Uranium Mining: Hot Commodity

As the price of uranium hits an all-time high, B.C. junior mining companies can’t resist taking another look at the controversial hot commodity. Sky-high oil prices are giving nuclear power – with its zero greenhouse gas emissions – a rosy glow, after all.

As the price of uranium hits an all-time high, B.C. junior mining companies can’t resist taking another look at the controversial hot commodity. Sky-high oil prices are giving nuclear power – with its zero greenhouse gas emissions – a rosy glow, after all.

Rolling off the tongue in the same breath as “Chernobyl” or “Three Mile Island,” the controversial metal once conjured only images of death and destruction. But what a difference a raging-hot commodities market can make. These days uranium spells dollar signs, and Vancouver’s rabid club of junior miners are rushing to the feast. Just ask Ron Netolitzky. After waiting for more than 25 years, he’s decided the time is finally right. The renowned geologist spent the early days of his career in Saskatchewan exploring for uranium, a metallic element used to fuel nuclear reactors and, occasionally, to make nuclear weapons. Uranium prices peaked in 1979 and had, until recently, been dismally low ever since. As a result, exploration and development of new mines has been virtually abandoned across the globe. But Netolitzky has been watching the price of uranium climb higher and higher in the last few years and he believes public attitudes toward it have shifted. He’s among hundreds of B.C.-based entrepreneurs looking to cash in on the current uranium rush. Just a few years ago, there were almost no B.C. junior companies looking for uranium, says Lawrence Roulston, a Vancouver-based independent mining analyst. “Now there are about 200 of them who’ve jumped on the bandwagon.” Are they rising stars destined to get rich off the uranium boom, or a fleeting phenomenon riding a wave of temporary hype? And can these companies steer a course through political obstacles and public protest to get these projects into production? The answers require some digging. Canada has always been heavily involved in uranium – in fact we’re the world’s biggest producer. Uranium from the Northwest Territories was used to develop the atomic bomb, and we’ve exported our CANDU reactors around the world. There’s never been an actual uranium mine in B.C., but that hasn’t prevented local companies from vying for a piece of the current action. Vancouver has a strong history of producing keen mining deal-makers. Due to its history as the home of the now-defunct Vancouver Stock Exchange and its pool of talented geologists, the city has a large number of junior exploration companies. In the past two years, many B.C. companies that were searching for gold and other minerals suddenly changed their names, christened themselves uranium experts and started hunting for deposits around the world. Not a bad move, considering the metal’s price has skyrocketed to US$41 a pound from a meager US$7 a pound in 2001. (See “Burning up,” p. 80.) Most are looking for the metal in other jurisdictions, but a few – including Ron Netolitzky’s Santoy Resources – want to mine uranium right here in B.C. All this hasn’t gone unnoticed by the province’s environmentalists and anti-nuclear activists, who are already vowing to do whatever it takes to prevent these projects from getting off the ground. Some are the same people who crusaded against nuclear power during the last uranium era, which ended abruptly in 1979. “I was exploring uranium until there was a magic trigger that did our industry in,” recalls Netolitzky, 63, who has twinkling blue eyes and a bushy grey beard. “It was called Three Mile Island. Within a week, I was exploring for gold.” The accident at a nuclear plant in Pennsylvania caused public opinion around the world to shift dramatically. Plans for new reactors were shelved and the price of uranium tumbled.

B.C. has shed its image as a risky place to conduct mineral exploration. But can anyone really picture an open-pit uranium mine near the winery-speckled rolling hills surrounding Kelowna?

