Monday, April 7, 2014

Fossil Fuels Still Rule But Don't Worry -- We Have Plenty Of Uranium

The 2014 Annual Report of the AAPG Energy Minerals Division Committee (Michael D. Campbell, Chair) just came out and its findings are quite interesting (EMD Uranium 2014). It’s a good read if you want to know the state of uranium in the world, but also covers a lot of material on all energy fronts. I have taken freely from it for this post. Full disclosure – I am on the Advisory Group to this committee.

Energy minerals focus on ores of uranium, thorium and helium-3 as materials useful for fission and fusion reactors. But rare earth elements (REE) and other energy-important or high-tech materials are also included (see figure below). Although coal is the most developed of all energy minerals, it has its own category and is not included in EMD analyses. Oil and gas are not minerals as they do not have a defined three-dimensional arrangement of their atoms in space, the definition of a mineral.

The common wisdom, that limited uranium supplies will prevent a substantial increase in nuclear energy, is incorrect. We have plenty of uranium, enough for the next 10,000 years. But uranium supplies are governed by the same market forces as any other commodity, and projections only include what is cost-effective today. Like natural gas, unconventional sources of uranium abound.

The energy stage for this report was set by the U.S. Energy Information Administration’s International Energy Outlook 2013 projections that global energy use between 2010 and 2040 will grow by 56%, from 524 quadrillion British thermal units (Btu) to 820 quadrillion Btu (EIA today). Most of this growth will come from outside the Organization for Economic Cooperation and Development, in non-OECD countries (the developing world) where demand is driven by steadily-increasing economic growth (OECD).

In general, the outlook for significant changes to the world’s energy mix is not good, and business-as-usual appears to be winning over significant change towards alternative energy sources. Global energy-related CO2 emissions are projected to increase by 46% to 45 billion metric tons in 2040. Fossil FOSL -2.66%-fueled economic growth in developing nations accounts for most of the increased emissions. Actions taken by the U.S. and Europe will have little effect on global output.

The world’s fastest-growing energy sources are renewables and nuclear, but both are only increasing by 2.5% per year. Fossil fuels, however, will still be supplying well over 70% of the world’s energy consumption through mid-century unless China and India increase new nuclear power plant construction in place of coal plants, and renewables grow much much more than projected.

Natural gas is the fastest-growing fossil fuel, as global supplies from tight sands, gas shales, and coalbed methane increase (EIA detail). Coal is expected to decrease as a source of power generation as natural gas, nuclear, and renewable energy increase.

Industry continues to use the largest share of delivered energy produced, and projections indicate it will consume more than 50% of global delivered energy in 2040.

While the report focuses on the status of the uranium industry, other industries are discussed. Following is a list of the Committee’s key findings concerning energy minerals with a rather complete discussion of uranium resources.

• Japan will most likely re-start many of their nuclear reactors with improved safety factors over the next few years because Japan has no realistic alternatives. They will remain the third-largest user of uranium in the world.

• The current status of U.S. reactors include 100 reactors in full operation, 5 under construction, 25 in the planning/permitting stage, and 32 in permanent shut-down or retirement.

• China has 20 operating nuclear power plants (only 1% of their total power produced), another 28 under construction, and has brought 3 nuclear plants on-line in 2013. An additional 50 nuclear plants are in the various stages of planning and permitting.

• 2013 U.S. uranium production increased by 16% over that of 2012, the highest production since 1997. At present, 83% of U.S. nuclear fuel demand is met by foreign sources, such as Canada, Australia, and Kazakhstan.

• Uranium spot prices will likely remain around $35/lb for yellowcake (U3O8). However, upward cost pressure is growing because of future demands from China, Japan, and new construction.

• China is considering the use of thorium technology in their nuclear-reactor designs to reduce their growing need for uranium. Thorium is under serious study to replace uranium in reactors via Thor Energy and a consortium involving Westinghouse and others.

