Head of Kazatomprom Arrested, Kaz Government Investigates JVs Cemented by Dzhakishev

This article originally appeared in Fuel Cycle Week #329, 5/27/09

By Nancy E. Roth, Managing Editor, Fuel Cycle Week

By all appearances, the first months of 2009 were exceptionally fruitful for the state-owned uranium producer Kazatomprom. If in fact one were watching the uranium industry in isolation from the rest of the Kazakh economy during this period, the past week’s sudden removal and later arrest of Kazatomprom chief Mukhtar Dzhakishev and several other high-level executives might come as quite a jolt.

Since January Kazatomprom has signed a momentous and lucrative nuclear cooperative agreement with India
(FCW #313, Feb. 4); begun two new mining ventures with China Guangdong National Power (FCW #314, Feb. 11); sold a 50% stake in its Budyonnovskoye deposit to Russian state-owned miner ARMZ (FCW #320, March 25); approved the ramp-up to commercial production at South Inkai, its joint venture with Canada’s Uranium One (FCW #309, Jan. 7)—plus launched operations at the Kharasan-1 mine, which it co-owns with Uranium One and a Japanese consortium (FCW #325, April 29). Meanwhile Uranium One’s two commercially producing mines in Kazakhstan, in each of which Kazatomprom owns a 30% stake, bumped their first-quarter 2009 output up 62% over that of the same quarter in 2008 (FCW #327, May 13).

Similar successes throughout Dzhakishev’s years at the helm of Kazatomprom have ushered Kazakhstan into the spotlight as a key player in the global uranium market. Last year the company announced plans to generate 30% of world uranium supply by 2015. It reported a total 2008 output of 8,500 tU (22.1 million pounds U3O8) and set a production goal 12,000 tU (31.2 million pounds U3O8) this year. When Dzhakishev took over in 1998, the nearly bankrupt Kazatomprom produced 1,073 tU (2.8 million pounds U3O8), according to the World Nuclear Association.

Economic Woes Plague Government

Nevertheless, the Kazakh economy, which had been racing along at double-digit growth rates, veered off track and crashed in the global recession. The teetering banking sector, particularly the country’s largest bank, BTA, barely survived. In February the government of Nursultan Nazarbaev stepped in and nationalized BTA, reportedly investing about $2 billion in it to date.

The head of the bank’s board of directors, Mukhtar Ablyazov, who may or may not have mismanaged the institution, quickly became a target for the government, which appears to be seeking scapegoats. Accused of criminal activities that allegedly drove the bank to its near collapse, Ablyazov, reportedly a personal friend of Dzhakishev, fled the country with his family in March. This week some in the Kazakh opposition have pointed to the personal connection in casting Dzhakishev’s later arrest as politically motivated.

Indeed, his position rapidly unraveled only weeks after Tatyana Kvyatkovskaya, a prominent former member of parliament, publicly accused him of collaborating with Abliazov to deprive the state of its most valuable uranium assets by selling them at a ridiculously low price to foreign concerns.

One of Dzhakishev’s central strategies in building Kazatomprom was to establish joint ventures with foreign partners that could offer skills and technology that would equip Kazakhstan with capabilities in producing higher-value products, such as fuel pellets and fuel assemblies. This would free the nation from its role as only the origin point for raw uranium resources and help diversify its economic base.

Over the last few years the uranium producer struck commercial agreements with companies from Japan, India, China and Canada in pursuit of these technologies. Its nuclear cooperation deal with India, which was sealed in January, illustrates Kazakhstan’s interest in India’s nuclear technology and expertise. Ironically, it was these joint ventures that emerged as a factor in Dzhakishev’s expulsion.

After sacking him on May 21, Kazakh officials arrested him on Monday, apparently detaining him on suspicion of wrongdoing rather than lodging specific charges as yet. The press has speculated that he will be charged with a range of crimes, including theft, embezzlement, corruption and collaboration with Ablyazov. Vladimer Shkol’nik, the former Kazakh minister of industry, was named as Dzhakishev’s replacement.

“Business as Usual” for Miners

Miners with projects operating or in development in Kazakhstan told
FCW that they were alert to the full range of scenarios that could develop. But they thought the government’s actions were “all motivated by other issues,” as Uranium One Executive Vice President Fletcher Newton said.

Newton, speaking by phone from Moscow, said he was more concerned about rumors raised by speculative press reports than by anything the government has done to date. “We’re not concerned,” he said. “We’re not named in any official press release,” including the most recent on the state security service.

“We have never bought anything from Kazatomprom. ... We feel very strongly we paid full value for the properties and the deal was approved by the Kazakh government.”

He acknowledged that the government did not offer the most transparent environment for doing business. “They can monkey around with [the agreement] if they want to,” Newton said. “But they have to understand this: we have 30 million pounds of their material under contract. If something happens to that they will become a pariah in the industry.”

But Newton thought the appointment of Shkol’nik, who he said has “experience, is very measured, very solid.” Shkol’nik in fact had signed on behalf of the government the property purchase agreement with Uranium One.

In a statement released today, Uranium One noted that some press reports had indicated that the Kazakh investigation was focusing on the Kyzulkum joint venture, in which the company owns a 30% stake.

“Uranium One’s Kazakh assets were acquired in November 2005 from a group of Kazakh investors by UrAsia Energy Ltd., which became a subsidiary of Uranium One in April 2007. UrAsia paid full value for those assets,” the statement said.

