Saturday, December 13, 2008

Western Lands Uranium Gopher for 12/14/08

Mining media reports and press releases for useful stuff.

gopherThis is an edited version of an article originally published in Fuel Cycle Week, V7N307 on 12/10/08 by International Nuclear Associates, Washington, DC. This is the last publication of this column for 2008. The column will resume in January 2009.

This column continues its admittedly non-rigorous coverage of the stocks of a handful of U.S. uranium miners who are active in western states. The data and brief analysis may offer readers a snapshot of how U.S. uranium juniors active in western states are weathering the unusually difficult conditions of the current market.

This analysis is not to be considered investment advice. I do not own any of the stocks discussed in this column.

Bad to worse

In terms of stock price trends, things have mostly gone from bad to worse. Five of the nine firms recorded new 52-week lows for the price of their stock during the past two weeks although four of the five had minor gains by market close Dec 5 that pulled them out of the cellar.

Company
Name

Stock Exchange & Symbol

52-Week High

52- Week Low

12/05/08 Closing Price

New 52-Week low

Bayswater

CVE:BAY

$1.00

$0.05

$0.05

X

Bluerock Resources

CVE:BRD

$0.90

$0.02

$0.03


Energy Fuels

TSE:EFR

$1.80

$0.11

$0.19

X

Powertech

TSE:PWE

$1.77

$0.17

$0.32


Strathmore

CVE:STM

$3.01

$0.16

$0.22


Uranerz

AMEX:URZ

$3.70

$0.45

$0.51

X

Uranium Energy

AMEX:UEC

$4.00

$0.21

$0.22

X

Uranium Resources

NASDAQ:URRE

$13.67

$0.36

$0.40

X

Ur-Energy

TSE:URE

$3.68

$0.34

$0.63


The major problem for all nine firms in that their very low stock prices make them attractive takeover targets. The low stock prices also make it nearly impossible to raise capital by selling new stock. This puts firms in a position of having to closely watch their burn rate of cash on hand in existing projects.

Uranium winter coming soon to a mine near you

An industry that was complaining last year about labor shortages for geologists and engineers is now likely laying some of them off to preserve working capital. For uranium juniors which have no projects in production, and no prospects for revenue, hibernation could be the next step. If the global recession lasts until 2010, as some economists predict, it could be a long sleep.

George Glasier, CEO of Energy Fuels (TSE:EFR), told the Denver Post on Dec 4, "We don't like suspending operations and layoffs, but we have to preserve capital to get through this and protect stockholders." He added that 10 jobs have been lost at the Whirlwind mine in Mesa County, Colo. The firm stopped production there last month.

Michael Collins, CEO of Bluerock Resources (CVE:BRD), which operates and is in production at the J-Bird uranium mine, told the Denver Post, " the firm has been caught in a liquidity crunch." Like other uranium juniors, Collins said, "It has been very difficult to raise money." However, Collins also told the Durango Telegraph on Dec 4 that the firm is "recapitalizing its operations," and that he expects significant growth in 2009 as a result.

New Horizon Uranium Corp.(CVE:NHU) has also shelved plans to develop a uranium mine in Colorado. William Wilson, the firm's COO who also now doubles as its new CFO, told the newspaper, "There just isn't any financing out there."

Last February the firm raised $5 million through a brokered private placement to fund the company’s continuing exploration programs on its Converse and Sand Creek joint ventures in Converse County, Wyo., and Summit project in San Miguel County, Colo. Wilson did not say whether the firm was continuing its work with these properties or is sitting on the cash.

Bayswater Uranium Corp (CVE:BAY) reported it has sold select claims in South Dakota and Wyoming to Powertech Uranium Corp. (TSE:PWE) for $50,000 and a stake in future yellowcake royalties. The area consists of 381 mining claims and 8,186 acres of Wyoming State mining leases for a total 15,806 acres. The claims sold consist primarily of early-stage properties that do not fit the company's plans to focus on core properties.

