About Uranium

Mineral exploration and development is predicated on the availability of capital to fund ongoing development, particularly among the non-producing junior exploration-mining group. There has been an enormous expansion in mineral exploration activity for uranium in both new areas and previously defined and/or currently producing regions. For 2005, funds raised for uranium exploration and development surpassed C$1.25 billion.

Dwindling surplus inventories, concerns about future supply, inventory build-up and demand by non-traditional market participants have all contributed to the improvements in the uranium market. Currently, forecasts are anticipating a US$40.00/lb spot uranium price within in the next 24 months.

The broad uranium sector has seen strong share price appreciation in the past year. Given the demand/supply imbalance anticipated for the balance of the decade, we do not see any impediment to the current bullish investor perception towards this sector.

This information is intended as a background on uranium, including the geologic environments which play host for uranium, as well as the basic processes for exploration and extraction.


Power demand drives uranium prices and with the consistent increase in worldwide power demand, nuclear power now accounts for approximately 18% of the world’s electricity needs; coal accounts for about 39%, gas 19%, hydro 16% and oil 8%. Currently, it is estimated that about 440 nuclear power reactors are operational with an additional 31 reactors under construction in 11 countries.

The International Atomic Energy Agency has increased its forecast for world nuclear power generation with the agency predicting that in addition to the numbers sited above, an additional 60-70 new plants could be completed by 2020. If achieved, this would result in raising the power capacity from nuclear power reactors from the current level of 367 Giga-Watts to at least 430 Giga-Watts.), an increase of 17%. (Giga-Watt energy equals capacity in thousands of Mega Watts). China and India are expected to lead the way in new plant construction with some forecasting that these two nations could quadruple production in this timeframe.

In addition to new plant construction, there are two other positive factors indicating longer-term increases in demand. First, the ability to up-rate existing plants in a cost-effective manner is ongoing. This is plant specific, but according to data (for example, in Switzerland) five reactors have seen capacity up-rated by 12%. Plant life extension is the other positive factor that could place further demand on requirements for uranium. Most plants have a nominal lifetime but engineering assessments of many plants has resulted in up to a 50% increase of the operating lives, through license renewal. For example, in 2000, the Russian government extended the life of 12 reactors in that country from their original 30 years, to an additional 15 years.

The growth of nuclear power generation has come about through a number of factors, probably one of the more important being the improving acceptance of uranium for power generation. The general perception that sources of non-fossil fuel energy are desirable has resulted in consideration of expansion to nuclear power generation, where perception of a safe energy source has improved. According to an article in the Australasian Institute of Mining and Metallurgy Bulletin, there have been almost 12,000 reactor years of civil power experience since 1955, and only one major accident involving radiation-related fatalities: that being the Chernobyl accident in the Ukraine in 1986.

The supply side of uranium is quickly turning out to be a very different picture, as mine production plus secondary supply has not kept pace with demand, particularly in the past 24 months. The current and longer-term forecasted imbalances will likely continue to exist and will serve to maintain the upward bias on the price of uranium. We maintain a bullish view on the potential for price appreciation for the underlying commodity over the next two years. In fact, the general gap between world demands versus primary uranium production is expected to continue to be maintained or widen over the next several years. Given the need for additional mine supply of uranium for nuclear power generation, the enormous expansion in mineral exploration activity for uranium in both new areas and previously defined and/or currently producing regions appears justified.

Mining and Development

How quickly has the shift in mineral exploration and development occurred? Before we answer this, we provide a brief background on current mine supply. For 2004, data produced by the Uranium Information Centre (UIC) (www.uic.com.au) indicated that world production is dominated by Canada and Australia, who together produce about 51%. These two countries are followed by Kazakhstan, Niger, Russia and Namibia. When all six are combined, they account for approximately 84% of annual mine production. The industry is dominated by eight companies with each producing more than 1,000 tonnes and combined they account for 82%, again according to 2004 data from UIC.

By mine, the three largest operations in the world by annual uranium production are McArthur River in Canada (Cameco), Ranger in Australia (ERA) and Olympic Dam in Australia (BHP-Billiton). Outside of the exploration and development programs in place by established producers, mining has seen a massive resurgence in the number of companies and the amount of money being dedicated to uranium exploration and development. The numbers are quite staggering, in fact.  Mineral exploration and development is predicated on the availability of capital to fund ongoing development, particularly among the non-producing junior exploration-mining group. A few years ago, the amount of capital raised for the sector was under $150 million. For 2005, funds raised for uranium exploration and development on Canadian Equity markets alone exceeded $1.25 billion.

