Australia is primed to cash in on uranium
If demand for uranium were to ever flourish like it did for iron ore a few years back, Australia is well positioned to cash in. The industry remains relatively small compared to commodities like gold, copper and even coal, but the potential is there.
During peak periods in 2004 and 2008, uranium prices briefly rose as high as $130 a pound before the trend was disrupted by two major events: the global crisis in 2008 and the Japanese tsunami in 2001.
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Australia is home to some of the largest uranium deposits in the world. BHP Billiton’s Olympic Dam mine in South Australia, Rio Tinto’s Ranger lease in the Northern Territory, and the Four Mile mine in South Australia, run by Quasar and Alliance Resources are just three Australian sites where uranium is now being produced.
According to The Sydney Morning Herald, weak prices for uranium have force mines around the world to close, reducing the number of operating uranium mines in Australia.
Toro Energy, for example, is developing a uranium deposit in Western Australia but is unlikely to be mined unless prices recover significantly.
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"The continued weak uranium prices are having an impact on future supply potential over the long term. In the current low-price environment it is difficult to justify the economics of projects, which is leading to deferrals or even cancellations," said Tim Gitzel, chief executive of the world's second largest uranium producer Cameco.
"64 reactors are under construction around the world today and the new reactors have been coming online, four in China so far this year. So there are things happening that continue to strengthen the long-term outlook and that keeps us excited," Mr Gitzel said last week.
According to The Sydney Morning Herald, UBS analyst Dan Morgan said battery technology could improve the viability of renewable energy, but in the meantime the biggest challenge is community attitudes.
"If battery technology works it could solve some of those questions around renewables but I don't think batteries are the biggest risk to uranium. I think the biggest risk going forward is community opposition to nuclear plants and that is especially so in light of Fukushima," Morgan said.
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"The other problem with nuclear power is it has a large upfront capital cost, which means that it is pretty hard to get a nuclear plant financed. So I think that is also a challenge for uranium."
Many optimists believe the lack of new mines will eventually create a shortage of uranium, helping to stimulate the next uranium price boom.
Lithium producers bullish as EV revolution ramps demand
Rising demand for lithium is stoking prices for the electric vehicle battery metal, fueling long-delayed expansions that still may not produce adequate supplies that automakers need to meet aggressive production plans.
Growing industry optimism from higher lithium prices is a change from last year when funding for mines and processing plants dried up during the pandemic.
Albemarle Corp, Livent Corp and other producers are scrambling to make more lithium, but some analysts worry the recent price jump will not spur a big enough expansion to meet a planned wave of new EV models by mid-decade.
Since January, General Motors Co, Ford Motor Co LG Energy Solution and SK Innovation Co, along with other automakers and battery parts manufacturers, have said they will spend billions of dollars on EV plants.
U.S. President Joe Biden has proposed spending $174bn to boost EV sales and infrastructure. The European Union has similar plans, part of a rush to catch up with global EV leader China.
Those moves have helped an index of lithium prices jump 59 percent since April 2020, according to data from Benchmark Mineral Intelligence, a commodity pricing provider.
The rising demand “reflects what feels like a real and fundamental turning point in our industry,” said Paul Graves, chief executive of Livent Corp, which supplies Tesla Inc. On Monday, it said it would more than double its annual lithium production to 115,000 tonnes.
Graves warned, though, that “it will be a challenge for the lithium industry to produce sufficient qualified material in the near and medium term.”
Albemarle, the world’s largest lithium producer, aims to double its production capacity to 175,000 tonnes by the end of the year when two construction projects are complete. Albemarle's Q1 profit beat expectations thanks to rising lithium prices. Chile’s SQM, the No. 2 producer, said its goal to expand production of lithium carbonate by 71 percent to 120,000 tonnes should be complete by December.
Australia’s Orocobre is paying $1.4 billion for smaller rival Galaxy Resources, a strategy designed to boost scale and help it grow faster in regions closer to customers.
“The next few years are going to be critical in terms of whether there’s enough available lithium supply, and that’s why you’re starting to see commodity prices start to ramp,” said Chris Berry, an independent lithium industry consultant.
The price gains helped Albemarle and other major producers, including China’s Ganfeng Lithium Co and SQM, post big gains in first-quarter profit and boost forecasts for the year.
Even China’s Tianqi Lithium Corp, saddled with debt due to years of low lithium prices, signaled that recovering demand should help it swing to a profit this year.
Forecasts call for demand for the white metals to surge from about 320,000 tonnes annually last year to more than 1 million tonnes annually by 2025, when many automakers plan to launch new EV fleets, according to Benchmark.
Still, demand is expected to outstrip supply in 2025 by more than 200,000 tonnes, so lithium prices may need to rise to encourage producers to build more mines. That could boost the prices consumers pay for EVs. “Companies across the lithium-ion supply chain are in the best position they’ve been in for the last 5 years,” said Pedro Palandrani of the Global X Lithium & Battery Technology ETF , which has doubled in value in the past year.