Low stock prices make for ripe pickings

Acquisitions for cash of junior uranium companies with attractive holdings will likely come from outside investors and not from other uranium firms. For example, Warren Buffet made a surprise move to buy Constellation Energy for a song when the firm's stock fell to a record low price. Are there similar large investors now reviewing possible acquisitions in the uranium mining industry?

One industry CEO said last week he thinks the uranium business is "ripe for consolidation" once the price of the metal rises above $60/lb. It remains to be seen what impact, if any, the recent closure of some mine operations in the U.S. and Canada will have on supply and thus prices. On Dec 1 the spot price of uranium stood at $55/lb according to both Ux Consulting and Trade Tech.

Industry consolidation could come a lot sooner. Reuters reported on Nov 26 that Accord Nuclear Resources, a U.K. firm, has set up operations there and in the U.S. to pick up uranium firms for cheap prices due to sliding equity values. The firm believes the long-term outlook for the nuclear industry is bright. In the U.S. Accord has a joint venture with First Reserve Corp. Both are private equity firms.

Accord CEO Charles Scorer told Reuters that First Reserve shares his firm's objectives to invest several hundred million to buy uranium mines in the U.S. He emphasized that the firm will be considering acquisition of properties that are in production or near-term production. He also said the firm would not be interested in acquiring firms that are still prospecting potential properties. Scorer said, "most of the assets are undervalued because of the credit crunch and the fact that we are funded gives us good opportunities."

Alex Krueger, Managing Director of First Reserve Corporation, said, “Nuclear energy is gaining more focused interest as the result of a structural need tied to increased fossil fuel costs and carbon emissions standards impacting other forms of power generation."

The firm's principals also said their focus on production means that once they buy mines they intend to sell uranium on the global market.

Bright spots

Denison mines (AMEX:DNN), which shut down the Tony M mine in late November also announced that it is opening another Utah mine that has higher grades of uranium. CEO Ron Hochstein told the Deseret News Nov 26 the Beaver Shaft mine in San Juan County also has vanadium used to make steel alloys. He also said the firm would continue to operate the Rim Canyon uranium mine in San Juan County.

Denison also operates the White Mesa mill near Blanding, Utah. The threat of competition has occasionally emerged over the horizon, but so far has not moved beyond the proposal stage. While Denison has a mill that continues to seek ore, at least it doesn't have competition for it. In 2006 Uranium One (TSE:UUU) bought the rights to the Shootaring Canyon Uranium Mill.

However, Dane Finefrock of the Utah Division of Radiation Control said new operations there are years away given the regulatory approvals that would be need to start it up again. Last September Mancos Resources LLC shelved its efforts to open a uranium mill in Green River, Utah.

Powertech (TSX:PWE) is pushing ahead with development of ISL mines in Colorado and South Dakota. At the Centennial Project near Nunn, Colo., the firm is nearing completion of data analysis to support permit applications to state and federal regulatory agencies. It expects to submit the applications in the first half of 2009. At the Dewey-Burdock Project in South Dakota, the firm expects to submit permit applications to state and federal agencies by the end of this month.

Uranium Energy (AMEX:UEC) announced Dec 4 it has filed all permit applications for the Goliad Project near Victoria, Tex. This is the firm's "flagship project" for ISL uranium mining in south Texas. The applications include mining and environmental permits that have to be issued by the Texas Commission on Environmental Quality (TCEQ). Harry Anthony, COO, said the firm hopes to start operations by 2010.

While the firm has exploratory projects in five other states, Anthony said it will concentrate on the Goliad mine to preserve capital. CEO Amid Adnanai said the firm raised $15.3 million last summer but that capital preservation is the order of the day due to "uncertainties in market conditions."

Anthony noted that Texas has eight proposed nuclear reactors which will drive demand for uranium in future years. If all of them are built, he added, it will make Texas one of the largest nuclear energy states in the nation.

