Nuclear plants fuel surging uranium market: nuclear plant owners can read market signals as well as anyone. They track uranium production, monitor reserves and keep an eye on new players coming into the market. From what they've seen they are convinced their primary fuel is well worth a higher price.

That's the big reason the uranium market is booming, says Saskatchewan Mining Association Uranium Section Chairman Bob Pollock.

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"The spot price for uranium is at $23.50 right now (mid-April) but the long-term contracts are being signed for several dollars more per pound," explains Pollock. "Customers are prepared to pay a bit of a premium for a secure, long-term supply."

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For the last number of years, a fundamental feature of the market has been an imbalance between use and primary production. Pollock estimates the nuclear power reactor industry uses 160 million to 170 million pounds of uranium every year but the mining industry has been producing only about 90 million to 100 million pounds per year.

Secondary supplies made up the difference but indications are those sources are finally diminishing. Less fuel is available from blended-down nuclear weapons and stockpiles aren't as massive as in years past.

"Particularly in the United States there has been consolidation in the power generation business which has left a reduced number of owners. These larger operators can better manage the fuel supply and they don't need as much stockpiled uranium as they once did," Pollock says.

The perception of uranium availability has also changed the outlook. The 2003 flood at McArthur River, a fire at the Olympic Dam facility in Australia and the Russian decision to keep more blended-down material for their own nuclear reactors, making less secondary material available for sale, told the market that production interruptions can and do happen.

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Mines in places such as Namibia, Australia and particularly in Kazakhstan--where both Cameco and Areva have joint venture operations--are ramping up to meet demand while select lower-grade uranium operations in the United States are coming back into production.

"With higher prices the lower-grade reserves may remain viable for an extended period of time," Pollock says. "It is a fairly widespread view that (the price increase) is not a temporary spike but a fundamental change in the uranium market."

Saskatchewan uranium producers are well-positioned to capitalize on that market after a year of tremendous progress. Construction approval was granted for the Cigar Lake mine and the decision was made by the owners to proceed on the $450-million dollar project. Production is scheduled to begin in 2007 with a full complement of about 300 employees.

Cigar Lake ore will be sent by truck 80 kilometres to the mill at McClean Lake, which itself expects to receive approval this year for a $60-million expansion.

Built in 1999, McClean Lake is the newest of the mills and was designed to receive, store and process the type of high-grade ore that will be coming from Cigar Lake.

As Cigar Lake ramps up to full production, the initial processing step--to produce uranium in a solution form--will be completed at McClean Lake, with processing to final uranium concentrate to be split between McClean Lake and Rabbit Lake. The regulatory approval process for this transfer of uranium-bearing solution to Rabbit Lake for final processing has been initiated by Cameco and Areva. Ongoing underground exploration at Rabbit Lake has identified further reserves to supply ore to the mill until Cigar Lake material comes on stream.

There are also proposals to increase production at the McArthur River mine which, in tandem with the mill at Key Lake, furnished almost 60 per cent of the 30 million pounds of uranium the province contributed to world supply last year.

"The Athabasca Basin mines and mills have been exemplary facilities for 30 years," Pollock states. "The McArthur River and Cigar Lake mines will anchor production for many years and there are great prospects for new discoveries from the recent boost in exploration."

At the other end of the cycle, Cluff Lake decommissioning received regulatory approval in 2004 and the initial phase of mill demolition has been completed. Work is underway on closing the tailings management and mining areas, in advance of re-vegetation activity and the beginning of a long-term monitoring program.

"Cluff Lake operated for 20 years and produced more than 60 million pounds of yellow cake, yet the area of disturbed land was less than five square miles, an area smaller than some farms in southern Saskatchewan," Pollock says. "When decommissioning is complete the land will be turned back to its traditional uses and there will, in time, be no discernable footprint whatsoever."

On the regulatory scene Pollock notes two other significant events of the past year. First, the Canadian Nuclear Safety Commission (CNSC) and the provincial departments of Environment and Labour made strides towards reducing duplication through harmonizing their requirements. Second, the federal government introduced the Smart Regulation Initiative which the industry is hoping will result in long-term efficiencies and improved effectiveness in environmental processes. These would be in addition to improvements already identified by the CNSC for its implementation of the existing federal process.

Four of the six uranium operations in northern Saskatchewan reported no lost time accidents over the past year, and with the other two reporting rates below industry average, the uranium sector re-affirmed its outstanding safety reputation.

Uranium companies continue to be the major source of industrial employment in the North and key to supplying many opportunities for Saskatchewan companies. The Multi-party Training Program has been extended for a third time and the industry is proud to advance on-the-job training initiatives and scholarships.

"The broad conclusion you come to when you look back at the past year and forward to the coming years, is that the future is very bright for the industry in Saskatchewan," Pollock says. "Uranium producers are determined to continue making valuable economic contributions--to the North in particular and the province in general--in an environmentally sound manner."