Japan crisis is trouble for new Colorado uranium mill

Saturday, March 19, 2011 1:24 PM

The unfolding nuclear disaster in Japan is likely to delay plans to build a uranium mill in the Paradox Valley by at least a few months, said an executive at the company that owns the mill.

The disaster shook the world’s uranium market the same week that Energy Fuels Inc. was wrapping up a financing deal for its proposed Piñon Ridge uranium mill, between Naturita and Paradox, said Gary Steele, the company’s vice president for corporate marketing.

“I’ve had better weeks than the last one, believe me,” Steele said.

Tuesday’s weekly spot price of uranium fell to $60 per pound, according to UxC Consulting, a company that tracks global uranium prices. That’s down $6.50 from a week earlier and $12 from the end of January.

The March 11 earthquake and tsunami knocked out power to Japan’s Fukushima Dai-ichi nuclear complex and interfered with the plant’s ability to keep its nuclear material cool and contained. The plant has sustained several radiation leaks, and the U.S. Embassy in Tokyo warned U.S. citizens Thursday to stay at least 50 miles away from the plant.

Already, China and Germany have announced moratoriums on new nuclear plants, and U.S. congressmen like Massachusetts Democrat Ed Markey are calling for the same thing here. Italy will hold a national referendum on building more nuclear plants in June.

Reaction to the disaster has played havoc with Energy Fuels and other uranium companies, which mostly are headquartered in Canada.

“It is sell now, ask questions later for the uranium market,” Canada’s Financial Post said Tuesday.

Energy Fuels wrapped up its plan Thursday to sell $10 million in shares of the company. The price was dependent on market conditions at the time, and Energy Fuels stock had dropped to 41.5 cents per share at Thursday’s close on the Toronto stock exchange, down from 87 cents the day before the earthquake.

Steele said it’s “only realistic” to think some of the financing for the mill will be delayed, but perhaps by as little as a few months.

“We didn’t plan to go out and raise money in the face of what has been probably the worst week the nuclear industry has seen in 25 years,” Steele said.

Steele was referring to the Chernobyl nuclear plant in the former Soviet Union, which sustained the worst disaster in the history of civilian nuclear power in 1986.

The Piñon Ridge mill would be the country’s first new uranium mill in two decades. Energy Fuels hopes it spurs a resurgence in uranium mining in Southwest Colorado, which used to supply much of the ore for American power plants and nuclear weapons.

The tsunami happened just four days after Energy Fuels received a radioactive-materials license from the state health department.

The license requires Energy Fuels to put up $11 million to guarantee cleanup of the mill, due in four payments. The first installment of $1.4 million is due May 6.

The uranium market saw a rebound at the end of the last decade as more countries turned toward nuclear power and the uranium from old nuclear weapons – which had flooded the market for civilian reactors – began to run out.

UxC Consulting noted the fundamental strength of the market in its newsletter last Monday, but it anticipates a lengthy political fallout from the disaster that will continue to hurt the uranium market.

“We think it is much more likely that this story is not going to go away for a long time,” Ux Weekly said.

Steele also thinks the market is sound, but he agrees that the political conversation around nuclear power has gotten more difficult for his company.

“It’s definitely a bump in the road, and it’s likely to translate into some delay in what we’re able to do. It doesn’t shut the door on folks needing fuel for nuclear plants,” Steele said.