China rushes for nuke deals
From: By Andrew Trounson and Robin Bromby
April 05, 2006
ENERGY-hungry China already has people on the ground here seeking uranium supplies, with a surprise visit by a senior official to BHP's Olympic Dam requested yesterday as a deal was being signed with a junior explorer to develop long-term supplies.
Shares in junior Uranex leapt 65 per cent yesterday on the news that China National Nuclear Corp, the official nuclear agency, is talking to it about a long-term relationship for uranium supply.
CNNC, which has monopoly control of all nuclear materials within China, is understood to be in similar negotiations with another Australian company.
The news came just a day after the federal Government and Chinese Premier Wen Jiabou agreed a nuclear safeguards treaty that clears the way for Australian uranium to be exported to China.
Yuan Chen, the governor of the China Development Bank, Beijing's strategic lending bank, will on Friday visit the massive Olympic Dam uranium mine some 560km North of Adelaide in the middle of South Australia.
Mr Chen, who is visiting Australia separately from Mr Wen, surprised BHP Billiton yesterday with a request to visit the mine, and the company's head of base metals in Australia, Roger Higgins, has been drafted in to show Mr Chen and his delegation over the site.
Mr Chen, who is the equivalent of ministerial level in Beijing, is almost certainly looking over other Australian resources projects and has a big cheque book that he will be hoping to use to encourage new production to meet China's soaring demand for raw materials. The Chinese may also be interested in directly investing in Olympic Dam, if BHP would ever let them. Chinese interests had a good look over the mine last year before BHP took over previous owners WMC with a $9.2 billion bid.
China is shaping as a major market for Olympic Dam, and a sales deal would go a long way towards underwriting BHP's proposed $5 billion expansion of the copper and uranium mine.
While the visit is at the behest of the Chinese, it is the latest sign from BHP that it is becoming increasingly confident that the expansion will go ahead.
BHP Chairman Don Argus no doubt started the sales pitch soon after the treaty was signed in Canberra on Monday. At a lunch in honour of Mr Wen's visit, Mr Argus secured himself a seat at the head table next to the Chinese Premier. But while Mr Argus will be keen to secure a long-term sales deal, he does not have any uranium to offer the Chinese in the short or even medium term.
All Australian uranium is sold under long-term contracts, and Olympic Dam's production is already largely fully sold out to 2013, when the expansion is scheduled to come onstream. Olympic Dam supplies uranium to Japan, the US, Europe, South Korea and Canada.
But BHP will want firm commitments from buyers including the Chinese well before 2013, with a final decision to go ahead with the project expected in 2009.
Uranex has two uranium targets within Australia, but the Chinese have indicated their main interest is the Perth junior's 26,000sqkm of exploration tenements in Tanzania. Just as important is that the Tanzanian Government has indicated it will back uranium mining and issue all necessary export licences. Uranex shares climbed 42c to $1.06.
The Uranex announcement is highly significant in that it shows that the Chinese have been getting their ducks in a row in expectation of the uranium agreement between the two countries. Uranex's most advanced project is Thatcher Soak, in the same West Australian region as the 52,000-tonne Yeelirrie deposit owned by BHP. Petroleum company BP reported a 6000-tonne estimate in the 1970s at Thatcher Soak. Uranex managing director George Kenway said he was hopeful of further exploration doubling that estimate. But Uranex would be concentrating its effort in Tanzania while the West Australian Government remained opposed to mining the mineral.
"We'll wait to bring Western Australia along in tune with the way the political wind is blowing," he added.