McArthur River. Photo courtesy Cameco
The glow is coming back to uranium and that’s good news for Saskatchewan, especially for the province’s northern economy.
After a decade of declining output and revenues, the Saskatchewan uranium mining sector delivered some good news this past week during Cameco’s presentation of its fourth quarter and full year 2021 financial results.
The takeaway headline from Cameco president and CEO Tim Gitzel is that the McArthur River and Key Lake operations will be restarted this year and potentially produce as much as five million pounds of uranium by year’s end.
Those two operations, which had steadily produced about 18 to 19 million pounds annually from 2000 until 2018, will almost immediately bring economic benefits to Saskatchewan. In particularly, it will benefit northern communities whose members made up nearly half of the fly-in, fly-out workforce at these two operations.
McArthur River and Key Lake are joined at the proverbial hip even though McArthur River is 70 kilometres to the north. The ore at McArthur River is brought down south to a mill at Key Lake in totes. The ore is such high grade (about 15 per cent) that, in order to be milled, it must be blended down with lower grade material left over from the period prior to 1999, when for 15 years, Key Lake was both a mine and a milling operation.
McArthur River high-grade ore arrives as a slurry in special totes after being trucked 80 kilometres south to the Key Lake mill. Photo courtesy Cameco
The Key Lake mill has a valuable asset in that one of the mined-out pits serves as the tailings facility where the waste product from the mill is deposited in a natural geographic structure which contains the tailings. Among both regulators and people in the communities, the in-pit tailings facility has both the highest environmental and community acceptance.
The decision to suspend production at McArthur River-Key Lake was made by Cameco back in 2018 because the uranium market was not rewarding producers to invest in ongoing production. In other words, it didn’t serve Cameco to produce uranium for customers who weren’t willing to pay even historical long-term prices for the product.
In the wake of the 2011 Fukushima nuclear plant disaster in Japan, the market for nuclear fuel became depressed. Utilities found they could buy material on the spot market as countries such as Germany made decisions to close nuclear power plants, leaving surplus demand in the market. (While much praise is due former German Chancellor Angela Merkel overrall, her decision right after the Fukushima accident to close Germany’s nuclear power plants way before their operational lifespan was over is not considered one of her better policy moves. Germany has had to use coal-fired power or import coal-sourced electricity from its neighbours.)
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Elsewhere, in learning the lessons of the Fukushima Daiichi power plant, Japan’s utilities spent billions on correcting the safety features of its remaining nuclear fleet only to find it extremely difficult to get regulatory approval to re-open the upgraded facilities.
In both Germany and Japan, this has meant coal and liquefied natural gas has had to be used in older power plants to keep the lights on.
In the meantime, Cameco was able to buy and secure needed uranium on the spot market and fulfill its legacy contracts with utilities that own power plants in North America, Europe and Asia.
Things have taken a turn in the past year, however, and Cameco now faces competition in buying spot uranium from a commodity trader, Sprott Uranium Trust.
That may be one reason Cameco is willing to restart what it calls its “Tier 1” assets in McArthur-Key. It indicates that Cameco’s traditional utility customers have figured out the days of cheap spot uranium may be coming to an end and it would be best to sign a long-term deal with Cameco to secure supply for the next decade.
Whatever the reason, bringing McArthur River and Key Lake out of care and maintenance will mean a good percentage of the 500 people who were laid off in 2018 could be hired back. Cameco has said it has studied ways to streamline and digitize these operations so it is quite possible neither facility will ever get back to having as many employees as it did a decade ago. Nor will the number of people employed at the Saskatoon head office prior to 2011 approach the same level again either.
Nevertheless, Cameco’s announcement is a restart of major proportions. Even so, Cameco is also taking a cautious approach for the next two to three years. As the two legacy facilities gear back up, production at the Cigar Lake operation will be throttled back. By 2024, Cigar plus Key-McArthur will actually be operating at 33 per cent below its actual capacity. Only a return to utilities committing to long-term contracts will change that, Cameco has indicated.
Key Lake is the world’s largest high-grade uranium mill. Photo courtesy Cameco
French state-owned Orano is Saskatchewan’s other large producer. Its McClean Lake mill is where Cigar Lake ore is processed. The facility recently had a critical tailings facility expansion approved. Orano is the majority owner of McClean and a minority owner of Cigar Lake, McArthur River and Key Lake.
Orano has customers around the world and is the main supplier to France’s state electrical utility. France is the country with the highest portion of electrical generation served by nuclear power. Naturally, Orano greeted Cameco’s announcement with enthusiasm this week.
