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Mine ownership restricted
March 20, 2013
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WINNIPEG: Two of the world’s biggest uranium miners, Rio Tinto PLC and Areva SA, are pressing Canada to change a Cold War era policy that curbs foreign ownership of uranium mines. 

The campaign, backed by the Australian government, two Canadian provinces and Western Australia-based uranium producer Paladin Energy Ltd, could unlock some of the world’s highest-grade ore for development just as demand for the radioactive element looks to surge.

Unlike Australia, which has no restrictions on uranium-mine ownership, Canada restricts foreign companies from owning more than 49 per cent of any uranium mine. There are no ownership restrictions on foreign participation in exploration.

“It’s such an absurd situation,” John Borshoff, managing director of Paladin, said in an interview. It’s “something that is an anachronism from the Cold War”.

Borshoff said the Australian government, Rio Tinto and Paladin are joining forces to lobby Ottawa, while the Canadian provinces of Saskatchewan and Newfoundland and Labrador are also pressing for change.

The push to open Canada’s uranium sector comes while spirited debate about foreign investment elsewhere in the economy is underway. Ottawa last year approved a takeover of oil company Nexen Inc by China’s CNOOC Ltd but declared the Canadian oil sands off limits to state-owned enterprises in the future.

In 2010, as public concern grew about foreign control of resources, Ottawa blocked a hostile bid for fertilizer producer Potash Corp of Saskatchewan by Anglo-Australian miner BHP Billiton PLC.  

Ranking behind only Kazakhstan, Canada is the world’s second-biggest producer of uranium, which is mostly used to power nuclear reactors. Canadian uranium, produced in Saskatchewan by Cameco Corp and France-based Areva, accounts for 17 per cent of global output.

The ownership issue has come to the fore as Rio Tinto, Areva and Paladin all seek to develop promising Canadian deposits.

Ottawa can grant an exception to the ownership policy if a foreign company demonstrates it cannot find a Canadian partner. But it last did so in early 1990s, for two Areva projects.

Rio outbid Cameco in 2011 to buy Hathor Exploration for $654 million, securing the Roughrider project in northern Saskatchewan’s uranium-rich Athabasca basin.

Areva owns the Kiggavik project in the northern territory of Nunavut, while Paladin is developing Michelin in the eastern province of Newfoundland and Labrador.

To be sure, there is no certainty that the miners would start production in the near term even if they could, given escalating capital costs and stubbornly low uranium prices.

By the time the deposits could be producing in seven to eight years, demand may be rising again, reversing weakness triggered after the 2011 Japanese tsunami caused a meltdown at the Fukushima-Daiichi power plant and led to a shutdown of dozens of reactors.

Some 65 reactors are under construction around the world as countries such as China seek to produce energy for a growing population.

Senior mining analyst Raymond Goldie of Salman Partners in Toronto said BHP would likely be one of a handful of interested investors if Canada changed its policy on uranium mining.

It would be “open season, but not many people carrying guns,” he said.

BHP, the world’s No. 6 uranium producer in 2011, declined to comment.

Borshoff said the current policy makes it difficult for Paladin to find a partner to share the Michelin project’s costs because of the lack of clarity on who would operate it.

Rio Tinto spokesman Illtud Harri said the company is “actively engaged” with Canada and Saskatchewan on uranium mine ownership. Areva declined to comment, but Saskatchewan government sources said the company is also pressing Ottawa.

Australian Resources and Energy Minister Martin Ferguson raised concerns about uranium ownership with Canada last year. Ferguson’s office refused to comment on the issue, but said Australia was not considering any form of trade retaliation.

Canada isn’t alone in restricting mine ownership.

Kazakhstan’s state-owned company Kazatomprom has authority to hold a stake of any size in uranium mines. 

But that hasn’t stopped foreign companies from controlling mines there. Cameco holds 60 per cent of the Inkai mine in Kazakhstan in a joint venture with Kazatomprom, while Areva has 51 per cent of the Katco mine.

Australia has no such curbs, and Cameco has snapped up two Australian deposits in recent years.

Ottawa has restricted foreign ownership of uranium mines since 1970, driven by concerns about weapons proliferation, and efforts to change the rules have waxed and waned over the years.

Reuters

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