Mining: resources, needs, process

Transcription

1 Mining: resources, needs, process Sébastien de Montessus Senior Executive Vice Presdient, Mining Business SFEN, Atoms for the future, Nov. 10, 2011 SFEN Atoms for the Future Nov. 10,

2 Table of contents Uranium mining status post Fukushima Market: Resources & key players Economical, political & technical challenges AREVA mining activities: key leverage SFEN Atoms for the Future Nov. 10,

3 Nuclear energy Rational reactions post Fukushima Non nuclear countries NB programs confirmed Safety checks on IB NB programs confirmed 1 Nuclear countries Safety checks on IB 1 NB program stopped Several reactors set temporarily offline NB program suspended 1 1. if existing SFEN Atoms for the Future Nov. 10,

4 Despite Fukushima, rising demand will require bringing new mines into production Production required to meet net demand - Kt U, WNA 2011 report - World prospective production, reference scenario (tu) % % SFEN Atoms for the Future Nov. 10,

5 China s ramp up is largely ahead of the world nuclear renaissance and supported by an aggressive supply strategy China uranium requirements, tu X14 X tu High case tu Base case China s nuclear capacity is expected to ramp up from 8.6 GW in 2010 to ~ GW China will need ktU for the decade including strategic inventory build up China supply strategy Opportunistic spot purchase to build up strategic inventory Started record long term contracting (AREVA, KAP, Cameco) Fukushima impact expected to be limited by 2020 SFEN Atoms for the Future Nov. 10,

6 Strategic stockpiles and financial players will add up to uranium requirements China will constitute ktu of stockpile, 2-3 years of forward consumption corresponding to what other major consumption centers hold ktu Financial players like banks, funds, ETF have entered the market since 2007 Demand Reactor requirements Strategic stockpiles ETF Funds 5-10 % 1-3% mainly spot SFEN Atoms for the Future Nov. 10,

7 Table of contents Uranium mining status post Fukushima Market: Resources & key players Economical, political & technical challenges AREVA mining activities: key leverage SFEN Atoms for the Future Nov. 10,

8 Primary production cannot supply the market on its own: secondary resources are making the bridge between requirements and mine supply Secondary resources are estimated 16 ktu in 2010 In 2013, the end of HEU will drive lower available quantities down to approximately 13-15ktU HEU Downblend of Russian military uranium Tails re-enrichment Re-enrichment of tails DOE sales US Department of Energy sales of strategic stocks Recycling Recycling of uranium (Reprocessed uranium or MOX) Other Russia Sales Other downblends or sales from Russia SFEN Atoms for the Future Nov. 10,

9 Several mining methods are used, depending on the deposit MINIING LEACHING EXTRACTION Open-pit mining Conventional underground mining Deep mining (freezing the ore body) In situ leaching Dynamic acid leaching Dynamic alkaline leaching Static leaching SX: Solvent Exchange (tertiary amines) IX: Ion Exchange (Resins) SFEN Atoms for the Future Nov. 10,

10 It takes 15 years of exploration to acquire enough knowledge of the seam to begin mining Economic model of exploration Principles of Resources & Reserves Cost ~50 M Reserves Feasability Exploration results Mineral resources Mineral reserves Inferred Development of drilling Prefeasibility Increase in knowledge and geological confidence Indicated Probable Airborne surveys Geochemistry Geology Extended exploration Soil geophysics Detailed geochemistry Deep exploration Deficiencies Proof Drilling tests Resources Time (years) Measured Proven Inclusion of key criteria concerning mining operations, processing, metallurgy, and economic, legal, social, political and environmental aspects At the same time, as technical efforts are stepped up to obtain data and characterize the deposit, project development requires phases of organized and iterative studies to determine the uranium present in the resources and reserves SFEN Atoms for the Future Nov. 10,

