As Energy Fuels Resources (EFR) awaits Montrose County BOCC approval for a special use permit for the Pinon Ridge Mill and prepares to submit a permit application to Colorado Department of Public Health and the Environment (CDPHE), it lacks capitalization to build the mill, faces a very tight uranium market with surplus uranium production capacity, a dropping uranium market price and production costs higher than market value.
Today’s market bears little resemblance to the first uranium boom and bust in the Colorado-Utah borderlands when the federal government paid a guaranteed base price for uranium ore to miners to feed nuclear weapons production programs. ”Yellowcake,” uranium oxide produced by uranium mills is a global commodity widely available at a volatile market-based price for commercial purchase for use in nuclear reactor fuel.
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The 2008 Uranium Red Book’s annual report on the uranium market states that the World Nuclear Association (WNA) and International Atomic Energy Agency (IAEA) find no unmet uranium need through the year 2020,with uranium supply surpluses projected for 2010–2015. Both groups project that the world will be oversupplied with yellowcake for a decade and will have adequate supplies through the year 2030 from primary sources, such as mines, and secondary sources, such as reblended depleted uranium tailings and weapons grade material. The report identifies uranium resources sufficient to meet projected needs from mines and mills: 50,000 tons/yr of yellowcake for the next 100 years.
2. The spot market price for yellowcake is $42/lb, less than one-third of the peak price of $137 per pound in mid-2007 when EFR announced its mill plans. That’s too low to sustain uranium ore processing at the single licensed operating uranium mill in the U.S.
“Our costs are higher than the current spot market price, (emphasis added)” Denison Mines President told the Telluride Daily Planet in May, 2009, in announcing that Denison's White Mesa Mill would cease regular milling operations and processing of conventional ore, and lay off some workers for the remainder of the year.
White Mesa cost of uranium production in April had reached $65.85 per pound while the spot market price had fallen to $44/lb.
3. These huge obstacles aside, what will it cost EFR to mine and mill their ore? It will be at least as difficult for EFR to get into production as Denison who operates at a loss plus, they have to raise the full cost of building a mill.
How will EFR finance, build and operate its own heavy industrial mill and associated permanent waste site? Their value as a company based on “market capitalization” was only $23.6 million Canadian dollars – 76.5 million shares at $.31 per share at the end of August 2009 (less on September 25) or less than 1/6 of the estimated $150,000,000 cost of the mill and tailings disposal site. That type of financing is a huge obstacle to overcome in any market, much less the current economic environment where industrial construction faces financing challenges similar to residential and commercial construction.
4. The Western Small Miners’ Association submittal to the BOCC greatly exaggerates both the value and economic contributions of uranium production. They say there will be 623 jobs from 15 mines producing 33.3 tons per day of uranium, which inexplicably ignores EFR projection of mine and mill employment in its county application. EFR Fuels tells the county that they own mines that will feed the mill, at a profit, for 17 years and will support 85 mill jobs and 100 mine jobs if their facility operates at 500 tons per day. WSMA projects more than 3 1/3 times EFR direct jobs estimate.
WSMA uses a $70/lb price of uranium for its ore value and tax benefit estimates based on a nonexistent“long-term uranium contract price” while Denison Mines tells its shareholders that uranium spot market prices are the measure of whether it will process yellowcake.
A county-issued Special Use Permit and a state-issued mill recovery and tailings disposal permit is very unlikely to change global uranium spot prices that are lower than costs of production coupled with excess of global uranium production capacity over demand.
No uranium mill in the U.S. has operated for the 40 years Pinon Ridge is projected for and Dennison’s White Mesa Mill has been closed to uranium ore processing for most of its 30 licensed years. It is unlikely that the EFR mill can overcome its market obstacles and supplement the existing economy of Montrose County in the near future, much less at all.
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Editor's Note: Paul Robinson is Research Director at Southwest Research and Information Center in Albuquerque, NM
Lana V wrote on Sep 29, 2009 5:15 PM:
Local citizens there have been struggling against the project polluting their home town by air and water !
Right on the Pinon RIdge website the jobs shrink to about 34 - unless they run at full capacity.
Who can guarantee that all the "disposable income' won't flow to Junction - lot less expensive to shop there ! "
JudyJ wrote on Sep 29, 2009 9:09 AM:
madisonj wrote on Sep 28, 2009 1:36 PM:
This is just some guy's opinion and has nothing to do with a permitting decision. I suggest Mr. Robinson put his money where his mouth is on the commodoties marke if he's so sure about the future economics of uranium. "