Environmental headaches are still with us

Cameco's (NYSE:CCJ) headache at the Crowe Butte ISL mine near Crawford, Neb., got bigger this week. The Nuclear Regulatory Commission (NRC) granted status to "interveners" who oppose the expansion of the mine. The NRC said five groups and some individuals from these groups would be allowed to argue their case before the agency regarding the modification of Cameco's license.

In their ruling released Nov 21, the NRC grants status to representatives of the Oglala Sioux Indian Tribe, the Western Nebraska Resource Council, and several individuals. The key environmental issue is whether there is evidence of a hydraulic connection between the Chadron formation aquifer, which provides water for mining, and other aquifers or surface water bodies.

According to the Chadron News Record for Nov 25, the issue of ownership of the mine was raised in two separate arguments. One contention is that Crow Butte failed to disclose its foreign ownership in the license renewal application, However, NRC said it was aware of it when the agency approved Cameco's purchase of controlling interest in the mine ten years ago.

Opponents also contend that the Atomic Energy Act and other laws prohibit the NRC from granting an ISL uranium mining license to a foreign company. NRC agreed the prohibition is clear with regard to uranium enrichment facilities and power plants, but not in regard to "source materials licensing." However, NRC also said the issue is "potentially fatal" to the license renewal.

Other issues of contention, according to the Chadron Record, that will be argued before the agency include:

  • whether the contingency plans for a spill at the mine are adequate to handle non-radiological contamination;
  • whether a past spill raises serious doubts about the company's ability to safely handle mine operations;
  • a claim that Crow Butte failed to consult the tribe on cultural resources at the mine site;
  • if wetlands at the site are being harmed by min contaminants; and
  • whether the most current scientific data regarding the area's hydrogeology was used in preparing the license application.

The NRC ruled the issues relating to past performance at the mine are relevant to the license renewal because the agency must ensure the public that "the facility's current management encourages a safety-conscious attitude" and must provide "reasonable assurance that the facility can be safely operated."

The interveners have until December 21 to submit their briefs. The NRC did not set a date for its next hearing.

# # #

Friday, December 12, 2008

Idaho Falls stands up for Areva

NRC public meeting is rally point for 'Eagle Rock' uranium enrichment plant

drummerOn a cold winter night in Idaho more than 400 people turned out in Idaho Falls packing a hotel conference room to standing room only in a show of support for Areva's planned $2.4 billion 'Eagle Rock' uranium enrichment plant.

In the emotional highpoint of the meeting, Steve Laflin, CEO of International Isotopes (OTC:INIS), turned from the microphone and asked the crowd, "will everyone who supports construction of the plant in Idaho Falls please stand up." The room lifted off as one to drum beat applause.

The focus of the meeting was the kick-off by the U.S. Nuclear Regulatory Commission (NRC) on public involvement in the enrichment facility license application and review process.

NRC said they wanted to know if there was strong community support in Idaho for the plant. No question they received a clear signal about community support for the site.

Areva must get a license for the facility in order to break ground at a site 18 miles west of town. The NRC license review process is expected to take just under three years which targets the first shovel of dirt being moved in summer 2011. The plant is expected to generate 800 construction jobs and 300 permanent jobs when it is fully operational in 2014.

Community economic development agencies, including Grow Idaho Falls, told the news media that with a world class company like Areva coming to Idaho Falls, others will want to come as well.

On the net

  • NRC web page for Areva's license application
  • NRC web page on frequently asked questions about uranium enrichment plants
  • NRC Idaho Falls Meeting Slides (PDF)
# # #

Monday, December 8, 2008

NRC public meeting Dec 10 on Areva's Idaho plant

The federal agency will kick off public participation in the licensing process for the Eagle Rock uranium enrichment plant

Areva's planned $2.4 billion uranium enrichment plant, to be built about 18 miles west of Idaho Falls as the crow flies, needs a license from the U.S. Nuclear Regulatory Commission (NRC) before it can break ground. To that end, the agency is holding a public meeting in Idaho Falls on Wednesday, December 10th, to explain the licensing process.