The number of companies active in uranium exploration in 2005 is likely more than tripled the number active only two years prior. It is estimated that there are some 350 companies worldwide (public and private)  with a uranium asset or exploration project forming all or a portion of their individual property portfolio(s).

The breadth of exploration and development has also expanded over the past two years. In particular, there are numerous companies who have been actively acquiring previously identified deposits, primarily those potentially amenable to in-situ leaching (ISL) methods, as well as ongoing evaluation for additional deposits in regions which may host one of the four main uranium deposit types described later in this paper. Suffice to say that exploration for uranium is now a well-defined sub-sector for Canadian mining companies.

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Uranium, chemical symbol U, is a radioactive metallic element of high specific gravity, which occurs naturally in most rocks, soil and the ocean. It is 500 times more abundant than gold and it is as common in the earth’s crust as tin, tungsten and molybdenum. The most common ore of this mineral is pitchblende. Uranium is found as an oxide, uraninite or mixed oxide, pitchblende or complex salt such as brannerite (oxide of uranium, rare earths, iron and titanium), coffinite (uranium silicate), and carnotite (hydrated potassium uranyl vanadate). Uranium is insoluble in water and non-flammable, and occurs in nature as a mixture of three isotopes – U238 (99.28%), U235 (0.71%) and U234 (0.01%). U235 is the only naturally occurring uranium element that can be readily split (nuclear fission) yielding the large amount of energy, which is the basis for nuclear power. The vast majority of nuclear power reactors are fuelled by “enriched” uranium where the U235 content has been raised from 0.71% to approximately 3.5%. Uranium covers three sectors, as a commodity, source of power, and strategic metal.


Uranium is the heaviest naturally occurring element on earth. Martin Klaproth, a German chemist, discovered it in 1789. Prior to this date, chemists thought pitchblende was an ore of iron and zinc. Klaproth named this new element Uranium after the newly discovered planet Uranus. The pure metal was not extracted from pitchblende until 1841 when French chemist, Eugene-Melchior Peligot, heated uranium chloride with potassium metal, a method that proved successful in yielding almost pure uranium. The metal was of little use until 1896, when Henri Becquerel discovered that pitchblende emitted a form of radiation similar to that of X-rays. Further research showed that the radioactivity was produced by uranium and related elements in the pitchblende.

The discovery of nuclear fission in the late 1930’s revealed that, when bombarded with neutrons, the atomic nucleus of uranium-235 splits into two roughly equal parts and releases large amounts of energy and additional neutrons. This ultimately led to the development of nuclear energy for both peaceful and military employment.

By 1946 the United States, as leader in the development of nuclear power, established the Atomic Energy Commission and by 1951 the first useable amount of electricity from nuclear fission was produced. The first use of uranium as a power source occurred in early 1954 when the first nuclear powered submarine, the USS Nautilus, was launched. Also in 1954, the world’s first nuclear powered electricity generator began operation in the then closed city of Obninsk, USSR, at the Institute of Physics and Power Engineering. Commercial power from a nuclear power plant first began at Shippingport, Pennsylvania in 1957, and the industry rapidly expanded over the next two decades. From the late 1970’s to about 2002 the nuclear power industry suffered some decline and stagnation brought about in part by negative public perception and a sharp decline in the price of uranium. Few new reactors were ordered; the number coming on line from the mid-1980’s basically equalled those plants put into retirement. This said, during this timeframe, capacity increased by nearly one third and output increased 60% due to improvements in capacity and load factors. In the late 1990’s, the Japanese introduced the first of the much-improved third-generation reactors, which helped initiate a recovery. Third-generation reactors include the following:

  • Third-generation reactor improvements
  • A standardized design for each type to expedite licensing, reduce capital cost and reduce construction time.
  • Simpler and more rugged design, making them easier to operate and less vulnerable to operational upsets.
  • Higher availability and longer operating life – typically 60 years.
  • Reduced possibility of core melts accidents.
  • Minimal effect on the environment.
  • Higher burn-up to reduce fuel use and the amount of waste.
  • Burnable absorbers (“poisons”) to extend fuel life.
    Source: www.world-nuclear.org

Today, it is estimated that about 440 power reactors are operational worldwide, with an additional 31 reactors under construction in 11 countries. Many industrialized nations now rely partly on nuclear power and include South Korea, China, India, Russia, Canada, United States, United Kingdom, Japan and several European nations.