Cameco spokesman Lyle Krahn said the company was also not worried about the new development. “We have no reason to be concerned,” he told
FCW. “We are aware that things can change quickly. We’re experienced in dealing with similar situations.”

In Cameco’s view the key to success lies in its policy of developing long-term local relationships, and to be “open and transparent” in all its dealings, said Krahn. “We have relationships going back to the 1990s. We know how the country operates. These situations occur from time to time. It’s business as usual.”

Asked if Cameco still expected its Inkai mine to achieve commercial production in 2009, the spokesman said, “That’s still correct.”

Trouble at Chalk River Bodes Poorly for AECL; AREVA Rubs It In

By Jacob Mazer, Assistant Editor, Fuel Cycle Week

Uh oh! The troubles just keep piling up for Atomic Energy of Canada Ltd. The company is catching heat following the May 15 shutdown of the medical isotope-producing Chalk River, built by AECL in 1957. The cause this time is a radioactive heavy water leak from the reactor. The problem is yet to be determined, and sources connected with the facility told Canwest News Service that it could be eight to twelve months before the reactors restarts operation—that is, if it restarts at all.

Medical isotopes play a critical role in the detection and treatment of some cancers. Unfortunately, Chalk River is the major medical isotope source for much of the world, providing about 80% of Canada’s supply and about 40% of the world’s, some 20 million patients in 80 countries. The medical isotopes have a short shelf life, and the last batch from Chalk River was gathered last week, leaving the rest of the planet scrambling to make up for the missing production.

Canada has had little in the way of a back-up plan for the Chalk River reactor ever since AECL decided in 2008 to scrap the intended the years-over-deadline and millions-over-budget MAPLE reactors that were intended as replacements due to design flaws. Much ire has been directed at the government for failing to produce an alternative, but it doesn’t exactly cast a flattering light on AECL either, especially as the company struggles with high stakes to win a contract for two reactors at Ontario’s Darlington nuclear station.

Elizabeth May, leader of Canada’s Green Party, went so far as to call for an inquiry into to AECL’s conduct, and suggested that given its track record, the company would be a poor selection to build the Darlington reactors.

The Organization of CANDU Industries, which represents a force of more than 30,000 Canadians working on AECL’s supply chain, came quickly to the defense of the company. “If you look at projects where AECL has been building power reactors, they probably have one of the best records of any constructor in the world...these comments are incredibly irresponsible,” said Organization President Neil Alexander. If the statement sounds a bit defensive, it may be due to an awareness of the potential effects that AECL’s bad press could have on all those jobs.

Those eager beavers at AREVA, always willing to lend a hand, were quick to offer their resources. “AREVA is ready to provide all the support that you will deem necessary to reduce the health impact of the current isotope shortage,” read a letter from AREVA Canada President Armand Leferrere to Canadian Natural Resources Minister Lisa Raitt and Health Minister Leona Aglukkaq. It should be noted that said resources are fairly spare. Leferrere offered to "facilitate contact with European isotope producers," as well as to assist with repairs. He noted that AREVA could possibly alter some European research reactors to produce isotopes, but that the process could take "several" weeks.

It's hard to know how seriously to take that claim, or even how much help AREVA's resources would actually be. But this is not really about the isotopes. AREVA, along with Westinghouse, is competing with AECL for the Darlington contract. We won’t be so bold as to suggest that the offer might be a show of greater capability and competence that the competition—but perhaps you will be bold enough to infer it.

Judge Highlights Waste Laws’ Ambiguities in ES Decision

This article originally appeared in Fuel Cycle Week #328, 5/20/09

By Nancy E. Roth, Managing Editor, Fuel Cycle Week

Judge Ted Stewart’s 31-page decision in favor of the key argument of EnergySolutions, calls attention to how muddled and conflicted the nation’s waste-disposal laws are, and how seriously they had complicated his deliberations. The U.S. District Court for the District of Utah judge repeatedly pointed out the legal contradictions among three pieces of congressional legislation: the 1980 Low-Level Radioactive Waste Policy Act; the 1985 Amendments to the 1980 Act; and the Omnibus Low Level Radioactive Waste Interstate Compact Consent Act, which served to obscure rather than reveal the intentions of Congress in regard to the authority of the interstate waste compacts.

In the lawsuit, which EnergySolutions filed last May, the private waste-disposal firm argued that that the Northwest Low-Level Radioactive Waste Compact lacked the authority to prevent the company from importing and processing low-level waste from Italy and disposing of the remains at EnergySolutions’ low-level waste facility Clive, Utah. The Northwest Compact, of which Utah is a founding member, argued that it had acted under the express authority Congress had conferred upon it to regulate low-level waste. The state of Utah and the Rocky Mountain Low Level Radioactive Waste Compact were codefendants in the suit.

Laws a Jumble of Conflicting Intentions

In the introduction to the decision Judge Stewart distilled the cross motions for summary judgment into a single question: “what did Congress intend when it enacted statutes in 1980 and 1985 addressing the disposal of [low-level waste]?” The judge described how he sought guidance from the provisions of the three acts on the legislative limits on the Northwest Compact’s authority over out-of-region low-level waste, and the nature of the disposal facilities within the compact’s borders that fall under its authority. He found, however, that “the plain language of the Acts is insufficient to resolve the issue before the Court” and so delved into the pertinent legislative debates in the House and Senate.

