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Worldwide nuclear energy revival powers uranium exploration boom - Business in Vancouver, Issue #848 – January 24-30, 2006

Vancouver mining companies riding upward spiral of global demand for the commodity

Krisendra Bisetty

Global fuel supply security concerns have helped kick-start a nuclear power renaissance that's generating multiple opportunities for British Columbia uranium miners.

A correspondingly tight inventory of its essential ingredient, uranium, has pushed the commodity's price to levels not seen since the 1970s.

Uranium mines, some previously mothballed, are running at capacity. Exploration, meanwhile, has increased rapidly while both producers and mining companies are seeing their stock prices surge to record highs.

Canada is the world's top uranium producer, with the largest known high grade deposit in Saskatchewan's Athabasca Basin. The site has reserves estimated at 800 million pounds, the equivalent of 19 billion barrels of oil or four billion tonnes of coal, according to the Canadian Nuclear Association.

Eager to cash in on nuclear fuel's resurgence, Vancouver mining junior Mawson Resources Ltd. (TSX-V:MAW) has staked out a 5,000-hectare claim in Sweden, which it believes has the potential for a "world class" uranium deposit of about 100 million pounds, even though the country does not allow uranium mining and will phase out its nuclear power program by 2007.

"We've taken a strategic position over some large uranium assets and if and when Sweden changes its policy to uranium mining, we're extremely well positioned," said Mawson's president and CEO, Michael Hudson, who's counting on a September election that could change both the Scandinavian country's government and its uranium mining policy.

He added that despite Sweden's current position, it and other European countries are re-examining nuclear power for several reasons, including a recent natural gas price dispute between Russia and Ukraine.

The confrontation, which resulted in Russia temporarily halting gas sales to Ukraine, was likely the reason uranium stocks rallied considerably in the first few days of trading in 2006, GMP Securities analyst Duncan McKeen said in a report on the nuclear fuel market.

In addition, both Germany and Britain are heavily dependent on natural gas and are reviewing their future energy policies.

Hudson also pointed out that renewable energy sources "have not stepped up to the plate" and cannot satisfy the insatiable energy demands of countries like China and India.

Globally, 41 new nuclear reactors are being planned and 25 are under construction, including four in Russia and two each in China and Japan. They will be added to the world's inventory of 438 reactors, about half of which are in the U.S., France, Japan and Russia.

Hudson said available uranium supplies will therefore be squeezed further, another reason that Mawson, which was floated on the Toronto Stock Exchange in 2004, has begun exploring for the commodity.

"Uranium has gone from US$7 a pound to US$36 a pound in the last two to three years ... . That makes for a very profitable mine if and when you can get them started."

Mawson's share price, which was around $0.43 in October 2004, rose to $1.76 shortly after the company announced its Swedish claim.

In his January 9 report, McKeen said the nuclear power renaissance is being driven not only by concerns around fuel supply security but also because of a need to diversify energy sources.

He added that "leading uranium-producing countries, such as Canada and Australia, are considered less risky as supply sources than some of the countries currently supplying coal and natural gas."

McKeen said another bonus is that nuclear power doesn't emit greenhouse gases, which is a critical factor as the world adopts cleaner energy policies.

Production from existing uranium mines satisfies just 55 per cent of current annual global demand of 180 million pounds. The balance comes from inventories and decommissioned weapons, said Doug Cannaday, president of Vancouver energy junior Dejour Enterprises Ltd. (TSX-V:DJE), which is aggressively exploring for uranium in Saskatchewan.

"Although it's impossible to get an absolute handle on what those inventories are, it's believed to be less than a three-year supply out there, and when you consider it takes seven to 10 years to identify a commercial mine and put it into production, what the marketplace sees is anywhere from a four, five, possibly six-year huge shortfall."

Cannaday said there are about 280 mining juniors in the North American market exploring for uranium, a commodity 500 times more common than gold.

Other Vancouver companies include Western Prospector Group Ltd., which recently announced two new discoveries in Mongolia, and ESO Uranium Corp. (TSX-V:ESO), which completed $4.7 million in financing last December for exploration in the Athabasca Basin.