• Canada continues to produce world-class uranium deposits in the Athabasca Basin in northern Saskatchewan with record high uranium grades above 20% U3O8. Cameco CCJ +1.07%’s Cigar Lake deposit in Athabasca Basin is expected to produce 18 million pounds of U3O8 by 2018 or about 9% of the world’s uranium supply per year. Cameco also owns and operates the McArthur River Mine in the Athabasca Basin, which produces about 13% of the world’s supply.

• Australia’s Olympic Dam uranium mine is owned by BHP Billiton and produces about 6% of the world’s supply. Australia’s Ranger uranium mine is owned by Energy Resources of Australia produces about 5% of the world’s yearly uranium supply. Other uranium mines in Australia also rank high in production, such as the Beverly and Honeymoon Mines, with the Four-Mile Mine nearing production. In Western Australia, Cauldron Energy is having success with its metallurgical testing of its Bennet Well deposit and is preparing for production in the hopes of increases in U3O8 prices.

• Giant uranium producer, Rio Tinto, is having environmental problems with leaching-tank leaks at both the Ranger Mine in the Northern Territory of Australia and at its Rossing Mine in Namibia (SW Africa).

• Kazakhstan mines produce about 36% of the world’s yearly uranium supply, most of which go to Russia and China.

• Argentina has a number of uranium deposits under development to fuel their two existing nuclear reactors, with a third reactor coming on-line in 2014.

• Greenland’s Kvanefjeld deposit in the Ilimaussac Complex located in Southern Greendland is under development by Greenland Minerals & Energy, Inc. and contains significant uranium, rare earths, and zinc. The local and national governments are supporting the project.

• Mongolia has substantial uranium resources. Russia mined these deposits to 1995, and then resumed in 2008. Russia is negotiating to develop other deposits in the area but is having issues with the political risks involved within the government. Mongolia is attempting to improve its nuclear mining regulations and laws.

• In Africa, Gabon, Mauritania, and Zambia have emerged with viable uranium resources; but doing business in such remote regions are challenging both financially and geopolitically. Some mines in Africa are closing in response to these difficulties.

• Tanzania has a number of developing uranium deposits. The East African Resources, Inc. (EAR) has arranged financing to fund further exploration on its Mabada deposit. Other deposits are under development by EAR with a South Korean group and by a Russian group (Uranium One).

• India is looking to Central Asia to meet its uranium needs, such as Uzbekistan, Kazakhstan, and Mongolia, as well as Australia.

• Reports have surfaced that China now controls the market on up to 15 strategic minerals including REEs and graphite, while Russia exerts major control on palladium, platinum group metals, and nickel, as well as uranium via Kazakhstan.

• The U.S. DOE has identified five elements of the REE group as the most critical to U.S. industry: dysprosium, neodymium, terbium, europium, and yttrium. These elements are key components for high-tech magnets, lasers, semiconductors, lamps and special glass. Concerns are that China may be only able to produce enough heavy REEs to supply its own needs leaving the world with an inadequate supply.

• To counter this problem, the State of Alaska is helping to fund a rare-earth mine, Ucore Rare Metals, Inc. In Canada, the government is considering providing funds to secure REE supplies via Pele Mountain Resources, Inc. In Europe, Tasman Metals, Ltd. could become a dedicated supplier of REEs to the European Union.

• Ocean-Floor Mining permits by the United Nations continue to increase in the Pacific, Mid-Atlantic, and Indian Oceans. Ocean-Floor Resources may contain more than 27 billion tons of nodules consisting of over 290 million tons of copper, 340 million tons of nickel, and very large reserves of REEs. The environmental challenges will be different than for mining on land, but should be better since removal of material will be minimal compared to land mining and no processing will occur within the ocean.

It appears from this report that sufficient mineral resources exist to support significant growth in nuclear and renewable energy, and high-tech industries, but that fossil fuels will continue to dominate the world’s energy supply.

If we want to change this future, we will have to change the developing world more than our own.

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