Although Judge Stewart displayed a remarkably sympathetic understanding of the historical and political concerns that shaped the legislation, he did not find what he was looking for: “Unfortunately, a resort to the legislative history of the 1985 Act and Consent Act to determine Congressional intent regarding the scope of compacts’ exclusionary authority yields very little in the way of clarification.”

NW Compact Failed to Convince Judge

In laying out the ruling Judge Stewart clearly disagreed with certain of the Northwest Compact’s actions and arguments.

For example, the judge described how Northwest tried to pass off a hasty amendment to its rules on out-of-compact waste as “merely a clarification” of the existing rules. The amendment, which the compact’s governing body passed on May 8, 2008, specifically prohibited the Clive facility from accepting foreign waste. But the judge rejected the maneuver: “The Court finds that the May 8, 2008 resolution cannot be considered merely a clarification, but is, instead, an amendment of the approval previously granted by Northwest.”

He also spurned the contention of the Northwest Compact and the state of Utah that the compact has authority over the Clive facility because the state licenses it. “That argument is without merit. ... The Court finds that the Clive Facility was not established by Northwest, that it is not operated under Northwest, as required by the 1980 and 1985 Acts, and that the State’s regulatory requirements are insufficient to designate the Clive Facility as a regional disposal facility.”

Northwest also could not effectively dispute the EnergySolutions claim that the Italian low-level waste was “scientifically indistinguishable” from material it now receives at its Clive facility.

“Northwest concedes that the Italian [waste] is classified as Class A [low-level waste],” the judge wrote, adding that the only argument the compact and the state mounted was that they had “insufficient information” to make any claim about the waste.

Potential Abuse of Authority Worried Judge

What appeared to tip the scale toward EnergySolutions was the judge’s concern that granting compacts “blanket discriminatory authority” over acceptance of low-level waste could defeat the primary purpose of the legislation, which was to ensure that the U.S. would have sufficient waste-disposal capacity. “For example, a compact would be well within its authority to effectively shut down any [low-level waste] facility within its boundaries, simply by denying it the right to receive [waste] from inside or outside of the compact region,” he wrote.

Northwest admitted under questioning at the Feb. 26 hearing that “under its interpretation of the 1985 Act, it had authority to do just that, although it disclaimed any such intention,” Judge Stewart noted.

Nevertheless, the judge was “troubled by the potential for abuse” if private low-level waste facilities were “left so completely at the whims of the compacts. Uncertainty thus created may be sufficient to deter private efforts...and thereby frustrate, in part, the intent of the Acts.”

Therefore, although the laws did not offer Judge Stewart a clear account of congressional intentions in regard to the compacts’ authority, he saw that upholding the compact’s arguments could lead to a scenario directly conflicting with the laws’ purpose.

He ultimately could not decide the case on what Congress unambiguously intended, but what Congress did not unambiguously intend: “After careful consideration...the Court finds that the Consent Act does not express an unambiguous intent by Congress to grant the nearly unlimited exclusionary authority over LLRW disposal within the compact boundaries which is claimed by Defendants.

“Northwest has authority only to restrict access to its regional disposal facility. Because the Court finds that the Clive Facility is not a regional disposal facility, the Court finds that Northwest has no authority to restrict the flow of out-of-region waste to the Clive Facility... .”

NRC Review: In for More Roadblocks?

The Nuclear Regulatory Commission issued a statement on Wednesday that said in light of the May 15 decision it was “seeking the views of the potential parties” on how it should proceed in evaluating the EnergySolutions application for a license to import the waste.

The deadline for submission of comments is June 19, with replies to follow by June 26. NRC spokesman David McIntyre told FCW that the intense public interest in the resolution of the issue would likely push it to the upper end of the commission’s list of priorities. “There’s no interest in holding back,” he said, although he also stressed that the Commission would not rush to approve the application either.

But other events could derail the NRC review. The House or Senate could rev up the moribund Radioactive Import Deterrence Act, which Rep. Bart Gordon (D-Tenn.) and Sen. Lamar Alexander (R-Tenn.) both introduced on Jan. 14. Gordon’s bill had 79 cosponsors as of April 18, but it has not moved since it was referred to the House Ways and Means Committee. Its Senate counterpart has similarly languished in the Senate Environment and Public Works Committee. The decision will undoubtedly stir up activity on both bills. Should the bill pass in Congress it would again sandbag to commission’s process.

Also, the Northwest Compact and its codefendants have 30 days to file an appeal. A spokesman from the Utah Attorney General's Office told the Deseret News on Friday that a decision to appeal was under review. McIntyre said an appeal would again put the process on hold.

Nunatsiavut's Uranium Ban Stands as Economy Sags

By Jacob Mazer, Assistant Editor, Fuel Cycle Week

Atlantic Canada is feeling the impact of the global recession, and feeling it hard. A new report by the independent Atlantic Provinces Economic Council finds that the region lost 7,400 jobs last month despite a growth of 36,000 jobs in the rest of the country. Newfoundland and Labrador in particular have seen hits to employment with job losses of 1.9% since October.

Despite these conditions, the Inuit government of Labrador's Nunatsiavut area is upholding the ban on uranium mining even as jobs disappear. The legislature passed the three-year ban in April 2008, prohibiting any mining, development, or production. Exploration is still permitted; however, not much of it is taking place. Only three junior miners applied to conduct exploration work this summer, and none of them will be drilling any test holes.

