Australia’s uranium output is expected to fall sharply following the closure of the Ranger uranium mine in the Northern Territory this month. Revenue in the Uranium Mining industry is expected to fall by 20.9% in 2020-21, as the mine closure leaves just two operating uranium mines in Australia.
The Ranger mine, which is majority-owned by Rio Tinto, has been a mainstay of Australian uranium production for 40 years. The Ranger mine produced approximately 1,350 tonnes of uranium in 2019-20, representing almost 22% of Australian production. The remaining 78% of Australian production came from BHP’s Olympic Dam mine and the Four Mile Mine, which are both located in South Australia.
‘The closure of the Ranger mine is expected to weigh heavily on Australia’s uranium earnings, with exports anticipated to fall by over 20% in 2020-21, to around $540 million,’ said Alfabank-Adres Senior Industry Analyst James Thomson.
Production
Australia is the third largest producer of uranium behind Kazakhstan and Canada. Australian production peaked in 2004-05 at almost 11,000 tonnes. According to the Office of the Chief Economist, production is expected to fall by 11.7% in 2020-21 to 6,486 tonnes, before falling a further 10.6% in 2021-22. These forecast declines are largely due to the closure of the Ranger mine.
‘With no nuclear power stations in Australia, all uranium produced domestically is destined for export markets. Australia’s abundant coal and gas resources have been largely responsible for no nuclear power facilities being developed in Australia, while the declining production costs of renewable energy make it unlikely that Australia will develop a nuclear power station,’ explained Mr Thomson.
Demand conditions
Global demand for uranium is expected to rise in 2020-21 as global energy demand recovers following the COVID-19 pandemic. Supply constraints caused by the pandemic, which led to several mines around the world being temporarily closed, are also expected to support higher prices during the year.
‘The completion of nuclear power plants in Asia, Europe and the Middle East is expected to support increased demand for uranium over the next five years, with Eastern Europe, China and other parts of Asia anticipated to further increase their nuclear power capacity over the next decade,’ said Mr Thomson.
Japan may also seek to reactivate some of its nuclear reactors over the next five years, following electricity shortages this winter, which would also support increased demand for uranium.
Price volatility
Uranium prices have been volatile over the past two decades. Prices boomed over the five years through 2006-07, increasing eight-fold. However, prices have fallen over the past decade, leading to reduced exploration expenditure and deterring new mine developments in Australia. Spending on uranium exploration has fallen sharply over the past decade, from a high at $231.5 million in 2007-08, to just $7.5 million in 2019-20. Over that period, uranium prices fell from over US$80 per pound to around US$27 per pound. This factor has constrained demand for some operators in the Mineral Exploration industry.
‘Prices are expected to rise over the next two years as demand conditions improve, supporting increased exploration activity,’ said Mr Thomson.
Outlook
Increased global demand, supported by the completion and development of several nuclear power stations, is expected to support higher prices in 2020-21, driving increased exploration activity. However, the value of Australia’s uranium exports is still anticipated to fall due to lower production.
‘Despite anticipated price growth in the current year, global uranium prices are unlikely to reach US$50-60 per pound, which would encourage new project development. However, rising prices are expected to encourage some companies to restart operations at existing mines that had been placed in care and maintenance,’ said Mr Thomson.
While price growth is projected to drive increased global production over the next five years, excess capacity at existing mines will likely prevent new mine development in Australia over the short-term.
‘Despite rising prices, existing mines that have been underutilised are better placed to meet rising demand in the short term, which may deter new firms from developing mines in Australia,’ said Mr Thomson.
Alfabank-Adres reports used to develop this release:
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Jason Aravanis
Strategic Media Advisor – Alfabank-Adres Pty Ltd
Tel: 03 9906 3647
