An overview of the Australian uranium industry is ... - Minter Ellison

Australian uranium industry: latest developments 29th July 2013 Lucy Lovelock Senior Associate - Energy & Resources T +61 7 3119 6524 M +61 405 184 620 [email protected]

Uranium The uranium mining industry in Australia is quietly experiencing a renaissance. Following the publication of the Queensland Uranium Mining Implementation Committee's report on 18 March 2013, the re-establishment of uranium mining in Queensland appears to be a very real prospect. NSW has also recently overturned its ban on exploration for uranium, a new uranium mine has been approved in Western Australia and a new market for uranium in India may be only two years away.

Market for Uranium The International Atomic Energy Agency (IAEA) conservatively projects that global nuclear power capacity will grow by almost 25 per cent on present levels by 2030, with China, India, South Korea and the Russian Federation being the main drivers of the expansion. According to the World Nuclear Association, there are 28 new nuclear power plants being built in China and a further 266 planned or proposed plants worldwide. In addition, the Japanese reactor 1 restart program is expected to commence in the next 12 months . This expansion in demand for uranium is expected to trigger an increase in the uranium price which has been languishing around $38/lb (as at 15 July 2013), a far cry from a market high spot price of $135/lb in 2007. Dr Vanessa Guthrie, Managing Director of Toro Energy predicts that the market will rebound around 2016-2017. According to Guthrie, long term contract prices are currently approaching 2 $60/lb . The Federal Resources and Energy Minister, Gary Gray, said in a speech given on 17 July 2013 that there are two fundamental drivers of nuclear power – energy demand from growing populations, and the need to reduce greenhouse gas emissions. He stated that in 2013, the 432 reactors currently operating worldwide will require over 66,000 tonnes of uranium but the current global mine production is only 55,000 tonnes. The difference is largely being met by secondary sources, such as the downblended uranium from the former Soviet Republics ('swords into ploughshares' program'). This program is set to end in 2013 and will affect market dynamics. With 33% of the world's known reasonably assured resources of uranium, Australia is well-placed to exploit growing worldwide demand. What follows, is an overview of the latest policy and industry developments affecting the Australian uranium industry.

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http://uk.reuters.com/assets/print?aid=UKBRE9680DQ20130709 http://www.miningaustralia.com.au/features/grabbing-the-bull-by-the-horns

MINTER ELLISON | AUSTRALIAN URANIUM UPDATE

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Latest developments Federal policy – exports to India? The Commonwealth's main sphere of influence in the uranium industry relates to the export of uranium. The current policy on uranium exports is summarised by the Department of Foreign Affairs 3 and Trade as follows: •

Australian uranium may only be exported for peaceful non-explosive purposes under Australia's network of bilateral safeguards agreements, which provide for: - coverage by IAEA safeguards; - fallback safeguards in the event that IAEA safeguards no longer apply for any reason; - prior Australian consent for any transfer of Australian Obligated Nuclear Material (AONM) to a third party, for any enrichment beyond 20 per cent of uranium-235 and for reprocessing of AONM; and - physical security requirements.

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Australia retains the right to be selective as to the countries with which it is prepared to conclude safeguards arrangements.

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Non-nuclear weapon state customer countries must, as a minimum, be a party to the Nuclear NonProliferation Treaty (NPT) and have concluded a full scope safeguards agreement with the IAEA.

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Nuclear weapon state customer countries must provide an assurance that AONM will not be diverted to non-peaceful or explosive uses and accept coverage of AONM by IAEA safeguards.

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Commercial contracts for the export of Australian uranium should include a clause noting that the contract is subject to the relevant bilateral safeguards arrangement.

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The Australian Government has further tightened Australia's export policy by making an Additional Protocol with the IAEA (providing for strengthened safeguards) a pre-condition for the supply of Australian obligated uranium to all states.