11 Three main types of uranium mining operators Uranium mining operators fall into one of three principal and exclusive categories: Medium-size operators in the nuclear industry (more or less integrated) The giant mining companies for which uranium represents only a small share of their activity The junior mining companies AREVA is in the first category This category also includes the most active producers, which are also trying to imitate AREVA s integrated business model AREVA ARMZ Cameco KAP BHP Rio Tinto Paladin Share of world production 19% 16% 20% 18% 5% 15% 5% Integration in nuclear activities Mine other minerals Number of uranium geographies * Combined production of U1 and ARMZ * SFEN Atoms for the Future Nov. 10,

12 A decline in industrialized countries, an increase in emerging countries Canada Kazakhstan - 3% since % since 2006 Niger X 2010 production ktu Total : 53ktU Top 6 Countries 86% of total 1. Kazakhstan 34% 2. Canada 18% 3. Australia 12% 4. Namibia 8% 5. Russia 7% 6. Niger 8% Namibia Top 5 Producers 72% of total + 120% since % since 2006 Cameco 17% AREVA 16% Kazatomprom 15% ARMZ/U1 13% Rio Tinto 12.1% Australia % since 2006 SFEN Atoms for the Future Nov. 10,

13 Kazakhstan has accounted for most of the growth in production in recent years; it represents 34% of total production today Uranium production - kt U, WNA 2011 market report Past Forecast 45% 40% 35% 30% 25% 20% 15% 10% 5% Other Canada Australia Kazakhstan Kazakhstan as a % 0% SFEN Atoms for the Future Nov. 10,

14 Table of contents Uranium mining status post Fukushima Market: Resources & key players Economical, political & technical challenges AREVA mining activities: key leverage SFEN Atoms for the Future Nov. 10,

15 Uranium prices evolution Speculative bubble Arrival of financial players Prices likely to go up as a consequence of -Increasing demand -Challenging new mines Market maturity Nuclear winter SFEN Atoms for the Future Nov. 10,

16 Factors impacting uranium cost MINERAL EXPLORATION MINE DEVELOPMENT Exploration and development costs need to be financed upfront MINING OPERATIONS ORE PROCESSING Cash costs only cover operating expenses and are often reported excluding royalties & taxes SITE RECLAMATION Remediation costs need to be financed along the life of mine SFEN Atoms for the Future Nov. 10,

17 There is enough uranium in the ground, but the era of cheap resources is over Uranium Identified resources, ktu, 2007 vs 2009 Red Book % -16% <$40/ kgu <$80/ kgu <$130/ kgu <$260/ kgu 0 Source: Red Book Total resources increased by ~15% between 2007 and 2009 However, resources at less than $40/kgU represented only 12.6% of total resources in 2009 vs 54% in 2007 However, there are still adjustments to be made to the real cost of resources SFEN Atoms for the Future Nov. 10,

18 Producer countries have increasingly captive policies Increases in royalties and taxes Other ways of capturing value Canada: Tiered royalties up to 15% of income have been charged since 2009 Kazakhstan: An increase in royalties from 2.5% of income to 20% of production costs Governments are now requiring free portage rights in mining projects (Niger, Mongolia, etc.) Negotiations of transfer prices are increasingly difficult, with a portion of the value blocked in the local subsidiary SFEN Atoms for the Future Nov. 10,

19 New production will come from challenging mines Technical challenges Deeper deposits Low grade Multi-metal deposits Complex-to-treat ores geographical challenges Need to built new infrastructures Complex transport logistics of reagents and uranium Financing challenges Free carry of national companies Higher capex Strong local inflation In such environment, only companies like AREVA who are heavily investing in R&D and that are technically focused will be able to put new mines into production in a profitable fashion Prices need to be at the right level to face the challenges of the new mines SFEN Atoms for the Future Nov. 10,

20 coupled with bigger challenges to bring new mines into production Decline in production at the Kazakh mines with lowest costs Technical difficulties at most of the big uranium mines Investors and speculators are returning to the market End of HEU Cigar Lake and Imouraren represent the major share of capacity growth Growth in Kazakhstan probably coming to an end No more big discoveries through exploration in the period Exploitation of more complicated mines (low grade ore, depth, etc.) Questions concerning the expansion of Olympic Dam Short term Medium term Long term SFEN Atoms for the Future Nov. 10,