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Uranium occurs in a variety of different geological environments – in igneous, hydrothermal and sedimentary settings. There are 14 major categories of uranium deposits defined by these settings, however, the four major environments from which the majority of western world supply originates, we describe in more detail over the following pages. Over 33% of the world’s uranium resources are in unconformity¬related deposits such as the Athabasca and Thelon Basins, Canada and the Pine Creek Geosyncline (Alligator River deposits) and Rudall River Areas in Australia. Hydrothermal breccia iron-oxide-hosted deposits (IOCG) such as Olympic Dam in Australia account for approximately 30% of world uranium resources, sandstone (roll-front) deposits such as those found in the Western Cordillera of the United States and in Kazakhstan constitute over 18% of world uranium resources, and paleoplacer (quartz-pebble conglomerate) deposits such as those at Elliot Lake, Ontario and Witwatersrand in South Africa constitute approximately 13% of world uranium resources. The grades of unconformity-hosted deposits can be quite high grade, to over 10% U3O8, while deposits hosted in sandstones and IOCG deposits are large, but generally low grade averaging below 0.5% U3O8. Economically, at a grade of 0.1% U3O8 with the uranium price at US$33.00 per lb, this equates to approximately US$66.00 per tonne of rock. At a grade of 1.0%, the value increases to US$660 per tonne as 1% equates to just over 22 pounds in one tonne of rock..

Uranium generally occurs as the primary oxide minerals uraninite (UO2) or mixed oxide, pitchblende (U3O8). A variety of other minerals can occur depending on the type of deposit including carnotite (uranium potassium vanadate), uranium titanates (davidite, brannerite, absite) and uranium niobates (euxenite, fergusonite, samarskite). Many secondary uranium minerals are brightly coloured and fluoresce including gummite (secondary hydrated uranium oxides), autunite, saleeite, torbernite (hydrated phosphates) and coffinite, uranophane, sklodowskite (hydrated uranium silicates).

Unconformity-related deposits

This type of deposit occurs at, or close to, major geological unconformities. Below the unconformity, the metasedimentary rocks which host the mineralization are usually faulted and brecciated while the overlying younger rocks are usually undeformed. The minerals found in these deposits are usually uraninite and pitchblende. All of Canada’s uranium production currently is from unconformity-related deposits in the Athabasca Basin where the deposits occur below, across or immediately above the unconformity with the overlying Proterozoic sandstones. In the Athabasca, the highest-grade deposits occur at or just above the unconformity. These deposits tend to be high grade, and some are exceptionally high grade as at Cigar Lake where the average grade is almost 20% U3O8. In such an environment, it is common that the deposit can have a very small footprint, thus drill spacing of 100 metres can miss hitting a potential economic zone depending on the grade.

Sandstone deposits

These deposits occur in medium to coarse-grained sandstone units in a continental marine sedimentary setting with impermeable more dense sedimentary layers occurring immediately above and below the mineralized sandstone. In these deposits, uranium is precipitated under REDOX conditions (reducing environment caused by a variety of reducing agents in the sandstone). There are three main types of sedimentary uranium deposits:

  • Rollfront deposits are curved bodies of mineralization that cross cut the sandstone bedding;
  • Tabular deposits are irregular lenticular bodies parallel to the depositional trend and often occur in paleochannels in the underlying basement rocks; and
  • Tectonic/lithologic deposits occur in sandstones adjacent to a permeable fault zone.

These deposits are usually low to medium grade varying from 0.05 to 0.4% U3O8 and ore bodies range up to 50,000 tonnes U3O8. The main minerals are uraninite and coffinite. In recent years, production from these low-grade deposits has been enhanced by ISL methods of extraction.

In the western United States, large sandstone-hosting units occur within the Great Divide and Powder River Basins in Wyoming. Sandstone-hosted uranium mineralization also occurs in large sedimentary basins in south-central Kazakhstan. Cameco operates the Smith Ranch-Highland ISL operation in the Powder River Basin, Wyoming, and also has a 60% interest in the Inkai JV Project in Kazakhstan with KazAtomProm, with expected production in 2007. The Smith Ranch project has proven and probable reserves of 27.4 million pounds U3O8.

Intrusive breccia complex deposits

These deposits occur in brecciated settings believed to have formed in near surface sub-volcanic environments, with tectonic faulting, fracturing and gravity collapse causing brecciation. The best example is at Olympic Dam in South Australia where uranium occurs in a hydrothermal hematite-rich granite breccia complex in the Gawler Craton, overlain by flat-lying sedimentary rocks. The mineralization occurs on the flanks of localized diatreme structures with large zones of hydrothermal alteration with hematite-rich breccias hosting the copper-uranium mineralization. Uranium grades average

0.08-0.04% U3O8, and copper grades average 1.8% Cu. Ore resources at Olympic Dam as of March 2005, had proven and probable reserves of 650 million tonnes grading 1.5% copper, 0.05% U3O8 and 0.5g/t Au, plus 3.9 billion tonnes of additional resources grading 1.1% Cu, 0.04% U3O8 and 0.5 g/t Au.

