TORONTO (miningweekly.com) – Taken solely at face value, South America hardly excites when it comes to uranium. Brazil is the region’s only producer and its output is relatively meagre compared with other nations. It recorded output of 231 t uranium in 2012, down from 265 t in 2011, according to the World Nuclear Association (WNA). By contrast, the world’s leading uranium producer, Kazakhstan, produced 21 317 t in 2012.

The effort to spark greater interest from a broader audience was hardly helped by current market conditions and sluggish prices; the uranium oxide spot price stood at $34.50/lb effective December 30, according to Infomine.com.

But uranium marches to a different, longer-term beat from other metals and minerals, and the next few years could witness a sea change in terms of demand. China would undoubtedly act as the dynamo, with 18 nuclear reactors already operational, 29 under construction and many more to come, according to the WNA.

“I think the uranium market has turned and I think it turned in September and October despite the negativity at that time,” U3O8 Corp president and CEO Richard Spencer told Mining Weekly Online. “Instead of being petrified by the markets, people are starting to be a bit more analytical, identifying the huge opportunity that’s coming up.”

U3O8 has two flagship uranium projects in South America: Berlin, in Colombia and Laguna Salada, in Argentina.

A key demand driver in South America is embedded in the region’s growing population and its increasing level of wealth and consumerism. Unsurprisingly, the resultant demand on energy infrastructure would continue to climb and some nations were already nearing capacity.

“Both Argentina and Brazil have energy shortages, [while] Chile has a phenomenal energy crisis brewing,” Spencer said. “I don’t know how they’ll get around it because their hydro potential is almost tapped out. They don’t have all that much [domestic] coal or natural gas … They’ll have to do something about their energy security.”

Nuclear energy could offer a clean alternative for the continent, which happens to also be blessed with uranium potential, the main prospective zones located in Brazil, Argentina, Peru, Colombia and Guyana.

“The geological potential of South America is the same as West Africa, be it Namibia or Niger or similar areas, because they were contiguous at one point. That’s one of the main reasons we have focused on South America because the potential is the same as West Africa,” Spencer said.

“Africa produces about 17% of the world’s uranium and there’s absolutely no reason that South America can’t be at that level or more,” he added.

TWO NATIONS, ONE GOAL

Argentina and Brazil are at the forefront of South American nuclear development and are the only nations in the region with operational nuclear reactors. Both are working together and sharing technology through cooperation agreements, with Argentina particularly keen to foster the development of mini-reactors.

“Argentina has a third reactor coming online now. The reactor is going to be a local design: a mini reactor that is just 25 MW,” Spencer said. “These small reactors have huge growth potential and their output is between 25 MW and 200 MW, the latter being about one-fifth the size of standard, large reactors.”

“The central government will fund the reactor build and it could have significant results as a lot of players are looking for reactors of this size, particularly Saudi Arabia for its desalination plants,” he said. “In addition, Argentina has a fourth large reactor out to tender at the moment and the country is talking about a fifth. Meanwhile, Brazil is finishing off their third reactor and they are talking about building more.”

“[Longer term], Argentina’s federal government wants to double the nuclear capacity by 2025, which will mean bringing about three more reactors,” he said. “However, the one thing they don’t have right now is uranium production and the central government is left saying: ‘we’re spending all this foreign exchange on importing uranium but we have our own reserves so why don’t we get them into production?’

“These are the reasons why we feel Argentina is a sweet spot irrespective of what else is going on there. For uranium, it’s basically a perfect situation,” he added.

OPPORTUNITY KNOCKS

Getting a project on stream in time to catch uranium’s rising wave in South America and the rest of the world will be essential for success. To this end, U3O8 will focus on its Laguna Salada project, in Argentina’s Chubut province, which currently has a National Instrument 43-101 resource of 6.3-million pounds of uranium indicated and 3.8-million pounds inferred.

The company announced in November and December the discovery of two new mineralised zones: La Rosada and La Susana, respectively.

“[And] we’ve been lucky enough to negotiate with the provincial government, which holds concessions next to ours. In fact our deposit is open into their territory … We’re now preparing to align with them and are just putting the finishing touches to a definitive agreement,” Spencer said.

“The extraction process of the uranium and vanadium [at Laguna Salada] is with washing soda and baking soda. Even down to the basic chemicals it’s something that the local population can understand,” he added.

In terms of capital expenditure (capex), the project is comparatively cost friendly. “We’re busy with the economic assessment and it looks as though capex will be in the $150-million range,” Spencer said. “Making the project modular could reduce these capex costs to something below $100-million, which is a much more digestible figure for this kind of market.”

“We’ll keep working on our flagship Berlin project, in Colombia - as there are critical tasks to be undertaken there, including some testwork that could have huge implications - and build on what we’ve achieved in the past,” he added.

“But our emphasis will be on Argentina,” he said. “With the provincial company on board we will have the commitment towards an option [that allows us] to explore their ground and to increase the size of the resource.”

“So the objective for 2014 is to increase the resource fairly dramatically by upgrading these discoveries … We’ll be trying to get Laguna Salada to at least 20-million pounds, although we believe it could be quite a lot bigger than that,” he said.