Not only is the uranium industry in the region stagnating, it is actively shrinking. The most promising project in the area is Aurora Energy's Michelin deposit, containing a Measured and Indicated Resource of 30,000 tonnes (66.1 million lbs) U3O8. One year ago, Aurora Energy employed more than 200 people; these days, it employs only eight.

To the credit of the Nunatsiavut (which only gained its limited autonomy at the end of 2005), the reasoning for the ban is to give the government time to develop a land-use plan and an environmental framework, rather than just the old and dusty anxieties about the consequences of uranium mining (though this has something to do with it as well). Lands and Resources Minister Todd Broomfield's tone suggested plans for future mining as he implored workers to have patience. "Hang in there. These companies aren't going away. We have the mineral. We have to do this before we allow major developments on our land. I think it's very important to take the time to do this right."

Nonetheless, patience is hard when you're out of a job. It must especially ache to see the fruits of uranium mining displayed elsewhere, as in the case of West Australia where BHP Billiton is commencing development at the Yeelirrie deposit following the November 2008 reversal of the territory's ban on uranium mining. The project will require about 700 workers during construction and about 300 once production begins in 2014. BHP Billiton's projections envision the production of about 5,000 tonnes (11 million lbs) of uranium per year over a 30-year stretch, translating to about US$13 billion in revenue over the mine's life.

Prior to the WA ban's reversal, exploration was also permitted. In West Australia, miners operated with the knowledge that mining would inevitably be legalized and poured energy and funds into exploration and development within the legal limits so that projects could get up and running quickly once the law changed. A similar phenomenon is taking place in Queensland, where hundreds of exploration permit have been issued despite certainty that the territory's uranium mining ban will last until at least 2012. Nunatsiavut should note the example and work with companies to make the settlement fertile ground for the industry as it works out its policy instead of blocking development in a time of economic need.

Is Honest Discourse Too Much To Ask of Vermont Legislature?

By Jacob Mazer, Assistant Editor, Fuel Cycle Week

There's been a lot of hubbub lately surrounding the Vermont Yankee nuclear plant. The state's House is looking at a bill that would force the plant's owner, Entergy, to fill a fund for the decommissioning of the site within the next decade in case the plant is not granted license to extend operations from 2012 to 2032. The Senate version of the bill required the fund to be filled only if the plant is spun off to proposed Entergy offshoot Enexus (the move is currently under review by the Vermont and New York Public Service Boards). The fund currently contains about $400 million after losing some value in the recent economic downturn. Costs to fully decommission the plant are estimated at about $900 million.

Vermont Governor JIm Douglas (who vetoed a similar bill last year) and Public Service Commissioner David O'Brien have both spoken against the legislation, noting that the terms of Entergy's purchase of Vermont Yankee allowed the company to avoid payment into the fund—a trade-off for the low rates charged for the power the plant generates.

Given this existing agreement, it's not difficult to see the decommissioning fund legislature for what it really is: an attempt to disrupt the use of nuclear power by any means. Indeed, the debate over the legislature is really a proxy for the question of whether or not to continue the use of nuclear power in Vermont. Not that there has been any shortage of discussion on this issue, with the extension of Vermont Yankee's operating license still up in the air.

While going through some of the Vermont Yankee crossfire in the local newspapers, I came upon some choice (generously, we'll call them) misconceptions about nuclear energy that bear repeating. A letter to the Rutland Herald claims that if Vermont Yankee were "really clean or green, then there would not be state laws mandating Entergy to return the site to greenfield condition after ending reactor operations." In fact, the return to greenfield status is a common requirement for many decommissioned industrial projects, including most power plants, be they coal, gas, or nuclear.

Another letter to the Times Argus referred to "the sneaky connection between nuclear reactors and the military, with "depleted" uranium...and nuclear bombs, which are all part of the atom smashing process."

This comparison is akin to banning portabello mushrooms because the amanita phalloides is poisonous.

No one can claim that the Vermont Yankee plant has been free of problems (mostly related to sloppy upkeep practices), and Entergy has not helped the case by delaying, half-assing, and otherwise dragging its feet when it has come to fixing them. But the Vermont Yankee Public Oversight Panel, an independent body convened by the Public Service Commission, concluded in March that the plant can be "operated reliably and that the current level of reliability can be maintained through an extended operating period" provided that a few identified management and equipment issues are addressed. These issues relate to tighter management and inspection practices and equipment replacement, problems that can easily be addressed.

In the meantime the reactor retains its essential integrity and the plant provides Vermont with cheap, reliable energy and high-paying jobs. The plant should continue to operate, and Entergy should be required to fill the decommissioning fund according to the terms of its license from the NRC, not the reactionary, ill-informed guidelines the antinuclear groups prefer.

Hyperion Valued At $100 Million

By Jacob Mazer, Assistant Editor, Fuel Cycle Week

Hyperion Power Generation has received media attention this week, with articles that observed in wonderment the company’s $100 million valuation—a significant sum, especially given that its product is an untested technology several years from deployment.

The company plans to sell a line of miniature nuclear reactors—we’re talking 6-foot by 10-foot miniatures—that would generate 70 MW of heat and 25 MW of electricity, each running at about $25-$30 million.