While it is great news to see these decisions this week and see rising share prices for both Cameco and junior uranium explorers, revenues for the government of Saskatchewan in the form of royalties won’t get back to pre-2011 levels until Cameco decides it can produce at 100 per cent capacity.
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And the industry is at least five to 10 years away from seeing brand new “greenfield” uranium production take place. When that happens, it will be in a relatively new area of the province’s Athabasca Basin uranium region.
Despite the low prices for uranium prior to this winter, there has been a decade or more of extensive exploration in that part of the Athabasca basin geological region that is about halfway south of the former Cluff Lake mine and north of the communities of Laloche and Clearwater River Dene Nation.
This appears to be the next big region in the basin to see development and the shape of any future expansion of Saskatchewan uranium production will be defined by geography and geology of this region.
Denison Mines and several other companies such as Nex Gen Energy and Standard Uranium have projects on the southeast side of the basin. Because there are no direct road links to existing facilities, it would seem that these junior mine explorers will need to come to a possible arrangement to develop an acceptable regional milling facility. The location of a mill serving more than one new mine could depend on regulator and community acceptance of a regional tailing facility as well.
Community acceptance is critical. The legacy companies – Cameco and Orano – have long established relationships with communities in the Athabasca Basin and in nearby communities such as English River First Nation and Pinehouse. The new players in the market have been busy trying to establish similar business and community development relationships with Metis and Dene communities on the southwest corner of the basin.
Another factor could work in favour of developing new mines with a smaller environmental impact overall. A new mine or series of mines plus a milling facility north of the Clearwater River would not be connected to the provincial power grid as is the case with existing mines. Preliminary proposals from some of these companies envision diesel or liquefied natural gas being hauled to the mining facilities on the west side.
Should a new mine and milling operation be proposed, it may come at a time when Canada as a whole begins to license a new generation of small modular nuclear reactors. This might be the place where Saskatchewan finds itself in both ends of the nuclear power cycle.
Canada’s nuclear regulator, the Canadian Nuclear Safety Commission (CNSC), is gearing up to study the technical aspects of a number of different sized-nuclear reactors.
SaskPower is planning to be part of this and could be interested in modular reactor that is anywhere from 150 to 300 megawatts for the provincial grid.
McArthur River. Photo courtesy Cameco
What would be intriguing is whether a future proponent of the next big uranium mining and milling operation was to propose powering the operation with an even smaller modular reactor, perhaps in the range of 20 megawatts that could provide both electricity and high temperature steam and water for the milling process. Such a modular reactor could run for years without refueling and bring clean air environmental benefits plus take hundreds of truckloads of diesel off the northern road network. The CNSC would be the key player in both licensing the mine and licensing its power source.
While the government of Saskatchewan has benefitted from the royalties the uranium industry has generated over the decades as well as payroll income taxes paid in a high wage industry, it is the federal government, primarily the CNSC, which has set the regulatory benchmarks for uranium mining development.
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Ottawa has designated the CNSC as the primary federal regulator for new and existing uranium mining projects which require a federal environmental assessment. Besides many specialists in the field of environmental science, the CNSC has built up a cadre of experts on Indigenous consultation.
With Canada having embraced the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), the licensing of the next greenfield uranium mines in northern Saskatchewan will hinge on how the uranium mining industry engages with multiple Indigenous communities that view the southwest corner of the Athabasca Basin as their traditional territories.
The Indigenous communities are well aware of where that positions them. In late October of 2021, Teddy Clarke, the chief of the Clearwater River Dene, issued a press release which complained that the number of competing mining exploration projects north of his community was far too much and his community should have been consulted.
Mining exploration is the one part of the uranium mining cycle that is controlled by the province of Saskatchewan. The province, as landlord, issues mining leases without any Indigenous community veto. But companies worry that UNDRIP will change that.
Clarke’s press release had the effect of knocking about 20 per cent off the price of the junior mining companies through the latter part of 2021. The news release demonstrated how Indigenous engagement will be a key factor if Saskatchewan is to see a return to the era when it was the largest uranium producer on earth.
Nobody is expecting a return to those days in the next few years but Cameco’s announcement this week may signal a return to the possibility that Saskatchewan will see some new players and new mines enter the lexicon of Saskatchewan resource development by the middle part of this decade.
Murray Lyons worked as a reporter and editor for weekly and daily newspapers in Saskatchewan and Manitoba from 1975 through to 2008, then spent eight years in the Saskatchewan uranium industry as a corporate communicator.
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