant builders, including even late-entry AREVA, want their facilities operating by 2013, the year the Russian agreement expires.

Still More Demand Than Capacity

Assuming USEC succeeds in completing its full-scale plant, it would be able to supply the needs of 38 1,000-MW nuclear reactors per year. A quick look at the numbers show that, taken together, the ACP and NEF, the nation’s two licensed plants, could supply less than 60% of the U.S. enrichment market demand in 2013—and that assumes that all of their production will go to domestic users. This leaves a lot of demand on the table, which may be one reason why AREVA wants to get into the market within the same time frame as its competitors. But AREVA may also be betting that USEC will not find the support it needs to open its new plant, leaving the domestic market even wider open.

Were if all three plants to be producing at capacity in 2013, they would only put out about four-fifths of the U.S. market share for enriched uranium. It’s no surprise AREVA has put its horse in the race. Clearly, the plant builders expect that their combined $6 billion bets will pay off.