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Japan steals march on Asia rivals over uranium supply

By Mari Iwata, Dow Jones Newswires, Nov 13, 2007

Japanese firms can afford to wait for uranium prices to fall before buying fresh stakes in uranium mines owing to a run of deals in resource-rich Kazakhstan, said a senior government official.

Category: General
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"Japan has secured (the equivalent of) 30%-40% of its annual uranium imports just from its Kazakh stake buys," said Harufumi Mochizuki, director-general of the Agency for Natural Resources and Energy, a unit of the Ministry of Economy, Trade and Industry. Kazakhstan holds the world's second-largest reserves of uranium, a key fuel in the generation of nuclear power.

As a result, the Central Asian nation is increasingly a target of major energy consumers including China which are planning to expand their nuclear power output over the next few decades to cut their reliance on coal and oil.

Rising demand for uranium in Asia has coincided with supplies becoming tighter on bad weather.

Flooding has delayed the opening of Cameco Corp.'s Energy Resources of Australia Ltd. (ERA.AU) unit to declare force majeure on uranium deliveries from its Ranger mine in Australia.

The resulting surge in uranium prices led to a wave of industry consolidation. French nuclear giant Areva (CEI.FR) bought Canada's Uramin, while Australia's Toro Energy Ltd. (TOE.AU) made a A$276 million friendly takeover offer for fellow uranium explorer Nova Energy Ltd. (NEL.AU) among other sector deals.

"Uranium business has basically been a seller's market, but we moved slightly ahead" of rivals in China and South Korea, said Eiichiro Otsuka, deputy general manager of the Nuclear Energy Department at Sumitomo Corp. (8053.TO).

In January 2006, Sumitomo Corp. bought a 25% stake in the West Mynkuduk uranium project in Kazakhstan.

Some months later, Junichiro Koizumi visited Kazakhstan for the first time as Japan's prime minister, to talk about uranium exports to Japan. Another government delegation led by METI minister Akira Amari visited the country early in 2007 to maintain the relationship.

Kansai Electric Power Co. (9503.TO), Japan's second largest utility by capacity, also bought a 10% stake in the West Mynkuduk project, while the remaining 65% is held by state-owned uranium company Kazatomprom.

The project, expected to start test production in the next few months, is scheduled to reach full output of about 1,000 metric tons a year in 2010 and keep going for more than 20 years. All of the output will be sold to Japanese utilities, Otsuka said.

Marubeni Corp. (8002.TO) and other Japanese companies including Tokyo Electric Power Co. (9501.TO), Japan's largest utility by capacity, have invested in another Kazakh uranium project, namely the Kharassan mine project, through a Japanese holding company since the start of last year.

The holding company has indirect ownership interest in two affiliates, each of which operates one uranium block.

Details of the stakes haven't been disclosed, but the Japanese side has the right to take 2,000 tons a year of uranium from the project, which is scheduled to reach full production in 2014, according to Marubeni.

"Thanks to (these deals), we won't have to worry (about uranium supply) for a substantial period of time," said ANRE's Mochizuki.