CHAPTER 12 ENERGY MINERALS
| Jurisdiction | United States |
(Mar 1985)
ENERGY MINERALS
Energy Fuels, Nuclear, Inc.
Denver, Colorado
In the competitive environment of today's energy mineral market, it is becoming increasingly important for the lawyer to understand the marketing issues involved in the sale of fissionable minerals and coal. During the expansive times of the late 1970's, the markets for both coal and uranium were increasing rapidly. The demand for these energy minerals, either real or perceived, lead to doubts of the ability of the mining industry to meet the needs. This was a time when the production of both coal and uranium became extremely important. Marketing of these energy minerals was secondary to the production process. I believe this situation has reversed itself today to the extent that the marketing of uranium and coal has now become crucial in determining what the production level of a project will be. There exists today overproduction capacity in both the uranium and the coal mining industry, thus, only those production projects that consistently generate sufficient market interest will survive in the future. This is not to imply that new coal and uranium production projects will not be developed in the future, however, those that will be developed will first meet the test of the market.
Historically, uranium supply agreements have given rise to significant litigation. Coal supply agreements, likewise, have been challenged as being nonresponsive to the needs of the consumers and outdated in terms of commercial applicability. In order to limit the significant risk of litigation in a long-term uranium or coal supply agreement, the lawyer must be cognizant of the potential problems and the unique issues to be addressed in the supply agreement. Issues that may give rise to later conflict should be considered carefully and addressed in the contractual agreement between the parties.
Coal and uranium, although both primarily used for the generation of electricity, have distinct differences when considering marketing strategies. The similarities are possibly more limited than the differences. Because of the number of unique differences related to the marketing of coal and uranium, a discussion of each is necessary.
[Page 12-2]
Fissionable Minerals
The fissionable mineral of interest to the mining industry in the United States today is natural uranium. Fissionable products derived from natural uranium are not discussed in this paper as they are typically not associated with the uranium mining and production facility. However, an understanding of the front-end of the nuclear fuel cycle is essential for the individual involved in the negotiation and drafting of the uranium supply agreement. Although uranium is produced as a by-product of the phosphate fertilizer industry, most of the uranium produced in the world is recovered from either conventional surface or underground mines or through in situ mining. Regardless of whether the uranium is recovered as a by-product of a phosphate operation, conventional mining methods, or in situ mining, the end product sold to the customer is essentially the same. Regardless of the method of production, the resulting product will be uranium concentrates containing natural uranium in the form of U308. Natural uranium must be further processed for use in light water nuclear reactors. The fissionable element or fissionable isotope important in the light water nuclear fuel assembly is primarily U235. Naturally occurring uranium contains .711% U235 which is not sufficiently concentrated to sustain a nuclear reaction in the enriched uranium reactors. Natural uranium must be enriched in its U235 content to the range of 2% to 3% to sustain the nuclear reaction.
The uranium concentrates containing the U308 produced by the uranium mills and nonconventional production facilities must be converted to uranium hexafluoride (UF6). UF6 at relatively low temperatures, is a gaseous substance. The enrichment process used throughout the world requires uranium to be in this gaseous form. UF6 is the feed material to the enrichment process. After enrichment in U235 content, the gas is then converted back into a metal, typically UO2, for assembly into the nuclear fuel rods. The contract for the supply of natural uranium concentrates is primarily the relationship between the uranium producer and the utility customer. The conversion of U308 to UF6 effects the uranium producer only to the extent the uranium concentrates must meet the requirements of the facility converting the U308 to UF6.
The quality of uranium concentrates sold and delivered is not an issue of negotiation as all customers require that the uranium purchased meet the standards imposed by the facility converting the uranium concentrates (U308) to UF6. Uranium concentrates that fail to meet these requirements will be unacceptable and rejected by the customer. The determination of whether uranium concentrates meet the requirements of...
To continue reading
Request your trial