The agency's objective is to "fully engage the public in a discussion of the regulatory issues."

The agenda for the meeting involves two brief presentations by NRC staff on the licensing process and the environmental impact assessment that is part of it. The majority of the time for the evening will be devoted to public Q&A.

The meeting starts at 6:00 PM with an informal open house and the formal part of the meeting starts at 7:00 PM. It all happens at the Shilo Inn on 780 Lindsay Blvd (map) in the Grand Teton Room. The meeting is open to the public.

More information

If you have questions, you can contact Breeda Reilly at the NRC at Tel: 301-492-3110 or email her at breeda.reilly@nrc.gov

For additional online information see the NRC's web page on Areva's license application and NRC's web page on frequently asked questions about gas centrifuge plants.

Note: Areva refers to the plant at the Eagle Rock facility. The firm maintains a web page of basic information about the plant.

# # #

Sunday, December 7, 2008

Another blogger for nuclear energy

Welcome Marcel F. Williams at the New Papyrus

MarcelWilliamsPlease welcome Marcel F. Williams who is writing on his blog about the future of public power and nuclear energy.

His blog is titled, NEW PAPYRUS The online magazine of science, technology

He also has some ideas about funding the emerging nuclear renaissance despite unprecedented financial conditions for investments in large power projects.

Welcome Marcel. Do well.

# # #

An alternative to nuclear loan guarantees

Betting the company, even with insurance, is a bad idea

poker chipsAdvocates of loan guarantees for new nuclear power plants have argued that federal insurance for 100% of the loans and 80% of the cost of the new plant will provide confidence to investors. The idea is that by reducing lender exposure to risk of default to just 20% of the cost of the plant that investors will provide the funds to build new reactors. In good times this seemed like a good plan.

In the case of a $4.5 billion 1000 MW facility, the formula would result in insurance for $3.6 billion leaving $0.9 billion at risk in the event the project fails. Cost overruns are not insured. Few utilities and even fewer investors would want to be on the hook for $900 million or more. Anyone watching the catastrophic financial turmoil worldwide knows this plan won't work given current circumstances.

Good times have turned to hard times, and with this drastic change, comes the need to take a new look at the funding mechanisms for new nuclear builds. There has to be a better plan, and there could be one that works if a different set of funding mechanisms and organizational arrangements were put in place. The federal government currently funds large environmental infrastructure projects for water pollution control with revolving loans. The model could be applied to building nuclear power plants.

The government as a credit union

The main idea is that the government should set up a revolving loan fund and be the investor of first choice for a nuclear utility. By offering funding at 100% of the cost of the plant, to be repaid over 15 years at a rate equal to a treasury bond, e.g., 4.5%, the government would break even and provide exactly the same benefit to the utility as a loan guarantee. The difference is the government assumes all the risk, not just 80% of it.

powerlinesNeither the utilities nor the investors in the plant would be exposed to a 20% stop loss in the event of default. Smaller utilities like Ameren (NYSE:AEE)would not have to "bet the company" to get in the game. Larger utilities like Duke (NYSE:DUK) could more quickly commit to building new nuclear power plants and retire older coal fired plants and eliminate their greenhouse gases. Most importantly, this arrangement would make moot state laws that strangle new nuclear builds with prohibitions on recovery of construction costs while the plant is being built.

Smart grids needed for the nation

The second organizational arrangement is to set up smart grids to get the electricity to market and to lock in rate bases so that Independent Power Producers don't pick off the most lucrative customers. This organizational arrangement could include regional power consortiums that promote cooperation across state lines and normalize rates of return for the new nuclear plants. Upgrades to the nation's electrical transmission and distribution grids are needed, and the development of regional compacts among utilities would be advanced as a result of lower costs associated with building new nuclear plants.

