Tuesday, 22 May, 2007

by Bruce Hextall
AFX

Rio Tinto said it has the potential to significantly expand it uranium business in the near term to maximize the benefits of supply shortage in the nuclear material that has sent prices to record levels.

At a briefing in London last night, the world's second largest miner said much of the growth relies on the group securing approval from traditional landowners for development of the Jabiluka deposit in Australia's Northern Territory.

As well, it said development of its Kintyre deposit in Western Australia requires approval from the anti-uranium mining state Labor Government.

Rio's chief executive for energy, Preston Chiaro, said growth opportunities could result in annual

group uranium production almost quadrupling to 20,000 metric tons by 2015.

Chiaro said the forecast increase in output 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.

Chiaro said Jabiluka will 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 Chiaro claimed that the relationship with Rio had 'improved dramatically in the past two years.'

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

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

He said the group's Sweetwater project 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 restart production as early as next year.

Spot uranium prices now stand at 1.22 usd a pound compared with an average 0.48 usd in 2006.

Chiaro told the briefing that 'there remains plenty of upside to uranium fuel prices' as the cost of uranium in the nuclear energy cycle is relatively small at 26 pct of overall costs, compared with about 78 pct for coal.

He said the cost of nuclear power would become 'even more competitive in a carbon-constrained world.'