| Speculators hit Jeffrey City again | |
| 03/05/2008 | |
| By Samuel Western | |
SHERIDAN - I’ve been watching with concern as a financial and environmental drama unfolds southwest of what’s left of Jeffrey City.  The old Top Hat Motel sign broods over the empty streets of Jeffrey City. Photo by Susan Greenwood Jeffrey City, as many in Wyoming know, is the town that uranium built. When the price of yellowcake (uranium oxide concentrate) soared in the 1970s above $40 per pound, the city’s population numbered nearly 5,000. Then the price of uranium collapsed and with it, the fate of Jeffrey City. It currently sports a population of 115 hardy souls. Now uranium rides again. In December 2000, a pound of yellowcake sold for $7.10 a pound. In June 2007, the spot price crossed the $130-a-pound threshold. The world began turning over rocks looking for uranium, at least for a while. One big rock lies not too far from Jeffrey City. It’s called the Green Mountain mining play or venture. There’s already a profitless mine there, the Jackpot, which was plugged in the mid 1990s due to low uranium prices, technical problems, and a less-than-vintage ore grade. Now there’s talk of reopening the mine and even sinking more shafts. Speculation, not actual demand, drives this development. Yet of all energy resources, uranium is the most politically charged and unpredictable. It’s high stakes poker with five aces and jokers wild. The game attracts both silver-tongued speculators and true believers who contend that if you give them and their Geiger counter enough leeway, they’ll satisfy the world’s demand for energy. The uranium business thrives on rumor and crisis. "Uranium markets are driven by perception of what might happen as much as actual supply and demand," said Steve Kerekes, a spokesman for the Nuclear Energy Institute. When the price for yellowcake bounces off the stratosphere, emotional and economic forces conspire to make us all fools. As economist John Kenneth Galbraith once said about such state of affairs, “The circumstances that induce the recurrent lapses into financial dementia have not changed in any truly operative fashion since the Tulipomania of 1636-37.” Galbraith is referring to the epoch when the normally prudent Dutch surrendered their senses to a craze over tulips. A single bulb once sold for 40 times the average yearly wage. Similar forms of delirium cause companies to wax impractical about underground mining of uranium, specifically in Wyoming. In July 2006, a Toronto-based firm called Uranium One announced they had entered into an agreement to buy Green Mountain venture and the mothballed Sweetwater Uranium processing mill. They were to pay its current owners, the London-based Rio Tinto Mining Company, $110 million dollars and change. The deal seemed all but sealed. Nothing appeared unusual about the sale except the economics. Uranium One was sure they could make money mining the low-to-mid grade uranium using underground methods. This industry thrives on defying conventional wisdom. Red-blooded uranium miners leave the word “can’t” to ivory tower eggheads. Furthermore, Uranium One has the reputation of successfully tackling tough mining problems. Companies mine uranium two ways: in-situ leaching, where ore is leached out the ground by injecting – then extracting - a weak acid into uranium-bearing sandstone. Or, in places where leaching can’t be used, companies can dig it out the old-fashioned way in an open pit or underground mine. In-situ leaching produces a pound of uranium oxide ore for about $10.00 - $35.00. That’s in America, however. You can do it even cheaper in places like Kazakhstan. Underground mines, especially in America, have much higher production expenses than in-situ leaching: start-up, labor, environmental and equipment costs, including ventilation systems to deal with radon gas and the eternal question on what to do with the overburden. It’s difficult to imagine an underground mine uranium where production costs would be under $50.00 a pound, $60.00 - $80.00 is more realistic. This means underground mines only makes sense if you have a rich ore body (not in Wyoming, ever), cheap labor (a thing of the past), and a reliably very high price (possible, but unlikely). Otherwise underground mines will be the last to open and the first to close, the epitome of boom and bust mineral extraction. “Uranium mines are sensitive to two variables,” a mining engineer told me: “price and grade. And on both counts, this operation is vulnerable.” Furthermore, the Green Mountain play has a little water problem. Mark Moxley, a land quality manager with Wyoming’s Department of Environmental Quality said that when the former owner of the Green Mountain properties, U.S. Energy partnered with Anaconda Minerals to open an underground mine, “our debate with them was over water. We calculated that there’d be a 3,000-gallon per minute inflow. That’s a hell of a lot of water. They never wanted to acknowledge that.” Then Moxley put his finger on the core issue. “It’s our job to ask: “What it would it cost the state of Wyoming if things went bad? Amen, especially over such a speculative play. It’s one thing to grit our teeth and acknowledge uranium mines as the price we pay for “not freezing in the dark,” as the energy Cassandras like to say. It’s another matter to encourage activities that line the pockets of speculators. American underground mines, even run by responsible companies, have thin profit margins and court broad environmental liabilities. But in July 2007, the law of gravity caught up with heavenly uranium prices. Too much uranium on the market! Within three months, the spot price fell from $138 to $72 where it remains today. The deal between Rio Tinto and Uranium One faded away. Last week, Uranium One’s compelling chairman Neil Froneman found himself unemployed over troubling company finances, including the news he had over-estimated reserves and cashed in 32 million Rand (about $4.1 million) in Uranium One stock last year. A Rio Tinto spokesman said, “exploration of the (Green Mountain) sale options is still ongoing.” It’s going to be tough sell – and it should be. Just drive through the uranium country in Wyoming and see the reclamation work still going on 25 years after the last gamma ray of uranium ore was exposed to the air from the last boom. In most cases, uranium ore from deep underground needs to remain right where it is. As Moxley said, “Ore isn’t ore unless it can be economically mine. It’s just a mineral deposit.” -30- | |