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Tuesday, 20 September 1994
Page: 1027

(Question No. 1702)

Senator Coulter asked the Minister for Primary Industries and Energy, upon notice, on 31 August 1994:

  (1) Is the Minister aware of: (a) the considerable reputation the uranium broker, Nuexco, enjoys in the marketing sector of the uranium industry; (b) a report by Mr George White, President of Nuexco, entitled The Future for Nuclear Power and the Uranium Market which includes a figure 6 indicating that all reactor consumption up to the year 2010 could be met from civilian U308 and ex-military highly enriched uranium (excepting specifically military-dedicated material) from the US and the Commonwealth of Independent States, without mining another tonne of uranium in that time; and (c) statements in the same Nuexco paper, according to which the current rate of uranium inventory drawdown could proceed for 30 to 40 years before production actually needs to be expanded.

  (2) Has the department analysed the relationship between current spot prices and actual costs of production; if not, why not.

  (3) What are the current costs of production for Ranger-3, as compared with costs of production for the Jabiluka deposit.

Senator Collins —The answer to the honourable senator's questions is as follows:

  (1) (a) I am aware of the role of Nuexco in the nuclear fuels market which is not just as a uranium broker. The company also trades significant volumes of uranium and its owner, Concord Resources, also has interests in some United States mines which are currently non-operational. Nuexco is thus a market participant and its analysis of market trends ought to be treated with the same degree of caution as that of any other market participant.

  (1) (b) I am aware of the paper by Mr George White Jr, Senior Vice President of Nuexco, entitled The Future for Nuclear Power and the Uranium Market, including figure 6 that compares world natural uranium requirements with inventories. In this paper White stated that world uranium inventories, including military highly enriched uranium, provided enough material to fuel world requirements to beyond the year 2005. I also note, however, that:

  (i) a substantial portion of the Nuexco figure for civilian inventories comprises Russian stocks, the size of which has been subject to considerable conjecture.

  (ii) Russia has indicated a preference to keep its civilian uranium stockpile for domestic use and for exports to the West to be based on natural uranium production and provision of enrichment services;

  (iii) the only firm proposal for diverting military highly enriched uranium to the civil market is under the US-Russia agreement finalised last January. The 500 tonnes of highly enriched uranium under this agreement will be gradually absorbed into the civil market at the rate of 10 tonnes a year for the first 5 years and 30 tonnes a year during the remaining 15 years of the agreement. The agreement is also understood to stipulate that the material will be marketed in a manner that minimises any market disruptions;

  (iv) White also postulated in his paper that it was possible that politics will keep any additional military stocks from entering the civil market, in which case Nuexco expected civilian inventories to reduce to minimum levels in less than 5 years. The investment by Concord, Nuexco's owner, in standby uranium production capacity in the US suggests that it expects this to be the more likely scenario.

  (1) (c) The statement in White's paper that the current rate of inventory drawdown could proceed for 30 to 40 years before production needs to be expanded is based on the unlikely assumption that stocks of all military highly enriched uranium will be made available to the civil market.

  (2) Current spot uranium prices are below production costs of virtually all uranium mines and would generally need to firm to induce any new production. However, even in today's depressed market there are still some utility buyers willing to pay a premium to assure long-term security of

uranium supplies, so current spot prices should not be regarded as necessarily indicative of prices available under long term contracts.

  (3) Details of production costs are commercial in confidence.