In short, there are two mechanisms which would be needed to make this idea work (1) a revolving loan fund, and (2) multi-state electric power compacts to speed development of upgraded delivery of electrical power from the new plants. This isn't TVA on steroids because each utility and each state would have to buy-in to each regional compact. Approval by state legislatures would be needed, but that's a good idea because it would build a political consensus for the compacts.

How much how soon?

nuclearenergy1The size of the revolving load fund would need to be on the order of $100-200 billion depending on how fast the NRC completes licensing reviews of the current pile of COL applications now pending before the agency. The fund would remain stable over time allowing for orderly entry of new projects as old ones pay off their loans. There is no reason why similar revolving loan funds could not be set up for other "green" energy technologies including wind, solar, and energy efficiency projects.

There are applications pending with the Department of Energy for $122 billion for 21 reactors worth an estimated $188 billion. That's why a fund of at least $200 billion is a reasonable target. As the money was paid back, the government could make new loans for new plants. This isn't a public works program for its own sake. It puts the government squarely in the role of funding "essential services" the same as for other government functions.

There are some things government must do

finish the jobThis proposal mirrors the idea of TVA because it relies on the principle that there are some things the government must do. One of them is to take on projects that are so large, and carry so much risk, that they exceed the capabilities of the private sector to undertake them. Examples from the New Deal include giant hydroelectric dams in the West. Examples from the 1950s include the Interstate Highway System. Nuclear power plants are similar types of projects.

It is time to recognize reality that if nuclear energy is to be a means for reducing the growth of greenhouse gases, and diminish the threat of global warming, that the government must stop promoting a charade that projects costing four-to-eight billion dollars each, with payback periods of 15 years, can be financed solely by the private sector.

More coal is the de facto fall back choice

It is time for the government and the nuclear industry to cooperate to design a workable plan to fund and build nuclear power plants without the crocodile tears of so-called "fiscal conservatives" who's policy position is simply a de facto choice for more fossil plants and more greenhouse gases.

Anyone who wants to see the alternative can look at South Africa where Eskom just stopped its efforts to award a $12 billion contract for new nuclear reactors. Eskom may have made some mistakes along the way, but the current power shortage, and continued reliance on coal fired plants also has its roots in government ineptitude and short-sightedness over how to fund nuclear plants.

Nuclear energy is a multi-generational commitment

greenhouse_gasesLet's be clear about why we want to build nuclear power plants with a government revolving loan fund. Once that idea is in the spotlight, the real work of preserving the survival of our species on this planet can begin. Government failure, which is reliance solely on limited loan guarantees, insures only one outcome. Our children and grandchildren will inherit a legacy that turns life forms on the earth into crispy critters. If you think this is hype, take a look at the latest figures on the melting Arctic ice pack.

Green groups take note. This model for development of a revolving loan fund at low interest rates can benefit solar, wind, and geothermal projects. The Energy Policy Act of 2005 could be re-written removing loan guarantees for a whole variety of projects, along with their impossibly small limits for insurance. It would open up development of energy infrastructure across the spectrum of technologies now on the market and make a real difference in terms of limiting the growth of greenhouse gases.

I have no idea who the incoming Obama administration will select as the new Secretary of Energy, but this issue goes beyond mere administration of energy policy. This is a leadership issue that requires action by the new president, his top advisers, congress, and the nuclear industry. The Wall Street Journal reports that the incoming administration is thinking of appointing an "Energy Czar" to coordinate climate and energy issues. The funding of nuclear power plants ought to be on the short list of issues this official addresses the first few weeks in office.

Comments are welcome

Comments are welcome. If you have a blog or web site with your own views, pro-or-con, let me know, and I'll post a link here below the text of the article.

# # #

Pebble Bed follows Eskom into funding limbo

Lack of money for light water reactors impacts commercial development of advanced nuclear fuel concept

PebblesThe South African government's inability to fund conventional LWR reactors will significantly slow down development of the new pebble bed technology.

The announcement by Eskom last week that it was canceling its $12 billion tender for conventional light water reactors is having a severe effect on the development of the pebble bed reactor technology.