Hyperion believes the reactor will be particularly appealing to developing nations that may not have the transmission infrastructure to support larger generation facilities.

The company’s business plan is equally ambitious, with designs to open as many as eight manufacturing facilities across the globe, for a combined potential to fabricate 1,000 reactors per year.

Idaho and New Mexico are offering tax incentives to attract these plants, CEO John “Grizz” Deal said, and joint-venture discussions are underway in Eastern Europe, Asia, and Australia. “We are four years away from putting the first reactor in the ground,” Deal said.

Given the different facets of this plan, that’s a lot of optimism, verging in some respects on wishful thinking. The four-year timeline until deployment proposed by Deal is plainly not feasible when one considers the time needed for the design review and certification by the Nuclear Regulatory Commission.

The point is confirmed by NRC Spokesman John McIntyre. “I can’t comment on Hyperion’s business projections, but the certification and approval of the small reactor design will take several years,” McIntyre said. Furthermore, a lousy world economy has not made the financing of large industrial projects any easier, be it a $25 million reactor or a $100 million manufacturing plant, even with the company’s relatively strong financial position.

Deal noted that Hyperion is applying for federal stimulus money, but new and untested technologies don’t exactly have the best record of scoring that backing.

Still, the company supposedly has 70 reactor orders on its books, which means someone believes in the plan. Romania’s TES group is to be the first customer, signing a letter of intent to buy six units last August, with interest in purchasing up to 50 more if the reactor proves satisfactory.

We’ll be watching as details develop to see whether Hyperion pulls some miracle moves to carry out its plans, or whether it’s all just—forgive the pun—hype.

Uranium One Boosts Output; Kaz Tax Impact Still Unclear

This article originally appeared in Fuel Cycle Week #327, 5/13/09

By Nancy E. Roth, Managing Editor, Fuel Cycle Week

Uranium One’s strategy of shedding less productive assets in order to tighten its focus on kicking up production at its more fertile properties in Kazakhstan seems to have paid off, judging by the strong results it posted in its first-quarter financial statement this week. Attributable commercial production of U3O8 as of March 31 has reached 700,900 pounds, 62% above the 431,500 pounds hit during the first quarter of 2008.


There is more to this extraordinary gain than meets the eye. Last year’s first-quarter output figures reflect the commercial production of only one mine, Uranium One’s 70%-owned Akdala. This year’s first-quarter figures show for the first time the contribution of the newly minted South Inkai mine, in which the company also holds a 70% interest (state-owned miner Kazatomprom holds a 30% share in each mine).

“From an accounting perspective, a new mine only enters into commercial production once it has gone through a period of initial production and can demonstrate that it can operate profitably,” wrote Uranium One’s Senior Vice President for Investor Relations Chris Sattler, in an e-mail to FCW. “The upshot of the accounting rules is once a mine is in commercial production you start to see the impact in our Income Statement. So as of today, Uranium One has two mines in commercial production—Akdala and S. Inkai—and one mine in pre-commercial production—Kharasan.”

This shows up in Uranium One’s first-quarter revenue and sales as well. Revenue came to $43 million, nearly double the $22.5 million in the same period last year. Attributable sales volumes totaled 880,000 pounds, a striking 211% above the attributable sales volumes of 282,100 pounds in the same period of 2008.


But this did not proportionately improve quarterly earnings, due to this year’s much lower average realized sales price: $49/pound U3O8 compared to the $79/pound average realized price in Q1 2008. That is why in Q1 2009 earnings amounted to $15.9 million, 2% below the $16.3 million earned during Q1 2008
.





Overcoming Output Obstacles

In presenting its first-quarter results on Monday Uranium One executives highlighted how the miner had surmounted obstacles that had held back production last year. A dearth of sulfuric acid that had limited 2008 production in Kazakhstan was no longer a problem, President and CEO Jean Nortier told analysts; in fact, “Sulfuric acid deliveries are exceeding our expectations,” allowing the miner to retain its 2009 U3O8 production forecast of 3.5 million pounds, which it projects will rise to 5.6 million pounds in 2010.

To prevent future acid shortages Uranium One also has a joint venture with Kazatomprom to build a sulfuric acid plant near the Kharasan mine. The partners have funded about 30% of the $217 million cost, and expect to pay the rest through debt financing. Officials also stressed continuing improvements at the production sites. For example, the mining team last year installed additional processing capacity and a precipitation and filtration circuit at Akdala, which helped keep down production costs in the first quarter of 2009 and lower the company’s dependence on offsite processing.

In addition Akdala would use drying facilities to be installed later this year at South Inkai, instead of continuing to use external facilities. Chief Operating Officer Steve Magnusen told analysts that in the final quarter of 2008 Akdala had seen “its best quarter ever”—having turned out 524,400 attributable pounds of U3O8.


The South Inkai mine meanwhile put out 245,100 pounds U3O8 (attributable) in Q1 2009, its first operational quarter. The Betpak Dala joint venture of Uranium One and Kazatomprom will invest $43 million in the mine this year, primarily on the new drying circuit and well field development.


Uranium One also owns a 30% interest in the Kharasan project, which, having officially opened on April 24, is now in pilot production. Others in the joint venture, known as Kyzylkum, are Kazatomprom, with a 30% interest, and Energy Asia (BVI) Ltd., a consortium of Japanese utilities plus trading company, which owns the other 40%.