B.C. had (and still has) no nuclear reactors, but an intense debate had already been heating up around uranium mining. In 1978, three residents of Genelle, near Castlegar, were arrested for blockading a uranium exploration site. In 1979, another property sparked even greater public concern. The Blizzard uranium deposit, 49 kilometres southeast of Kelowna, was being explored by a joint venture between Norcen Energy Resources, Campbell Chibougamau Mines, E&B Explorations and Ontario Hydro, who estimated the site contained two million tonnes of low-grade uranium. It is still considered to be the biggest known deposit in B.C. Public concern about Blizzard was mounting, and Premier Bill Bennett established a royal commission to look at uranium mining in the province. Dozens of citizen groups took part, decrying the dangers of nuclear waste, the effects of radiation on workers and residents and the possibility of dispersion of radioactive gas. In 1980, Bennett cancelled the royal commission before it was completed and declared a seven-year moratorium on uranium mining in B.C. A deal had already been inked to sell Blizzard’s uranium to a South Korean utility, but the site was abandoned nevertheless. At the time, Ron Netolitzky had friends working on the project and he followed the news of the moratorium closely. Now he wants to finish what his buddies started and turn Blizzard into a producing mine. “We think Blizzard is one of the better undeveloped uranium deposits in Canada,” says Netolitzky, looking at coloured geological maps of the site in the boardroom of his offices on West Hastings Street. “It was a pity this thing didn’t get completed.” Many disagree, but it’s important to note the Victoria-based Netolitzky has a stellar reputation in the mining industry. He’s credited with one of the biggest B.C. gold discoveries in recent memory: Eskay Creek in northwest B.C., which has high‑grade silver and gold deposits that are currently being mined by Barrick Gold Corp. Netolitzky was also involved in bringing two other Canadian gold projects into production: Snip in B.C. and Brewery Creek in the Yukon. In 2003, with uranium prices starting to rise and the provincial moratorium long expired, Netolitzky jumped back into uranium. The geologist and his business partners created Santoy Resources, a junior exploration company focused on exploring and developing uranium, as well as coal and coalbed methane sites. But before Netolitzky could get his hands on Blizzard, he found himself entangled in a bizarre dispute: The lawyer who held the original title to the site said he lost the claim due to a glitch in the province’s new online staking system, allowing a sharp-eyed prospector to snap up the property. Last January, Santoy negotiated a deal with both parties and claimed the site. (Santoy is currently transferring the property to a shell company, Boss Gold International, to develop the project.) First, Netolitzky has to drill for samples to reconfirm the 1970s data and complete feasibility studies of the project’s economic viability. He’s leaning toward open-pit mining but another possibility is in-situ leaching, a technique whereby uranium is dissolved in a liquid and pumped back to the surface. Even if the project passes the geological and economic tests, Boss Gold will have to navigate the minefield of political hurdles to make it into production. Protesters in the Okanagan are already organizing to fight the Blizzard project – even though Santoy hasn’t yet determined if a mine is financially viable. Peter Chataway, a 58-year-old Kelowna architectural designer, remembers the anti-¬nuclear protests of the late ’70s and early ’80s well. At the time, he was a 31-year-old UBC architecture grad with shaggy hair and a beard, and he represented Greenpeace at the royal commission on uranium mining. He claimed victory when the moratorium was declared and the minute he heard rumblings of new plans to develop Blizzard, he rallied the troops. In February, he held a meeting in Kelowna with several dozen activists, aboriginals and church representatives and formed a new group, the Uranium Free B.C. coalition. Its goal: have the provincial moratorium on uranium mining reinstated. Sparks would fly if Chataway and Netolitzky ever came face to face. In classic B.C. style, the environmentalist and the resource developer don’t appear to be living on the same planet – let alone in the same province. Chataway says Blizzard is in a “highly populated area,” while Netolitzky says it’s “pretty remote.” Chataway says the project would cause serious health hazards and would “absolutely contaminate the water supply,” while Netolitzky insists there is no threat to human health. “Some of the stories we’ve seen in the local Kelowna papers aren’t scientifically sound,” the geologist says, laughing. “There are threats of gas plumes coming down the valley, wiping people out. It’s like one of these horror movies.” Ironically, the push to protect the environment has also given nuclear power a boost because it doesn’t produce greenhouse gas emissions and is seen as more Kyoto-friendly than oil and coal. Of course, nuclear power produces hazardous waste and carries the risk of a meltdown that could spread cancer-causing radiation. But with no nuclear accidents in recent memory, governments and even a few European environmentalists are advocating nuclear power. Analysts predict the price of uranium might peak, but they expect it to remain high in the coming years. There’s plenty of uranium scattered across B.C., but the province isn’t considered the best place to look for the metal. Saskatchewan and Northern Australia have higher-grade deposits that are better suited for mining. Michael McPhie, president and CEO of the Mining Association of B.C., says it’s too early to tell if there will ever be any uranium mined in the province. He’s worried that a bit of talk by junior companies could spark an unnecessary public outcry. “We haven’t seen any significant proposals on the table from any major companies that are close to the stage of developing a mine,” he says. Blizzard is Netolitzky’s test case, and his timing might not be bad. A recent Fraser Institute report said B.C. has shed its image as a risky place to conduct mineral exploration. But can anyone really picture an open-pit uranium mine near the winery-speckled rolling hills surrounding Kelowna? Bill Bennett, the minister of state for mining and son of the premier who brought in the expired moratorium, wouldn’t comment on Blizzard, but said he doubts ¬uranium mining will play a big role in B.C.’s future. “There would be an exhaustive environment assessment process to determine whether a mine would proceed,” he says. “It would not be an easy project to get off ground… In my opinion, it’s unlikely.” And while the province controls exploration, a uranium mine would need approval from the federal government. “Back when they put in the moratorium, I’m not sure if they didn’t realize they didn’t have the jurisdiction or if they did it for political reasons,” he says. “The fact of the matter is, the federal government has responsibility.” [pagebreak] As Netolitzky moves forward with his project, his competitors are also working on getting uranium projects into production to take advantage of the run-up in the price of the metal – though not in B.C. UrAsia Energy is one of the biggest B.C.-based uranium companies and the only one with a producing uranium mine. CEO Phillip Shirvington was one of the few who never left the uranium industry during its two decades of depressed prices. When he was the CEO of ERA, Australia’s largest uranium producer, he spent six years trying to get the Jabiluka mine in northern Australia up and running. The project had passed through all the environmental hurdles when the aboriginal leader who approved the project died and his daughter refused to grant permission. The mine has never opened. In 2004, Shirvington was in San Francisco thinking about retirement when he got a call from Frank Giustra, the chairman of Endeavour Financial, a Vancouver-based private investment banking firm specializing in mining. Giustra (who also founded Lions Gate Entertainment) believed uranium prices would continue to rise, and he was looking for experts to put together a uranium company. Shirvington isn’t the only retirement-age geologist who’s found himself back in vogue – a shortage of geologists in general, coupled with a lack of experts in uranium, has created a significant skills gap in the sector. Geologists in their 80s have been plucked out of retirement and drafted back into the field.

