Cameco Corp (NYSE: CCJ) is the 800-pound gorilla of the uranium sector. Cameco is to uranium what Wal-Mart is to retailing, and what Saudi Aramco is to petroleum. On a percentage basis, Cameco dominates its sector more so than either of the two. Cameco probably has more clout in turning off the electricity now powering your computer than any other company in the world.
Can you imagine what would happen if Camecos labor force hypothetically went on strike for six months? The repercussions would probably send fuel managers, who purchase the uranium that powers nuclear reactors, into a ghoulish panic. Consumers, who are oblivious to the importance of uranium, and believe electricity is their god-given right, just as many of us once took 20-cent gasoline prices for granted before 1973, might suffer a utility-bill shocker, should anything interfere with the steady supply of uranium to U.S. utilities. Imagine what would happen if we had brownouts and blackouts in the same way we had gasoline lines during the oil crises of the 1970s? Uranium is the least expensive part of the nuclear fuel cycle. Without uranium, however, a nuclear facility is about as functional as a car on blocks in some Alabama crackers front yard.
This week, the spot price of uranium rose to $40/pound, for the first time since Ronald Reagan was president. That should help grow the uranium business in Wyoming by leaps and bounds. In Part 5, we look at the largest U.S. uranium producer, Cameco-owned Power Resources.
Understanding In Situ Leach Uranium Extraction
It took $284 million Canadian to build, and it operated with 546 people, said Patrick Drummond, Plant Superintendent for Cameco subsidiary Power Resources Smith Ranch facility. He was pointing to Kerr McGees Smith Ranch underground mine on the wall across from desk, which was later converted into an ISL operation, first run by Rio Algom. This operation cost US$44 million to build and 80 people to start. Drummond was referring to the In Situ Leaching (ISL) uranium extraction facility, known as Smith Ranch. That should give you the scale of the ISL versus an underground mine, he explained.
The aging, but sprightly, Drummond knows his uranium. Hes worked in underground mines, open pit mines, and uranium mills since 1980. From 1996 to the present day, hes worked in Wyoming for Power Resources at the companys ISL uranium extraction facility. I started off in the coal mines in Scotland, boasted Drummond, who claims he can spot a coal miner in a bar, just by looking at the veins in his hands. I worked up in Elliot Lake and the massive underground mines up there. Clasping his hands and looking down, he seemed to apologize, Its also a massive environmental problem to clean up, a major undertaking. Quirk Lake was one of the bigger mines up there. It cost a lot of money to clean it up.
The New Face of Wyomings Uranium Mining is the ISL uranium extraction method, also known as solution mining. The differences between mining uranium underground and an ISL operation are both minor and vast. Both methods mine uranium beneath the surface. So both methods are underground mining. However, that is where the similarities end. With underground, you bring up the ore, grate it, crush it, and extract the uranium from the ore, Drummond explained the basics of underground uranium mining. That ore becomes waste, which is known as tailings. You then have to service these big tailings and then decommission.
ISL is the new breed of mining. With ISL, we dont do that, continued Drummond in his day-long lecture to our editorial team during a VIP tour of the Smith Ranch facility. To mine underground with ISL, you drill the holes where the uranium is and extract the uranium from the underground ore, he said. Then, you process that into yellowcake.
Its not all wine and roses for Drummond, though. He pines away for his underground mines, From a mining perspective, its not mining so it is not as exciting. Drummond laughs, ISL is like a water treatment plant. We take water out and remove some ions. He makes it sound so simple, We remove the water from the underground and remove the ions, being the uranium ion. Then, we put the water back under the ground. All of the water goes back into the ground? Actually no. Drummond explained, We take our water out and we put 99 percent back in. The one percent we call bleed. Its a control function.
Drummond cites more comparables, To start an underground mine, it would take a year to do the shaft before you could start mining. Then, theres the development cost of the mill complex. You have all that outlay of cost before you can get any benefit. Its expensive to do underground -- $200 million plus because of the upfront development costs. From his perspective, the miner in Drummond has come to like solution mining. ISL is easier. It is a lot cheaper: less expensive capital costs and less operating expenditures. It is less labor intensive. Asked about the deadly radon emissions, often cited as a danger in underground mining, Drummond shot back, This is a zero emission facility.
Analyzing the two methods, he said, You can start producing faster with an ISL operation. You start your first header house, and you can start producing and make money. He added, So you get a return on your investment faster. Whats the downside? We also recover less uranium with ISL, Drummond admitted. Some of Camecos mines in Saskatchewan are running around 5, 10, 15, and 27 percent uranium. In this area, or in an ISL, it runs less than one or two percent. Its very low. Plus the uranium ore body must be found below the water table. He added, You can only do ISL in rock thats porous and has water in it in the first place.
To put it in the simplest terms, billions of years ago, the uranium found its way into the underground aquifers of Wyomings sandstones. We add oxygen and get the uranium back into solution, Drummond remarked. We complex it with CO2 to keep it in solution, and then bring it to the surface. We extract it with an ion exchange base. According to Drummond, extracting uranium works on the same principle as a water softener. We add salts to the resin to get the uranium to back off from the resin. Then, we take that uranium and make it into a final product called yellow cake.