But since initial pre-commercial operations began last year U3O8 production has lagged behind target at Kharasan, as shown in first-quarter 2009 figures. Total pre-commercial U3O8 output amounted to 25,600 pounds, of which 7,600 pounds were attributable to Uranium One.


Last December the company launched an investigation of these early results and found out that “misinterpretation of the geology” along with “unsatisfactory control over well installation” had contributed to underperformance at the wells. The company said it had hired more-experienced team members and had modified the location of 18 holes in the field layout, installing nine by the end of Q1 2009. It has also added stronger pumps and more flow meters to improve wellfield management.

At full ramp-up, which the company expects to achieve by 2012, Kharasan is projected to produce 1.6 million pounds (attributable) per year.

In response to an analyst’s question regarding the Japanese consortium’s Kharasan offtake agreement, company officials would not directly reveal how much was involved but offered some details. The maximum offtake of the Japanese consortium will be 20% of the total production; one portion of the contract is at fixed price, and consists of a relatively small amount to be supplied from 2014-2018. For the rest of the offtake, each year the consortium must commit to the percentage of production they would require five years ahead.


New Tax Structure to Affect Cost/Pound


Uranium One proudly depicted its production costs in Kazakhstan as the “lowest in the world,” as Nortier said, directly contradicting the recent presentation Kazatomprom official Alexander Gagarin delivered a few weeks ago at conference in Sydney (FCW #325, April 29).

According to the quarterly statement, production cost in the first quarter was $13/pound U3O8, up from $12/pound U3O8 in the same period last year. At South Inkai the production cost was $20/pound U3O8 in the first quarter of 2009.

But these figures will go up as a result of Kazakhstan’s new tax code, which went into effect on Jan. 1. It has three components: a 22% mineral extraction tax, which is like a royalty; an income tax, which decreased from 30% to 20% this year; and an excess profits tax. Magnusen said the mineral extraction tax, which is derived via extraction costs, not revenue, would bump up Akdala’s production cost by $2/pound U3O8, and South Inkai’s cost by $4/pound U3O8.

In its financial statement the miner noted that there was “considerable uncertainty surrounding the interpretation and application” of the new taxes. Consequently the company “has not fully given effect” to the tax code in its financial statement, it said.

Niger President in Talks To End Tuareg Insurgency

This article originally appeared in Fuel Cycle Week #326, 5/6/09

By Roger Murray, Special Correspondent, Fuel Cycle Week

In a bid to resolve the long-running Tuareg insurgency in northern Niger, where all the country’s operating uranium mines and exploration projects are located, President Mamadou Tandja held a face-to-face meeting with leaders of three rebel groups for the first time on May 3 (FCW #313, Feb. 4).

After two hours of talks in the northern town of Agadez, the center of the uranium mining industry, Tandja told reporters he had offered amnesty. The rebels have been fighting for a greater share of Niger’s uranium revenues.

“We have asked them to put down their weapons and come build the country with us. We forgive them because we want peace in Niger,” Tandja said in a state radio broadcast following the talks.

The government had previously refused to hold direct meetings with the rebels, whom it has frequently described as armed bandits. But a decision by the Tuaregs to release the last of eight hostages seized in June 2007 evidently opened the door for negotiations.

In attendance were delegations from three rebel groups: the Niger Justice Movement and two breakaway formations, the Front of Forces for Rectification and the Niger Patriotic Front. The delegations came from Libya, which has been mediating in the conflict.

Imouraren Mine Construction Launched

During his visit to northern Niger, Tandja laid the foundation stone for the new Imouraren mine which is being built by AREVA. The ceremony was attended by several hundred guests, including French Secretary of State for Cooperation and Francophony Alain Joyandet and AREVA CEO Anne Lauvergeon.

Imouraren will be one of the world’s largest new uranium mines, with a planned annual output of 5,000 tU (13 million pounds U3O8), which will double the country’s current annual uranium production, according to AREVA.

Federal Support For Nuclear on Horizon as Companies Wait on Loan Guarantees

By Jacob Mazer, Assistant Editor, Fuel Cycle Week

The Senate Committee on Energy & Natural Resources passed a bill on to the Senate floor that would provide credit resources in support of the deployment of clean energy technologies, including nuclear.

The bill was introduced by Committee Chairman Jeff Bingaman (D-NM) and Ranking Member Lisa Murkoski (R-AK), who have emerged as one of the Senate’s strongest nuclear advocates, and is co-sponsorted by a bipartisan group of six other senators.

The legislation envisions a body called the Clean Energy Deployment Administration within the U.S. Department of Energy that would create an “attractive investment environment for the development and deployment of clean energy technologies.” CEDA would take control of the existing loan guarantee program and develop a “clean energy investment fund” to provide loans, loan guarantees, and other credit for clean generation and transmission projects.

The plans set out in the bill are actually quite ambitious. It is hoped that CEDA would eventually become self-financing through a portfolio investment approach. The agency would fund “riskier technologies with a higher potential to address our climate and energy security needs” that might otherwise have trouble finding financing. While we believe this is a nifty idea, it is somewhat doubtful how this high-minded legislative language would translate into reality.

Waiting for the DOE

In addition to funds currently available for loan guarantees, the bill would call on Congress to direct an additional $10 billion to the agency. The DOE currently has $90 billion allocated toward the guarantees, though only $18.5 billion has been earmarked for nuclear plants, with another $2 billion for front-end projects.

