The Queensland Government has paved the way for a recommencement of uranium mining in Queensland. Its new action plan is a major step towards capitalising on the estimated $10 billion in uranium deposits and further building Queensland's four-pillar economy (made up of the tourism, agriculture, resources and construction industries).
Like any mining project, the future development of the uranium industry in Queensland will be based upon its feasibility. The market for uranium ore is largely an illiquid market with much of the world's supply of uranium being sold under confidential long-term supply contracts (up to 85%).
The spot market for uranium ore is currently trading at an eight-year low at around US $35 per pound. It appears to have stabilized here after consistent downward movement for the last three years. The mid-term price (3-5 years) price is down to around US$38 per pound and the long term price (5-7 year contracts) is down to around US$53 per pound.
While the reduction in the price for uranium ore is a result of an oversupply of uranium ore and a significant dip in real demand, a number of analysts believe that in the medium to long term there are compelling supply/demand fundamentals for the development of uranium mines in Australian.
Where we left you last
In May this year we reported the findings of a report issued by the Uranium Mining implementation Committee (UMIC). The UMIC was commissioned to recommend a best practice policy framework for the development of a uranium production and export industry.
On 12 September 2013, the Government released its action plan for implementing the recommendations contained in the report.
Government reaction to the report
Generally, the Government appears to have endorsed the vast majority of the recommendations made in the UMIC report, giving priority to:
the approvals process for production tenements;
the environmental impacts;
transport and infrastructure development; and
a specific royalties policy.
Government to use current MRA tenure approvals process
The Government has endorsed that view that the current tenure approvals process in the Mineral Resources Act 1989 (Qld) is sufficient to deal with uranium activities (given that uranium is a mineral under section 6 of the Act) and no changes will be made to the current tenure framework that are specific to uranium.
Use of the "coordinated projects" process
Although the tenure approvals process will not undergo uranium-specific change, the Government has indicated that it will develop a policy that will require uranium mine proposals to be assessed by the Office of the Coordinator General through the coordinated projects process in the State Development Public Works Organisation Act 1971 (Qld). The rationale behind this is to provide a one-stop-shop for the assessment of all activities from production to export.
The Government has endorsed the UMIC's view that the environmental impacts of uranium mining are akin to those of other forms of metalliferous mines. While the report recommended a review of the Environmental Approvals process for its adaptability to uranium mining, the Government has indicated that such a review would not be undertaken until closer to the operational phase of the first uranium mine (which is likely to be 2017 at the earliest).
Bilateral agreement with the Federal Government
Knowing that uranium mining will trigger the "nuclear action" matter of environmental significance under the Environment Protection and Biodiversity Conservation Act 1999 (Cth), the plan is that environmental assessment will be undertaken under the current bilateral agreement with the Federal Government.
Overcoming transport and infrastructure issues for exports
The Government has acknowledged that a significant hurdle to developing a strong uranium industry in Queensland is the availability of the specialised transportation and export infrastructure required to support it. At present, the only ports capable of exporting uranium in Australia are in Darwin and Adelaide, meaning that proponents may face significant transportation and export costs.
For the short to medium term, it appears that Queensland ports are unlikely to export uranium and the Government will seek to engage existing interstate systems, process and infrastructure for the transportation and export of uranium.
Further, the current Government does not support nuclear energy production or waste disposal plants in Queensland, and uranium extracted must be exported for peaceful purposes only. As such, uranium may only be exported to countries that have a bilateral safeguard arrangement in place with Australia.
Notably the Government has not yet endorsed the UMIC's specific recommendations in relation to a royalty rate of 5% (with concession of 2.5% for the first five years of each new mine). Instead the decision regarding a specific royalty policy has been left to further detailed assessment, with a final decision expected in the 2014-2015 budget.
The action plan has set a clear vision for how uranium mining can recommence in Queensland, however it is like that investors and financiers in these projects will need to take a medium- to long-term view on the feasibility of these projects based upon the predicted solid demand for uranium in the medium to long term.
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