This policy was developed by the Fraser government in 1977 and remained virtually unaltered for thirty years until 2007, when Prime Minister John Howard announced that the export of uranium to India which is not a signatory to the NPT would be permitted under 'strict conditions'. His rationale for this change in policy was India's democratic government, growing regional power, rising energy needs and 'strong non-proliferation record'. He also wanted to strengthen Australia's bilateral relations with 4 India. Following its election in November 2007, the Rudd Labor Government reinstated a policy of not exporting uranium to countries that had not ratified the NPT, which includes India. In November 2011, the then Prime Minister, Julia Gillard called for a policy change to permit sales of uranium to India which has nuclear weapons and nuclear power, but refuses to sign the NPT. This about turn was on the proviso that uranium sent to India be accompanied by guarantees that it would not be used for weapons. She said in a Sydney Morning Herald column on 15 November 2011 that, 'We must, of course, expect of India the same standards we do of all countries for uranium export - strict adherence to International Atomic Energy Agency arrangements and strong bilateral and transparency measures which will provide assurances our uranium will be used only for peaceful purposes.' On 4 December 2011, Labor's national conference voted by a fairly narrow margin (208 in favour with 185 against) to overturn the long-standing ban on uranium sales to India.

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http://www.dfat.gov.au/security/aus_uran_exp_policy.html J Howard (Prime Minister), Supply of uranium to India, media release, 16 August 2007, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1E0O6%22 4


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Negotiation of a nuclear safeguards agreement between Australia and India began in March 2013 and it is likely to be two years before a deal is signed and sales can begin. Canada and the US already have safeguards agreements in place with India supported by an ad hoc monitoring regime of India's nuclear facilities set up by the IAEA. The existence of these bilateral agreements may explain the willingness of the Federal government to abandon its previous policy of only exporting to NPT signatories. The LNP Coalition has not revised the Howard policy with regard to uranium exports to India ahead of the 2013 federal election. It can therefore be assumed that, if it is elected to government, it will continue negotiating a bilateral safeguards agreement with India. NSW Until 2012, the New South Wales Government had maintained a 26 year prohibition on uranium exploration and mining. In 2012, Premier Barry O'Farrell stated that it would not be in NSW's best interests to ignore the revenue that might be generated from uranium mining. A month later, the State Government overturned its stance on uranium exploration by amending the Uranium Mining and Nuclear Facilities (Prohibitions) Act 1986 (NSW) to remove the general prohibition on prospecting for uranium in NSW. In September 2012, the NSW Resources Minister announced that the Government was open to expressions of interest for those seeking uranium exploration licences. In November 2012, NSW Resources Minister, Chris Hartcher announced that 39 companies had lodged expressions of interest to explore for uranium in NSW. So far, an evaluation committee has met and a probity auditor has been appointed. An announcement of the successful applicants is due 'mid year' (2013). Whilst prospecting for uranium is now permitted and may soon be a reality in NSW, the prohibition on uranium mining still remains. When announcing the NSW government's policy change with regard to uranium exploration, Premier O'Farrell added that his government was 'not about to rush into mining uranium until we have carried out the necessary environmental and exploration checks and have had a mature and sensible discussion about utilising this resource'. WA With the change of State Government in 2008 to a coalition of the Western Australian Liberal Party (led by Colin Barnett) and the National Party, the previous Labor Government's policy to prohibit uranium mining for nuclear purposes was overturned. At the end of 2012, the Premier said that he expected the State's four most advanced deposits will be producing uranium mines in the next 10 years. 5

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The project closest to fruition is at Wiluna but there are also large deposits at Kintyre , Yeelirrie , 7 8 Mulga Rock and Lake Maitland which are expected to be developed. Wiluna In October 2012, Toro Energy's Wiluna Uranium Project in the northern Goldfields received final approval from the WA Environmental Protection Authority, subject to strict conditions including the protection of groundwater-dependent flora and fauna. This was followed by Federal Government approval of the Project on 2 April 2013. The Federal approval process was protracted and formal extensions were secured to ensure that appropriate consideration was given to the environmental conditions to be imposed. Toro Energy is currently seeking partners to help fund the $269 million Project and, if financing arrangements proceed as planned, the new mine will start producing yellowcake by the end of 2015, with an expected annual output of 820 tonnes of yellowcake processed from 1.3 million tonnes of ore.

5 Owned by Cameco (70%) and Mitsubishi (30%) and operated by Cameco Australia. Kintyre is located 60 km south of Telfer and 260 km northeast of Newman at the western edge of the Great Sandy Desert in the East Pilbara region of Western Australia. A large resource definition drilling program was begun in September 2009. In October 2012, a mine development agreement with the Martu people was signed. Based on Cameco's review of the current market environment, it will complete the value engineering and the environmental permitting in order to maintain the ability to proceed with the project should the market factors improve the economics. Cameco has decided not to proceed with the detailed feasibility study at this time. 6 Acquired by Cameco from BHP Billiton in December 2012. 7 Owned by Energy and Minerals Australia Ltd. 8 Owned by Mega Uranium Limited.