The need to reform the loan guarantee program is abundantly obvious not only for its insufficiency (the fourteen applications for new nuclear plants received by the DOE totals about $188 billion), but for the Department’s inability to handle the applications (authorized in 2005) in a timely manner. While DOE struggles through the backlog, applicants are left to pace, wring their hands, and pour money into preparations for projects that may not be feasible without the guarantees.

Take, for example, the case of USEC, which is awaiting word on a loan guarantee for its planned uranium enrichment plant, the American Centrifuge Project. The company just reported a $2.1 million quarterly loss, despite a $162.3 million increase in revenue from the first quarter of 2008 to $505.6 million.

The revenue increase was offset in part by higher enrichment costs and lower-than-expected revenue from sales and services, but also by spending on the ACP. Advanced technology expenses were $31.4 million, $5.75 million higher than last year, due mostly to assembling the initial cascade of AC100 centrifuges to be used at the plant.

USEC declared in February that is was reducing the planned escalation of the ACP project to conserve funds while waiting to hear from the DOE. If the loan guarantee is not granted, the company is unsure where money for the plant will come from.

As it stands, USEC has enough cash to last only another 9-12 months. If the loan guarantee is not granted, USEC will have to cut spending even more, but may need funds even sooner if its current cash conservation measures do not work, or if unexpected project costs arise. Third party investment is being evaluated, the company says.

Funding the New New Wave

In other news, today Energy Secretary Stephen Chu announced another federal measure to support nuclear projects. Under the Nuclear Energy University Program, about $44 million in DOE funds will be directed toward 71 "cutting edge" nuclear research projects at 31 universities. The money will be dispersed over three years. More information at http://www.energy.gov/media/Final_FY_2009_NEUP_RD_Awards.pdf.

The DOE is also offering $2.9 million in fellowships and scholarships to individual students pursuing nuclear science and engineering. Applications are currently being accepted.

AECL Looks For Salvation In Eastern Europe

By Jacob Mazer, Assistant Editor, Fuel Cycle Week

The imperiled Atomic Energy of Canada Ltd. soldiered forward this week, launching a trade mission to four Eastern European countries to tout its nuclear technologies. The tour is led by Canada's International Trade Minister Stockwell Day, who is scheduled to meet officials in Lithuania, Latvia, Romania, and the Czech Republic.

Day met with Lithuanian Prime Minister Andrius Kubilius on Monday, pitching AECL's 700 MWe enhanced CANDU 6 reactor for the nation's planned Visaginas nuclear plant. Visaginas is a joint-project among Lithuania, Latvia, Estonia, and Poland, and the four countries hope to have a reactor in operation by 2018. Day told Kubilius that the enhanced CANDU 6 could be built in 54 months. Lithuania is expected to issue a tender in 2010.

In Romania, Day will try to sell the country on another CANDU reactor for its Cernavoda plant. Cernavoda currently operates two CANDU units, with two more CANDU 6 reactors scheduled for construction.

"The Baltic states and Romania have energy needs, and Canadian businesses have solutions. These countries represent significant opportunities for Canada's nuclear industry...and these opportunities will translate into jobs back home in Canada," Day said.

Indeed, AECL desperately needs these kinds of opportunities, and creating a greater presence in the foreign market could help the country stay afloat. AECL is currently competing against Westinghouse and AREVA to supply two new Generation III+ reactors for the Darlington nuclear station in Ontario (the companies are also competitors for the Visaginas contract). Both offer more established reactor technologies than AECL's next generation 1,200 MWe ACR-1000 model, as well as (at least marginally) better performance records. As we have noted before, without winning the Darlington contract, it is unlikely that the new CANDU technology will ever get off the ground. Creating a business supplying the smaller CANDU 6 reactors to Eastern European countries might go some ways to prop the company up if the interest in the ACR-1000 does not grow. One even wonders if the Canadian government is looking for a way to preserve the jobs at AECL and its supply chain without having to go with the unappealing option of giving it Darlington.

AECL, for its part, still seems confident about the ACR-1000, or at least that's how it is trying to look. The company announced yesterday that it issued almost $15 million in contracts to 18 Canadian manufacturers to provide components for ACR-1000 reactors.

EPA, Anti-mining Groups Gain Time to Comment on ISL Regs

This article originally appeared in Fuel Cycle Week #325, 4/29/09

By Nancy E. Roth, Managing Editor, Fuel Cycle Week

Acceding to a last-minute telephoned request from the U.S. Environmental Protection Agency last Friday, the Nuclear Regulatory Commission has postponed by two weeks its deadline for public comments on its interpretation of regulations on the range of onsite construction activities that in-situ uranium miners may perform before obtaining a permit to operate a mine. The deadline, which had been April 27, is now May 11 (FCW #322, April 7).

Within hours of the EPA’s April 24 call a joint letter arrived at the NRC via e-mail from a coterie of four anti-uranium mining activist groups, requesting a 60-day extension of the comment period, FCW has learned. Through a spokeswoman, EPA’s Office of Radiation staff geologist Loren Setlow denied that the environmental agency had acted “in collusion with any group.”

EPA Has “Standard-Setting Authority”

In a telephone interview Setlow told FCW that the EPA had only learned last Thursday about the Regulatory Issue Summary that the NRC published in the March 27 Federal Register and had asked for the extension “to make sure our regional offices are made aware of it” in case they want to comment.

