Foreign Companies Lining Up For Ukrainian Uranium

KIEV, Ukraine -- With prices rapidly increasing worldwide and a shortage in supply looming on the horizon, Ukraine’s abundant uranium-ore deposits have become a powerful magnet for foreign companies.


However, the country’s leadership is not eager to let them in so soon, opting instead to yield monopoly control over the potentially lucrative business to a yet-to-be-established state behemoth, which would need an estimated $2.4 billion in credit to get on its feet.

As the battle to gain control over the mining of Ukrainian uranium, together with its processing into nuclear fuel, continues, experts say development of the business is key to the nation’s energy security.

Ukraine, which receives about half of its electricity from nuclear power plants, has enough uranium reserves to weed out Russian imports and fill domestic demand for up to 1,000 years.

Just how much uranium Ukraine holds has been kept quiet and subject to state secrecy provisions. But Deputy Energy Minister Yuriy Nedashkovsky has told the Post that this information would be revealed to investors when the time comes.

High stakes

Nedashkovsky said he constantly receives dozens of offers from Western and Russian companies ready to step in to Ukraine’s uranium extraction and processing industry.

“The uranium market is booming, which creates a huge demand for access to Ukrainian uranium reserves,” he said.

Nedashkovsky said uranium prices have increased more than eight fold since 2000 from $23 per kilogram to $180. He expects prices to rise even further to $270 per kilogram by the end of this year.

According to the deputy energy minister, worldwide demand for uranium in 2004 reached nearly 70,000 tons annually.

Fresh extraction filled only half of this demand. The rest, he said, was covered by uranium from military reserves, which have been decreasing considerably, thus driving up world prices.

Currently, state-owned VostGOK, which monopolizes uranium extraction and its initial processing in Ukraine, churns out about 800 tons annually, or 30 percent of domestic demand.

Ukraine exports all domestically mined uranium, mostly to Germany, at world prices. Domestic demand is filled, according to Nedashkovsky, at prices significantly lower than world prices by Russia’s state-owned TVEL.

Ukrainian Energy Minister Yuriy Boyko has said the country hopes to nearly double domestic uranium production by 2009. While Ukrainian officials seem intent on keeping this potentially rewarding business in state hands, foreign companies are stubbornly lining up for a slice of the pie.

Knocking on the door

Serhiy Koroliov, a representative in Kyiv for France’s Areva NP, a leading supplier of nuclear fuel which also specializes in the construction of nuclear power stations, said that the investment his company could bring to Ukraine has virtually no limit.

“We are currently studying the economic potential of Ukraine’s reserves, but it is safe to say that we would bring in hundreds of millions of dollars … And I don’t mean just a couple of hundred [of millions of dollars],” Koroliov said.

The general thinking is that Ukraine needs help in tapping into its uranium potential fast. Ukraine’s unwillingness to bring foreign investors in for massive and costly uranium projects is a concern.

But media reports suggesting the country might choose its current monopoly supplier, Russia’s TVEL, to invest as much as $260 million, do not worry Koroliov.

Vasiliy Konstantinov, vice-president of TVEL, would not comment on the figure. He said that in order to take part in the development of Ukraine’s uranium deposits, ownership issues need to be clarified. Konstantinov said he would also expect the Ukrainian government to guarantee such an investment.

In addition to Areva NP and TVEL, Nedashkovsky named Australia’s Uran Limited as another interested company. Ukraine’s large business groups are also lining up.

“They [Ukraine’s big business groups] haven’t approached us officially, but I feel them behind my back,” he said.

Foreign companies, however, have already submitted proposals. Some are simply seeking rights to extract the uranium. Others are submitting more preferred bids, offering their backing in a joint venture. Giving foreign companies direct access to the uranium reserves won’t benefit the state, he explained.

Areva’s Koroliov said his company is flexible and would consider various forms of partnership.

But Nedashkovsky said investors will have to wait, at least until the government sets up a state corporation which could, in theory, establish joint ventures with foreign partners.

The new state company is to be called Ukratomprom, Nedashkovsky said, adding that it will be granted monopoly rights over uranium extraction and elements of nuclear fuel production.

About $2.4 billion will be required to build up this company and launch basic operations, Nedashkovsky said, adding that the state company will most likely seek credit lines for backing.

The deputy energy minister said uranium mining will be kept in house, adding that foreign interests would only be accepted as partners in producing nuclear fuel if the terms were right.

Source: Kyiv Post

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