Tuesday, 22 May, 2007

by Barry Fitzgerald
The Age

RIO TINTO has outlined major near-term expansion potential in its uranium business, allowing it to maximise the benefits of the supply shortage in the nuclear material that has sent prices to record levels.

But much of the growth outlined at a London briefing relies on the group securing approval from traditional landowners for a development of the Jabiluka deposit in the Northern Territory and, in the case of the Kintyre deposit in Western Australia, approval from the anti-uranium mining state Labor Government.

Rio's energy chief executive, Preston Chiaro, outlined growth opportunities that could result in annual group uranium production almost quadrupling to 20,000 tonnes by 2015.

The forecast production lift would come from existing mines (Ranger in the Northern Territory and Rossing in Namibia) and includes first production from the development of Jabiluka, Kintyre and Sweetwater in the US.

Mr Chiaro cautioned that Jabiluka would not be developed unless Rio got a "yes" from the traditional owners, the Mirrar people. Their leader, Yvonne Margarula, has long been opposed to Jabiluka's development but Mr Chiaro claimed that the relationship with Rio had "improved dramatically in the past two years".

"Hopefully, we can get her to say a 'yes' in the near-term future," Mr Chiaro said.

He said Rio would nevertheless continue to be cautious about seeking Mirrar approval. Under the approval process, Rio would not be able to seek permission for another four years.

Mr Chiaro said that at the Kintyre deposit, the traditional owners had approached the company about a development. Discussions were proceeding with the Martu people on a "commercial agreement" for Kintyre's development.

Mr Chiaro said that the Martu had also agreed to be the "leaders in approaching the Government about a possible development".

The group's Sweetwater opportunity is less challenging. The project was mothballed in 1983 because of low demand and prices at the time, but it remains one of only four mills in the US with all the required permits to operate.

Rio could switch it back on as early as next year.

Spot uranium prices now stand at $US122 a pound. That compares with a low of $US7 a pound in 2000. Mr Chiaro told the briefing "there remains plenty of upside to uranium fuel prices". He noted that the cost of uranium in the nuclear energy cycle was relatively small at 26 per cent of overall costs. That compares with about 78 per cent for coal.

He said the cost of nuclear power would become "even more competitive in a carbon-constrained world". The upbeat presentation comes as the $US90 billion Rio remains subject to takeover speculation.

Rio's chief financial officer, Guy Elliott, finished off the promotion by declaring that Rio was intent on ensuring its "value was understood in the market".

He said that along with the group's iron business, uranium was "one of our most exciting near-term growth opportunities". Rio closed up 29¢ at $92.90.