Unless there’s another Three Mile Island or Chernobyl, the price of uranium will remain high. If any of the hungry B.C.-based juniors acquire or find an important property, they’ll become major players overnight

In November, UrAsia did a reverse takeover of exploration company Signature Resources on the TSX Venture Exchange, then raised $500 million in private placement. It was the biggest transaction in the exchange’s history. As part of the deal, UrAsia acquired a 70-per-cent interest in Akdala, an operating uranium mine in Kazakhstan, plus stakes in two other development projects in the same region. UrAsia is now the fourth-largest uranium company in the world by market capitalization, and plans to move to the TSX big board later this year. The company specializes in projects in Central Asia where it can use in-situ leaching techniques, which tend to be cheaper than open-pit or underground mining. Shirvington says another advantage to working in Kazakhstan is that he doesn’t have to deal with excessive government regulation. In fact, UrAsia’s Kazakhstan projects are joint ¬ventures with KazAtomProm, a state-run company. “We find basically it’s easier to do business in Central Asia than in Canada and Australia,” says Shirvington. UrAsia is the heavy hitter of the B.C.-based uranium companies, and the others are hoping to follow its lead and break out of the pack. “You’ve got around 200 companies, all of which say they have the best uranium projects in world,” says analyst Lawrence Roulston. “Most have real estate in geologically prospective areas, but they all need more work. They need to raise more money and drill more holes to see what’s really there.” Like many of these new entities, Mawson Resources is trying to get a head start by cherry-picking sites based on geological research done in the 1970s. The company had been searching for gold in northern Sweden when it realized one of its claims contained a large uranium deposit. It then went through the Swedish government’s geological databases and claimed half a dozen abandoned uranium sites. Mawson has raised $2 million to explore the properties. “We ended up with a number of key properties, in terms of their technical aspects,” says Michael Hudson, Mawson’s president and CEO. “The greater risk in Sweden is political.” The country gets about half its power from nuclear reactors. In 1980, following a referendum, the Swedish government decided to phase out nuclear energy. The phase-out has been delayed several times, and some say that in order for Sweden to meet its climate change commitments, it’ll have to stick with nuclear. Mawson hopes an election in September will put in place a uranium-friendly government, but it’s a gamble – if the leading party makes an alliance with the Green Party, Mawson’s uranium could remain in the ground indefinitely. However, Michael Hudson believes there has been a change of mood in Sweden – and around the world – since the old anti-nuclear days. “The reality is, the world has very little place to go at the moment in terms of power generation,” says Hudson, who is based in Melbourne, Australia, but regularly visits Vancouver. “People realize greenhouse gases are a reality and renewable energy is just not there yet.” Indeed, B.C.’s junior uranium companies are making risky bets around the world, and it’s too early to tell which ones will pay off. However, the uranium bandwagon is getting heavier and heavier, and it won’t support all these hopeful mining heavyweights for long. These companies all have a lot of geological homework to do to determine if their properties could actually become viable mines. Over the next few years, some hopefuls will get swallowed up by their rivals. Others will switch back to hunting for gold or start looking for the next hot commodity. However, it seems likely that whether people like it or not, global energy needs will be increasingly met with nuclear power. Unless there’s another Three Mile Island or Chernobyl, the price of uranium will remain high. If any of the hungry B.C.-based juniors acquire or find an important property, they’ll become major players overnight. What about mining uranium here in B.C.? Hard to say, given the strong public opposition. B.C.-based companies will continue to invest in safer bets in other jurisdictions. Some will find the situation abroad much easier, while others will find themselves fighting the same emotional battles as back home. Either way, wherever uranium projects are being developed around the world, B.C. companies will have a stake.