From the first discovery of uranium in Wyoming by J.D. Love in 1951 until the mid 1980s, Wyoming was once among the world’s top uranium producers. Since then, a combination of a global depression in uranium producers and the emergence of other low cost producing areas, notably Canada’s Athabasca Basin, Central Asia’s Kazakhstan, and Africa’s Namibia, dropped Wyoming to one of the lower ranking uranium producers. But, over the past five years, the spot price of uranium has reversed its decline and stagnation. Now, Wyoming is again in the spotlight as a significant uranium producer. A visit to Wyoming’s land office confirmed interest in Wyoming’s uranium has skyrocketed.
“Staking activity is up significantly,” said Lynne Boomgaarden, Wyoming’s Director for the Office of State Lands and Investments, referring to the number of claims filed for uranium development in her state. “We have really seen a significant increase since about June 2004. We took one lease application to the board in April 2004. In June 2004, we had 30 or so applications. That’s when we really saw the increase.” In June 2004, David Miller of Strathmore Minerals quickly filed 10 minerals claims for uranium. On his heels, William Sheriff began filing claims as well. Since then, pages and pages of claims covering tens of thousands of acreage have been filed by Miller, Sheriff, their associates and their respective companies.
Subsequently, others jumped into the rush for Wyoming’s state uranium claims. From Crook, Campbell and Converse counties to Carbon, Sweetwater and Fremont, most of the available state trust lands, where uranium rollfront deposits had been previously identified by drilling during the previous two uranium booms, were snapped up. From Wyoming’s Powder River Basin, where most of America’s uranium and coal is produced, to the Great Divide Basin, which has seen uranium mining, any serious players, who wanted to quickly establish an in situ leach (ISL) mining operation in Wyoming, marked their territory.
“Most of the activity we’ve seen in leasing has been speculative activity,” explained Boomgaarden. “We don’t have new mines and new operations right now.” She added, “When I first came here in the spring of 2003, there was nothing.” A few changes have taken place, which Boomgaarden and many others have noticed. Through the first half of 2003, spot uranium prices stagnated around the $11/pound level. On March 3rd, spot uranium traded at $39.25/pound, according to TradeTech LLC, which keeps track of weekly and monthly spot uranium sales.
Holding costs on Wyoming’s state trust lands are affordable to speculators, when the underlying commodity in question has had a 500 percent increase in the past 62 months. Applicants file a lease application and pay an annual lease fee of $1/acre for each of the first five years of the lease. The application is presented to the Wyoming Board of Land Commissioners, which meets every other month. “Our royalty revenues from uranium have been pretty flat,” said Boomgaarden. “We can only hope as fiduciaries that we will enjoy operations on these leases that result in royalty returns.” And it appears her wish may soon be granted.
The key reason is that ISL mining is amenable in Wyoming’s sandstone geological formations. ISL, or solution mining, is said to be environmentally friendly, relatively easy and fast to put into operations, and economic at the current high price. Wyoming is the home to ISL mining, but current uranium production from this method is paltry compared to other global hot spots, such as Australia or Kazakhstan. About 16 percent of the world’s uranium mining comes about from the ISL method. Carbonated water, similar to club soda or perrier, is pumped into the ground to loosen up the uranium from the sandstones and then captured in “resin,” comprised of tens of thousands polymer beads. An ISL is self-contained, meaning that uranium and the deadly radon gas that is released during conventional uranium mining, does not escape into the atmosphere. Because it has emerged as the safest method of uranium mining, ISL’s popularity has continued to increase each year.
Uranium ISL’s May First Start in
Wyoming’s Powder River Basin
Wyoming’s Powder River Basin appears to be the likely location for a number of future ISL operations by uranium development companies. Of the six companies interviewed, five expressed their initial ISL operation would be established in Wyoming’s Powder River Basin. The most prolific coal- and uranium-producing areas in the United States, the tri-state Powder River Basin lies between Wyoming’s Laramie Mountains, the Big Horn Mountains of Montana and Wyoming, and the Black Hills of South Dakota. According to the U.S. Geological Survey published in 2002, the Powder River Basin was estimated to have a mean of 16.5 trillion cubic feet of undiscovered natural gas, 1.5 billion barrels of undiscovered oil and 86.5 million barrels of undiscovered natural gas liquids. It has been geologically prolific for uranium because the host formation is the Eocene age Wasatch Formation, which occurs under the entire area.
At the southern part of the Power River Basin, Cameco’s wholly owned subsidiary, Power Resources, has been steadily producing uranium oxide (U3O8) at their Smith-Highland Ranch. In 2005, Cameco reported production of 1.3 million pounds. The property has published proven and probable reserves of 16.1 million pounds of U3O8. Capacity could run up to 2 million pounds annually at each of their two processing facilities.
Three of the six uranium development companies interviewed also stated they intended to fast-track their ISL operation by creating a “satellite facility.” Such a facility would eliminate the requirement for a Nuclear Regulatory Commission (NRC) license. Those uranium development companies plan to “attach” a solution mining operation to an established producer. Under such a circumstance, the company would solution mine (also known as in situ leach mining) uranium on its property. The uranium would then be shipped to an established producer for processing. Because the spot uranium price is rising, and may hold around these levels (or soar higher), a profit-sharing arrangement negotiated by the newly producing uranium company and the more established company would probably make sense.
Look for Wyoming to emerge as a hot area for uranium production, with companies who mine there also enjoying strong price appreciation in their share prices. But, that’s only going to last for as long as uranium prices stay at the current level or break through the $40/pound barrier. The last time we saw the uranium price at this level, Ronald Reagan was president. The important barometer to a sustained uranium price above $40/pound depends upon whether the public utilities talk up their plans for more U.S. nuclear plants, the climate for nuclear energy continues to gain global momentum, whether China and India (and the dozens of other companies) continue to express their demand for more nuclear energy as a means to providing electricity without the pollution impact of coal or petroleum, and mostly whether or not another nuclear accident occurs, i.e. Three Mile Island or Chernobyl. If all these criteria remain in place, then uranium development companies are better leveraged for share price appreciation in the coming decade.
James Finch contributes articles about uranium, mining, the stock market and the broader economy to StockInterview.com. His archived and unedited articles, with complete graphics, may be viewed in their entirety at http://www.stockinterview.com