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QLD Mining of uranium in Queensland ceased in 1982 with the closure of the Mary Kathleen mine when deposits were exhausted. Over the next 30 years, there was limited further exploration of uranium resources in the State during periods when the LNP Coalition were in power. For the rest of that period, when the Qld Labor Party were in government, a policy ban on uranium mining was in place. Campbell Newman was elected and, on 22 October 2012, he announced that Queensland will permit uranium mining. This was quickly followed by the appointment of an implementation committee to report back to government on what regulatory and other issues need to be addressed in restoring uranium mining in Queensland. Implementation Committee As part of its consideration, the Implementation Committee considered a range of issues including: •

environmental safeguards associated with the mining, transport and export of uranium

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uranium mining rehabilitation requirements, standards and the use of appropriate financial or other assurances

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work place health and safety standards

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economic opportunities resulting from the recommencement of uranium mining.

The committee did not consider nuclear energy production or nuclear waste disposal plants in Queensland as part of the review. These areas were not covered by the state government´s decision to recommence mining uranium. The committee submitted its report, 'Recommencement of uranium mining in Queensland: A best 9 practice framework' to the Queensland Government on 18 March 2013. Issues and recommendations The Queensland regulatory regime and approvals process has regulated industries associated with the mining of radioactive materials (such as mineral sands and tantalum) for a number of years. Moreover, despite the policy ban on uranium mining, uranium exploration has been permitted in Queensland for some time. On this basis, the Implementation Committee concluded that, "with certain adaptations, Queensland's existing system for regulating mining and radiation safety is appropriate for uranium mining and therefore a new legislative framework is not needed...". Regulators Under the current Queensland regulatory regime, there are two regulators who are responsible for aspects of the regulation of health and safety in relation to uranium mining. The Queensland Health Radiation Health Unit addresses health issues which relate specifically to exposure to radiation, whereas the Queensland Mines Inspectorate regulates the safety of mining operations, focussing specifically on the hazards and risks associated with mining. There could potentially be some overlap between the two OHS regulators but with neither currently having sufficient expertise to address uranium mining as a whole. In its report, the Implementation Committee recommended that: •

selected mines inspectors should undertake training as radiation safety officers for naturally occurring radioactive material so that they can conduct proportionate and consistent assessments of radiation management plans and provide technical advice regarding radiation safety in mining; and

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Queensland Health and the Department of Natural Resources and Mines should enter into a formal memorandum of understanding to further collaboration of the two organisations and consider forming a regulator working group operating under an MOU to ensure that expertise from the Department of Transport and Main Roads, the emergency services and the Safety in Mines Testing and Research Station can be accessed.

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The report is available at http://mines.industry.qld.gov.au/assets/mines-pdf/umic-framework-report.pdf


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Uranium Exploration and Mining The Mineral Resources Act 2003 (Qld) (MRA) and Mineral Resources Regulation 2003 (Qld) provide the regulatory and administrative framework for the exploration, development and production of mineral resources in Queensland. However, the policy ban on approving the grant of uranium leases was never enshrined in the MRA, and exploration tenure has continued to be granted for uranium 10 exploration on the basis that the provisions of the MRA are not commodity-specific . With the recommencement of uranium mining in Queensland, the Implementation Committee has found that there is therefore no requirement for material amendments to the tenure approvals process. Uranium already falls within the definition of 'mineral' in section 6 of the MRA and there is no good reason to impose additional requirements for uranium mining to the existing approvals process. Some minor amendments may still be required to impose pre-conditions for grant of mining leases which relate to health and safety management and radiation safety plans. The Implementation Committee has recommended that the Queensland Government establish a policy for all uranium mine proposals to be assessed by the Coordinator-General as a 'coordinated project' under the State Development and Public Works Organisation Act 1971 (Qld), with the policy subject to review by the Resources Cabinet Committee once the process is established, but not before two years after the first proposal is received. Another key Implementation Committee recommendation is the establishment of a whole-ofgovernment Uranium Mining Oversight Committee to oversee uranium mining implementation, operations and rehabilitation in Queensland. Physical protection and safety The Mining and Quarrying Safety and Health Act 1999 (Qld) (MQSH Act) and Mining and Quarrying Safety and Health Regulation 2001 (Qld) currently govern the operation of uranium exploration activities to protect the safety and health of operating personnel and persons who may be affected by uranium exploration operations. This legislation is administered by the Department of Natural Resources and Mines. The MQSH Act applies to all mines (other than coal mines) in Queensland. The Implementation Committee does not consider that there is any reason to significantly amend the MQSH Act and associated regulations to adapt the legislation to uranium mining. Some minor amendments may still be required to manage uranium specific risks and hazards. The Radiation Safety Act 1999 (Qld) (RS Act) and Radiation Safety Regulation 1999 (Qld) which is administered by Queensland Health regulates only the possession and use of sealed radiation sources, such as exploration borehole logging devices, density gauges and XRF spectrometers. The exploration, mining and processing of uranium is excluded from the RS Act and remains the responsibility of the Department of Natural Resources and Mines. The Implementation Committee's recommendations with respect to health and safety focuses on: updating safety guidelines for industry by drafting three documents based on ARPANSA11 guidelines on the following:

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- exploration (based on the current guidance note QGN12); - uranium mining; and - uranium milling and ore processing operations; and devising an internal state monitoring regime to ensure that radiation risks from naturally occurring radioactive materials are kept within acceptable levels in Queensland.

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Transportation safeguards The transportation of radioactive materials in Australia is subject to both state and federal regulation. States are primarily responsible for the transportation of radioactive materials within their borders. This means that if the transport of uranium crosses state borders the regulations of each state must be met. If uranium from Queensland mines is to be exported via Darwin or Adelaide rather than a Queensland port a this will require multiple licences for the transport of uranium across state borders.

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In Queensland, new mineral exploration permits are either granted for coal or for all minerals other than coal. Australian Radiation Protection and Nuclear Safety Agency

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In Queensland the licensing requirements for transportation within Queensland are currently set out in the RS Act which is administered by the Department of Health. A separate transport licence for road or rail and air is required to transport radioactive material. A transport licence for road may only be granted to an individual and not a company. Mining of uranium in Queensland will result in larger quantities of materials covered by the RS Act being transported. Specifically, the requirement that a transport licence by road be held by an individual should, where possible. be removed in order to ensure that the licensing process is as efficient and streamlined as possible. The Implementation Committee has recommended that the Queensland Government work with South Australia, the Northern Territory, Western Australia and the Commonwealth to establish an inter-state committee to oversee and harmonise transport and logistics associated with the uranium mining industry. The harmonisation process would include the mutual recognition of transport licences and the consideration of individual or company licensing of transport operators. Export Uranium from the Mary Kathleen mine was previously shipped from the Port of Townsville. However, as yellowcake uranium is not exported in large quantities and there is no mine to port transportation infrastructure currently in place, it is unlikely that it would be economically viable to re-establish Townsville as an authorised port for the shipment of uranium. The Townsville community also has environmental and safety concerns about export through its port. As Adelaide and Darwin have a proven track record in exporting uranium, the Implementation Committee has recommended that Queensland uranium be exported through either or both of these ports. Next steps The Implementation Committee has recommended that the implementation of its report recommendations should be devolved to the Department of Natural Resources and Mines, and that the first action should be to establish the Uranium Mining Oversight Committee. The State Government's response to the Implementation Committee's report is expected in the next two months and should include an implementation strategy. At the time of writing, a Uranium Mining Oversight Committee has not yet been appointed.

Conclusions Australia has a robust regulatory regime at both the Commonwealth and State/Territory level with respect to the key functions of the Australian uranium industry - tenure, environment, health and safety, transportation and export. The regime balances Australia's economic and commercial interests with Australia's international obligations vis a vis non-proliferation. As demand for Australia's key exports of natural resources such as oil and gas, coal, copper and alumina fluctuates in the current global market and countries seek alternative fuel sources to tackle the threat of climate change, entrepreneurial resources companies are increasingly interested in exploiting the revenue potential of uranium. State Governments that have previously shied away from permitting the mining of uranium for environmental, global security or public perception reasons now see the mineral as a source of potential new employment and economic prosperity, with the potential to generate new royalties to replace those lost from reduced mining of other resources. With greater political and public support the return of a uranium industry in Queensland and expanded production throughout Australia seems more certain now than it has for many years.


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