Asked about the environmental agency’s interest and authority in the regulatory activity, Setlow, who delivered a presentation about EPA uranium-related activities at NRC’s 2008 Uranium Recovery Workshop, told FCW, “We have standard-setting authority for uranium extraction,” which includes groundwater protection standards, injection well permitting, and NEPA obligations regarding any environmental assessments developed for sites.

Setlow said EPA staff had not examined the 16-page White Paper that lays out the proposal of four in-situ miners, but that the specifics of the proposal were not part of the agency’s decision to ask for an extension of the comments period. Rather, he said, “Given our concerns about [NRC’s Generic Environmental Impact Statement] we thought it best to take a look at the proposal.”

He would not, however, reveal how the EPA had caught wind of the March 27 Federal Register statement, and the EPA spokeswoman sitting in on the call, Cathy Milbourn, quickly broke into the conversation, insisting that the question was out of the scope of the discussion.

Mining, Processing Activities Still Need Permit

Last November Ur-Energy, Powertech, Uranerz and Uranium One presented the White Paper to NRC staff advocating regulatory restructuring and changes. The proposal recommends a three-tiered structure for mining site construction prior to licensing. First-tier activities would require no consultation with the NRC, while second-tier activities would require a limited work authorization, which is easier and less time-consuming for miners to obtain than the current exemption-request process miners must now undergo.

But all uranium extraction and byproduct generation activities would fall into the proposed third tier, for which an NRC license would be required. In effect, the miners’ proposal would not change the status of any of the activities over which the EPA has jurisdiction.

The four groups that signed the joint letter e-mailed to the NRC on Friday are the Natural Resources Defense Council; the Western Mining Action Project; the Southwest Research and Information Center; and the Energy Minerals Law Center. The groups justified their interest in the action, stating, “The activities described and allowed for in the Draft RIS prior to license approval could result in significant impacts and, importantly, potentially prejudice licensing and its associated decisions.”

Like Setlow, the four groups connected the in-situ miners’ requested changes with the NRC’s development of a Generic EIS process for site environmental assessments and also expressed concern about the impending groundwater protection standard NRC is drafting in partnership with the EPA. “Both of these agency actions, the Draft GEIS and a proposed groundwater protection rule, are affected by (and could themselves impact) potential changes to pre-licensing construction activities at uranium recovery sites,î they wrote.

But attorney Christopher Pugsley, who drafted the White Paper on behalf of the miners, pointed out that the GEIS was an initiative of NRC staff struggling to cope with an influx of mining applications. But the request for regulatory modifications in regard to early construction activities at in-situ sites came from industry members, who modeled it directly on the 2007 initiative of potential reactor builders who succeeded in obtaining prelicensed site construction activities where

“In essence,” he wrote in an email to FCW, “one has nothing to do with the other.”



Bulgaria Weighs Russian Dependence Against Suspending Belene

By Jacob Mazer, Assistant Editor, Fuel Cycle Week

Bulgaria must come up with €3.8 billion (US$5 billion) for its planned Belene nuclear power plant in order to avoid falling behind on the project, according to one of Belene's consultants. "The government should close a financial deal as soon as possible," said Djurica Tankosic of architect-engineer WorleyParsons. "We can be on track until the end of the year. After that, without funding, there will be a delay."

State utility NEK is working with 49% partner RWE on the proposed 1,000 MWe twin reactor station, which it hopes will return Bulgaria to its role as a major regional power exporter after the shutdown of two reactors at the Kozloduy plant as a term of accession to the European Union. Current plans call for Belene to begin operations by 2014-2015. Bulgaria awarded a €4 billion (US$5.2 billion) contract to Atomstroyexport to handle the construction, but the money has yet to materialize.

The two financing sources currently on the table are through the French bank BNP Paribas (which has provided loans for construction to this stage along with EURATOM), or using a loan from Russia. Bulgaria ruled out taking a Russian loan last year for fear of high interest and and even greater energy dependence on the larger country, who already provide much of Bulgaria's oil and gas. However, word is that BNP Paribas has little interest in continuing to finance the project in light of current economic conditions and doubts about the viability of the project.

Russia, on the other hand, is as eager as ever to step up. "It is a serious sum, several billion euros, but we will consider this possibility and I think we will be able to resolve this problem," Prime Minister Vladmir Putin said. Russia is eager to secure its hold on Bulgaria (and by extension, the region) through Belene, going as far as to ear-mark money for the project in last year's budget.

Bulgarian right-wing opposition party Union of Democratic Forces claims that putting the project on hold is preferable to taking Russia's money. Chairman Martin Dimitrov called on the parliament to prevent taking loans, claiming it would saddle the country with debt at a time when money is already scarce, as well as subjecting itself even further to Moscow's will. A temporary suspension of the Belene project is also advocated by leading opposition party GERB, who are projected to win July's parliamentary elections.

The argument is not entirely unconvincing. Belene is an important part of Buglaria's future, a fact acknowledged by UDF and GERB. "Furthermore, selling electricity generated by Belene to other countries in the region would strengthen the country's economy." But Russia has so consistently acted the bully, using its influence in the energy sector as a tool for political leverage, that the prospect of even more reliance is seems like a pretty risky proposition.

Bulgarian Prime Minister Sergei Stanishev seems open to taking the Russian loans, and is expected to talk about Belene during his visit to Moscow next week.