Company Bets That Moribund Uranium Industry Will Heat Up
On a mountain south of this town devastated by the uranium industry’s collapse 15 years ago, a beehive of construction activity attests to one company’s optimism.
Work continues around the clock on Green Mountain to build a new mine in an area already riddled with holes and shafts that once produced much of the fuel used in the United States’ nuclear reactors.
U.S. Energy Corp. is sinking millions of dollars into the new Jackpot mine in a gamble that uranium prices will rebound. Only a few companies still work in the industry after a sharp decline that began in the early 1980s.
Uranium prices fell from a peak of about $45 per pound in the late 1970s to a low of $7.30 in 1991. At the same time, production from U.S. mines fell from a high of 44.4 million pounds per year in 1980 to 1 million pounds in 1992. Since then, production has risen to 4.7 million pounds in 1996.
With the decline, Jeffrey City plummeted from a population of about 3,000 people at the height of the uranium boom to fewer than 200 people now. Many buildings in town are boarded up, and starting next year, older children will be bused about 60 miles to Riverton to attend high school.
But things are changing: Uranium prices are rising and some difficult problems plaguing the industry, such as storing radioactive waste, are closer to being solved. And for the first time since 1993, there has been an increase in the number of uranium mines operating in the United States.
By the time U.S. Energy reaches its goal of two parallel shafts plunging 8,800 feet into Green Mountain--expected in late 1998--U.S. Energy hopes the country will be ready to buy uranium from the Jackpot mine. That mine, along with a mill 23 miles to the south, could produce up to 4 million pounds annually.
But unless the market for uranium begins offering prices approaching $20 per pound, the project will not make money, said George Smith, U.S. Energy’s manager of operations. The price has hovered around $11 per pound, but rose to $12.75 in late October. Kennecott Energy is U.S. Energy’s partner in the Jackpot mine.
U.S. Energy believes its timing is good for several reasons:
* Uranium production has lagged behind demand for several years;
* There is a new push to curb global warming. Some believe this could help revive nuclear power generation;
* There has been recent movement toward resolving the United States’ problem of storing used fuel rods from nuclear reactors.
President Clinton and Chinese President Jiang Zemin recently agreed to allow American companies to sell billions of dollars worth of nuclear power equipment to Beijing.
“We have to be gearing up right now because we believe the price will be in the $15 to $20 [per pound] range in the next three years for lots of reasons,” said Keith Larsen, U.S. Energy’s marketing director. “The biggest is that President Clinton will try to set limits [on emissions of gases believed to cause global warming] . . . and we really need nuclear power to achieve that goal.”
Jeff Combs, president of industry monitor Ux Consulting of Roswell, Ga., noted that worldwide production of uranium has fallen far below demand.
“So you need some recovery in price and some recovery in production for the market to be in equilibrium,” Combs said.
And surplus uranium built up during periods of high prices is being drawn down quickly, said Smith, who has worked in uranium mines for 40 years.
Those surpluses were a major factor in the industry’s decline, said Glenn Dooley, U.S. Energy’s vice president in charge of milling.
Dooley, who began his career as a uranium mill laborer in 1954, said that when producers could claim more than $40 per pound, the law of supply and demand kicked in: The market quickly was flooded by companies hoping to fill a large demand and prices fell when production began to outstrip demand.
The 110 operating nuclear reactors in the United States will consume about 53 million pounds of uranium this year. Domestic mines will produce only 5.9 million pounds, according to the U.S. Energy Department’s Energy Information Administration.
The agency estimates that U.S. uranium production will rise from its current 6 million pounds a year to about 9 million pounds by early next century.
The difference between production and consumption is made up through imports from countries including Canada and Russia and through the use of stockpiled uranium. Another source is the highly enriched uranium the United States and the former Soviet Union produced for use in nuclear weapons.
Significant quantities are to be prepared for use in nuclear reactors, and its entrance into the market is expected to hold down prices for uranium straight from the processing mills, said EIA analyst William Szymanski.
He said uncertainty over the amount of highly enriched uranium that will be allowed into the market has caused wide disparities in price projections.
The EIA in a recent study predicted that uranium would peak at $15.90 per pound through 2010; the Wyoming State Geological Survey projected $10 per pound from 1998-2001. U.S. Energy officials say they’re certain they can command $20 per ton.
Certain enough to have bought thousands of feet of heavy-duty conveyor-belt supplies to haul waste rock out of Jackpot. Certain enough to gamble on the expense of an underground mine rather than a cheaper alternative. Certain enough, also, to be the only uranium mining company in the nation working to open an underground mine, the most expensive uranium extraction technique.
Of the 13 U.S. mines operating in 1996, only one was an underground mine.
U.S. Energy’s certainty is founded in a belief that nuclear power will help solve problems including the byproducts and cost of burning a diminishing pool of fossil fuels, Dooley said.
“I’ve said all along, it might take 15, it might take 50 years, but nuclear energy will come back because it’s still a very, very clean source of power,” Dooley said.