21 Table of contents Uranium mining status post Fukushima Market: Resources & key players Economical, political & technical challenges AREVA mining activities: key leverages SFEN Atoms for the Future Nov. 10,

22 AREVA has multiple assets in a market dominated by a handful of players Total tu Present in 3+ countries Integrated nuclear player Cameco AREVA Kazatomprom U1/ARMZ Rio Tinto Others The top 5 producers gather 72% of the world production SFEN Atoms for the Future Nov. 10,

23 AREVA has diversified its geographic footprint Kazakhstan Katco Canada McArthur Cigar Lake (project) Niger Somaïr Cominak Imouraren (project) Namibia Trekkopje (project) SFEN Atoms for the Future Nov. 10, Sites in operation, projects in progress, exploration Exploration only

24 The diversification strategy will assure AREVA leadership Portfolio diversification Geography: Canada, Niger, Kazakhstan, Namibia, etc. Technology: Open pit / Underground, Dynamic Leach / Heap Leach Long-term management Projects at different stages of development in the pipeline A sustained exploration effort that will maintain production thanks to the level of reserves and resources Mitigation of risk Technical: Cigar Lake Political: Niger Fiscal: Katco Performance through flexibility Allocation of capital Optimization of the production mix Competitive sales advantage Security of supply Long-term visibility SFEN Atoms for the Future Nov. 10,

25 AREVA Historical Exploration Spending M Euros constants Prix spot en moyenne à $55/lb Prix spot en moyenne à $10/lb Development Exploration SFEN Atoms for the Future Nov. 10,

26 Key projects in line with a strategy to diversify resources Imouraren Katco 4000 Mine operator: AREVA Shareholders: AREVA NC Expansion* (67%), State of Niger (33%) *15% owned by KEPCO Planned production (1) : 5,000 MTU / yr Investment (1) : > 1,2 Bn Mine operator: KATCO Shareholders: AREVA (51%), Kazatomprom (49%) Resources: 54,400 MTU Planned production (1) : 4,000 MTU / yr Investment (1) : > 400M Trekkopje Cigar lake Mine operator: AREVA Shareholder: AREVA (100%) Resources: 45,500 MTU Planned production (1) : 3,000 MTU / yr Investment (1) : > 700M Mine operator: Cameco Shareholders: Cameco (50%), AREVA (37%), third parties Resources: 135,000 MTU (19% U ) Planned production (1) : 6,900 MTU / yr Investment (1) : > 1 Bn Note: (1) Production and Capex figures are 100% basis SFEN Atoms for the Future Nov. 10,

27 Integrated offer: from uranium ore to fuel assembly Uranium Ore Uranium Concentrates Uranium Hexafluoride Uranium Hexafluoride UO 2 Powder Fuel Assembly Concentration Conversion Enrichment De-conversion Fabrication U 3 O 8 UF 6 Enriched UF 6 Enriched UO 2 U235 : 0.7% U238 : 99.3% U235 : 0.7% U238 : 99.3% U235 : 4% U238 : 96% U235 : 4% U238 : 96% Service MW/d in kg of U or lb U kgu = 2.6 lb U Service in kg of U Service in SWU kg of U (or kg HM) SFEN Atoms for the Future Nov. 10,

28 What are the strengths of AREVA in the Mining Business? Clear leader Leveraging the integrated model Diversified Present in all areas where uranium is abundant. The diversity of our sites attenuates the high technical and political risks.but the location of deposits depends on geological factors which we do not choose! R&D and Experience A plus when mining future new deposits 40 years of experience in exploration and ore treatment is unique SFEN Atoms for the Future Nov. 10,

29 Thank you for your attention SFEN Atoms for the Future Nov. 10,