According to Business Report, commercial development of the Pebble Bed Modular Reactor could be delayed by at least four years from 2016 to 2020. The reason is the government will put its priorities on deploying conventional light water reactor nuclear power plants to meet the nation's crippling electricity shortages. It must raise at least $12 billion from a combination of World Bank loans and from an unprecedented tight-fisted commercial market. This priority will likely leave little funding available to pursue a fast-paced program to develop and deploy an untried advanced reactor technology.

Last February PBMR company chief executive Jaco Kriek said the construction of the demonstration reactor at Koeberg and pilot fuel plant at Pelindaba could be commissioned in 2014 rather than the previous target of 2011 or 2012. Now the date for commercial deployment has been pushed six more years in the future from that optimistic target. The new delay seems wholly related to funding constraints and not with problems developing the reactor design.

rug pulled out warningThe company acknowledged the rug has been pulled out from under it, financially speaking.

PBMR company spokesperson Tom Ferreira said: "PBMR, in close collaboration with the government, is reviewing and assessing its strategic intent and value proposition. These options will take account of the company's own assessment of market opportunities and work done with potential customers and partners."

Ferreira said the PBMR company had enough cash to last until 2010, he said, without indicating how much funding the project had. He also didn't say what would happen after 2010. Regardless of the firm's current position, and its expected burn rate, as things stand now a financially strapped South African government has put PBMR work second in line for new funding.

Former minister of public enterprises Alec Erwin said in 2005 that the government planned to produce 5,000 MW of power from pebble bed reactors, which is 30 PBMR reactors of 165 MW each. This ambitious goal now seems to live in a very distant future.

Government cupboard is bare

In terms of fixing the problems with the country's energy supply, the global financial crisis has put the government over a barrel. How the government will fund conventional light water reactors or advanced pebble bed designs remains a mystery. The Pebble Bed reactor project and an ambitious LWR new build were expected to put the country's GDP back on track. The economy has taken a hits from the effects of electricity shortages.

Over a barrelAccording to World Nuclear News Portia Molefe, director general of the Department of Public Enterprises, said that the government supported Eskom's decision not to go ahead with the $12 billion tender because "it is not affordable at this present juncture."

However, she said, "The South African government remains committed to introducing nuclear because we have to deal with our carbon footprint and we have to diversify our energy mix."

Meanwhile, the delay in South Africa opens the road to commercialization for this technology in China. In October China announced its first commercial project with pebble bed technology.

Efforts to build an advanced high temperature gas cooled reactor in the U.S. are still in the conceptual design stage, and construction is not expected to begin on an R&D prototype until 2016.

Update [Hat tip to Rod Adams at Atomic Insights]

PBMR is aware of how bad things look. Despite the appearances of the project being in dire straights, PMBR spokesmen have put a brave face on the situation. Here's a summary from iAfrica.com business news.

Portia Molefe, the director general of the Department of Public Enterprises - one of the partners in PBMR development, said,

"A decision on the future of the PBMR was to be made, she said. "In terms of its time scale, there has been a time shift," she said. "We shall make an announcement shortly."

Further, she indicated that the department was looking at ways of speeding up the PMBR process, not slowing it down "We are certainly not sounding the death knell for PMBR," she said."

This is an interesting set of statements. On one hand the government is confirming the new delay in the project, and on the other it says it will speed up the project.

Disruptive technologies that require new manufacturing and support infrastructure, as well as new materials, always take longer to deploy than incremental improvements with existing technologies. In the case of PBMR everything is new including the fuel.

There is no secondary loop. It's direct feed of high temperature helium into a turbine. This raises all kinds of technological challenges for materials. If you lower the temperature of the helium coming off the reactor to use conventional materials, you lose efficiency. If you emphasize a secondary loop for process heat steam, you give up the economics of generating electricity as the primary benefit. There is no such thing as a "free lunch."

This post will be updated as PBMR and the government of South Africa sort things out.

Prior coverage on this blog