In Canada, the Central Mineral Belt of Labrador is a major uranium province within a Proterozoic belt of volcanic, intrusive and sedimentary rocks at the edge of the Archean craton. Uranium and base metal mineralization occurs mainly as disseminated and fracture controlled zones spatially associated with intense alteration and tectonism. This emerging area is the target of uranium and polymetallic intrusive-related deposit (IOCG type) exploration programs. This target type is a bulk tonnage low-grade prospect similar in scope to that of copper-porphyry systems.

Paleoplacer – Quartz-pebble conglomerate deposits

These deposits occur in Archean-Paleaoproterozoic basins such as at Witwatersrand, South Africa and Elliot Lake, Canada. Uranium and often associated gold in these deposits, occurs in coarse grained sediments within paleochannels along the base of Proterozoic sedimentary basins. Grades in these deposits can vary from 0.01% U3O8 to as much as 0.15%, as was the case at Elliot Lake.

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Uranium ore can be mined by underground or open-cut methods, depending on the depth of the mineralization and grade. After mining, the ore is crushed and ground, and the oxide ore is treated with sulphuric acid to produce uranium oxide or yellowcake. In the case of the extremely high-grade ores in the Athabasca basin at McArthur River, mining is carried out using remote control underground mining methods, followed by processing underground where the ore is thickened and pumped as slurry to the surface. It is then placed into special containers for transportation to the mill at Key Lake.

In some circumstances, especially for lower-grade ores, the uranium may be mined by ISL, where uranium is dissolved from the orebody in place. The uranium is extracted through a system of wells drilled into the orebody and into which solution is injected to strip the uranium from the host rock and is then transported to the surface in solution. A production well then transfers the uranium-bearing solution to a processing plant where the uranium is recovered. ISL technology was developed nearly 25 years ago and features safe operations and minimal environmental impact, with low capital and operating costs. ISL mining accounted for approximately 16% of the world’s uranium production in 2002. The end product of the mining and milling stages, or of ISL, is uranium oxide concentrate (U3O8). This is the form in which uranium is sold.


Before uranium can be used in a reactor for electricity generation it must undergo a series of processes to produce a useable fuel. For most of the world’s reactors, the first step in making a useable fuel is to convert the uranium oxide into a gas, uranium hexafluoride (UF6), which enables it to be enriched. Enrichment increases the proportion of the uranium-235 isotope from its natural level of 0.7% to between 3-4%. This enables greater technical efficiency in reactor design and operation, particularly in larger reactors, and allows the use of ordinary water as a moderator.

After enrichment, the UF6 gas is converted to uranium dioxide (UO2), which is formed into fuel pellets. These fuel pellets are placed inside thin metal tubes, which are assembled in bundles to become the fuel elements for the core of the reactor.

For reactors that use natural uranium as their fuel (and hence which require graphite or heavy water as a moderator), the U3O8 concentrate simply needs to be refined and converted directly to uranium dioxide.


The main peaceful uses for uranium are in power generation through nuclear reactors and in medical applications. Nearly 17% of the world’s electricity is generated from uranium in nuclear reactors. This amounts to about 2400 billion kilowatt hours each year, as much as from all sources of electricity worldwide in 1960. It comes from over 440 nuclear reactors with a total output capacity of more than 367,000 megawatts operating in 31 countries. A further 31 reactors are under construction, and another 60-70 are on the drawing board.

However, this is only one positive use of uranium. Over the last few decades, the use of radioisotopes has changed our lives. It is used in medicine where radioisotopes are widely used for diagnosis and research; in the preservation of food by irradiation; and in agriculture where radioisotopes are used to produce high-yielding, disease and weather resistant varieties of crops, and in breeding livestock. Using relatively small special-purpose nuclear reactors, it has become possible to make a wide range of radioactive materials (radioisotopes).


Uranium world production is dominated by Canada and Australia who, together, produce about 51% of annual mine supply. These two countries are followed by Kazakhstan, Niger, Russia and Namibia. When all six are combined they account for approximately 84% of production from mines. The industry is dominated by eight companies with each producing more than 1000 tonnes and accounting for 82%, again according to 2004 data from UIC.

By mine, the three largest operations in the world by annual uranium production are McArthur River in Canada (Cameco), Ranger in Australia (ERA) and Olympic Dam in Australia (BHP-Billiton). Total supply in 2005 is expected to fall more than 20% shy of estimated demand.

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