And why it is called yellowcake? Some of it is yellow; some of it is green or dark green. Some of it is black, Drummond patiently explained. The color is a function of how we dry it, not how we process it. There is a very definite correlation between drying temperatures of yellow cake and color. It all depends on what chemicals you use while processing uranium. At Smith Ranch, we make uranium peroxide. It is very clean and yellow. We complex uranium with hydrogen peroxide to make our product. You can make different types of yellowcake. You can make a uranium diuranate, a complex made with ammonia. Yellowcake can be made with other chemicals.
How is Wyomings ISL uranium dried? We dry the uranium with vacuum dryers, said Drummond. The benefit of vacuum dryers is first of all, its a vacuum so everything is sucked inside the canister so nothing escapes into the environment. There are no gases that escape.
Investigating the Environmental Issues
It was, at this point, we felt it appropriate to inquire about all the puzzling worries many of us might correlate when thinking about nuclear energy and uranium. How safe is all of this really? When we first started uranium mining, we inherited people from the gold mines, Drummond explained. They were underground, and smoking, breathing in the dust. In the early days, we didnt have good ventilation. In underground mining, youve got to keep the air moving. Hard rock underground mining produces dust. The shards of silicone you are breathing stick to the follicles on your lungs, he noted. But that doesnt happen during the ISL extraction process. No emissions, a farm of well fields with underground pipes and tubing, and very detailed safeguards explain they the lobby wall of Power Resources is lined with Safety Award certificates and plaques.
On a daily basis, when we leave the facility, we are scanned for alpha radiation, continued Drummond. Depending upon your position here, you get urinalysis once per week or once per month. We also check for radiation levels. How did Drummond fare on his most recent radiation check? I was way below, he laughed. There are guys on the beach in Malibu that have higher radiations than I have.
What precautions does Power Resources take to protect the environment during the ISL extraction process? Since 1996, we have had zero excursions, Drummond announced with steeliness in his voice. We take very great pains to look at the topography, so if we do have an excursion, we make sure it does not enter what we call the waters of the state. Any channel that could take that and move it into the waters of the state, is something that we are very cognizant of.
After the holes are drilled into the well fields, a company does a baseline sample. Drummond said, Thats a sample of the constituents in the water. When we mobilize the uranium, we mobilize other items. It is our duty here, after we start the well field, to return the aquifer back to baseline when we are done. He added, If we know whats in the water before we start, then we know how to restore it to background. Restoration of the underground tampering with Mother Nature can take anywhere from 18 to 36 months.
The company is meticulous in restoring the landscape as well. Any restoration work on the surface is called reclamation. That can involve farming. When we start a well field, we have to, by license, remove the topsoil and store it somewhere, Drummond explained. When we go back to reclaim the property, we take all the pipes out, we take the houses down, and cut our wells off. Its all identified. We put an ID marker on the well. In 50 years time, when Farmer Joe comes around and wonders what was there, the state can say, That was a uranium well. From the time weve stopped mining, we put everything back to normal.
It takes from two to four months, or up to seven years, to exhaust a well field, depending upon the roll fronts. While it can take up to 24 months to put in a well field, reclamation and restoration take longer. We put back the topsoil on, depending upon the weather, as soon as we can, said Drummond. We re-seed, during the spring or the fall, which is the best time for seeds. The seed we use is dictated by the regulators so we use a certain amount of native vegetation. Because its very dry at the Smith Ranch, nearly bordering on desert, and because it is also very windy, slapping down the topsoil wont last very long. First, we plant some fast-growing oats to establish a root bed, he explained. If we just planted grasses, it would all blow away. Because we plant the oats, we have fat antelope and fat deer. From our observations, the sheep were well-fed and frisky.
How does Wyoming ISL mining compare to other places, such as in Texas or in Kazakhstan? In Wyoming, the water is pristine, very clean, even compared to Texas, where they do ISL, answered Drummond. The waters pretty clean down there also. Is the uranium the same? When we bring our uranium to the surface, it comes up as uranyl dicarbonate, he responded. In Texas, it comes up as uranyl tricarbonate. Whats the difference? Its in the processing of the uranium. We get about 8.5 pounds of pounds of uranium per cubic foot of resin, he explained. In Texas, they get about 3 to 4 pounds of uranium per cubic foot of resin.
Drummond described the Smith Ranch ion exchange operation, We have two columns in the ion exchange, each with about 500 cubic feet of resin. The resin costs about $200/cubic foot and, barring mechanical damage, can last up to thirty years, according to Drummond. The polymer beads they look like tiny plastic ball bearings capture the uranium during the processing phase. In Kazakhstan, you get about two to three pounds of uranium per cubic foot of resin, he continued. They use hydrochloric acid because of the water conditions. Of course, youve changed the chemistry of the water and have all the acid to clean up. Drummond described the water in Kazakhstan as very brackish, and yellowish. The TDS (total dissolved solids) is very high, he added. The waters not fit for human consumption anyways. He laughed, Using acid over there cleans their water up.
COPYRIGHT 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.
James Finch contributes to StockInterview.com and other publications. StockInterviews Investing in the Great Uranium Bull Market has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com
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