URANIUM EXPLORATION AND DEVELOPMENT - UNITED STATES

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development and Investment
(Apr 2009)
CHAPTER 11A
URANIUM EXPLORATION AND DEVELOPMENT - UNITED STATES
John F. Meck
Welborn Sullivan Meck & Tooley P.C.
Denver, Colorado

John F. Meck, a partner with Welborn, Sullivan Meck & Tooley, PC has over 35 years experience in private practice and as corporate counsel with emphasis in mining and oil and gas law, domestic and international business transactions, and finance. He has served as counsel for multinational mining and resource companies throughout North America and in Chile, Brazil, Argentina, Peru, French Guiana, the United Kingdom, Mongolia, Kazakhstan and Russia. Mr. Meck specializes in negotiating, structuring and implementing natural resource projects for the exploration and development of mineral properties, through direct investment, joint ventures, mergers and acquisitions. Mr. Meck has also served as general counsel and corporate secretary for publicly-held companies with stock traded on principal United States and Canadian Stock Exchanges. He has extensive experience in corporate matters implementing complex reorganization/merger agreements, and structuring entities to meet commercial objectives. Mr. Meck was educated at Dartmouth College (B.A. 1967) and Boalt Hall School of Law, University of California at Berkeley (J.D. 1971). He is currently a member of the Long Range Planning Committee of the Rocky Mountain Mineral Law Foundation and previously served on the Special Institutes Committee. Mr. Meck is a member of the California, Colorado and American Bar Associations and the American Society of Corporate Secretaries, and has been listed in International Who's Who of Mining Lawyers - since 2002.

Introduction

The purpose of this paper is to provide an overview of the exploration and development of uranium resources for power generation, the demand for nuclear fuel and worldwide uranium resources. The paper also provides an overview of the legal regimes that apply in the United States (US) to (i) the acquisition of mining rights to explore for and develop uranium, (ii) the conduct of exploration and development operations, (iii) uranium recovery activities under the Atomic Energy Act of 1954, as amended by the Uranium Mill Tailings Radiation Control Act of 1978 (the "AEA"), and (iv) miscellaneous regulatory regimes and related issues involved in uranium recovery activities.

1. Uranium - Facts and Figures

What is Uranium. Uranium is an element that was discovered by Martin Heinrich Klaproth, a German chemist, in 1789. It is a relatively common metal whose occurrence in nature is comparable to tin or zinc.¹ However, uranium is radioactive² and occurs in the form of three isotopes, the most common of which is Uranium 238,³ representing over 99% of the uranium found in nature.⁴ For purposes of this paper, the term uranium refers both to (i) ore containing U-238 and (ii) yellowcake [U₃O₈ or triuranium octoxide], a form of uranium concentrate obtained from uranium ore that has been mined from a conventional mine and processed in a mill, or recovered from an in situ recovery facility ("ISR Facility"). Yellowcake is the form of uranium product that can be marketed and sold after which it must be further processed/enriched to fabricate fuel for use in nuclear reactors to generate electricity or for the military/nuclear weapons.

Uranium Production and Power Generation. In 2007, the most significant producers of uranium were Canada (˜23%), Australia (˜21%) and Kazakhstan (˜16%),⁵ who collectively produced approximately 60% of worldwide production from mining operations for that year.⁶ Mined production of uranium from the United States in 2007

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was only about 4% of worldwide production, and Latin American production was relatively small with Brazil, the largest producer, responsible for less than 1% of worldwide mined uranium production in 2007.⁷ Conventional mines⁸ continue to account for the largest proportion of uranium production with the 8 largest mines in the world accounting for almost 70% of global uranium production.⁹ Increasingly, new uranium producing mines are ISR Facilities, particularly in the US and Kazakhstan.¹⁰ According to the U.S. Nuclear Regulatory Commission ("NRC"), there are about 12 ISR Facilities operating in the US, with applications for an additional 4 ISR Facilities pending.¹¹

Demand for Nuclear Fuel. In 2007 worldwide demand for uranium for nuclear power generation was approximately 65,000 tonnes.¹² While demand in recent years has been somewhat reduced due to reactor efficiencies and other factors, overall demand is expected to grow with a total of 44 additional reactors under construction worldwide - 11 in China, 8 in Russia, 6 in India, 5 in Korea, 2 each in Bulgaria, Japan and the Ukraine, and 1 each in Argentina, Finland, France, Iran, Pakistan and the US.¹³ Although the number of reactors in the US as a percentage of those operational worldwide has decreased in recent years, the US remains a significant consumer of uranium for nuclear power generation with the largest number of nuclear reactors (104) in operation worldwide in 2007.¹⁴ US demand for nuclear fuel to generate electricity greatly exceeds US production - in 2000, only 16% of all uranium purchased for US nuclear power plants was met by domestic production,¹⁵ although US production in 2007 was approximately 12.5% greater than in 2000.¹⁶

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Despite recently depressed prices, the long term demand outlook for uranium as fuel for nuclear power generation should increase significantly, as additional plants under construction are completed and commence operation. Moreover, projections with regard to additional plants continue to grow. The projections for China alone are significant - the Chinese government projects that its nuclear power generation capacity will increase from 9 GWe (gigawatts of electricity) from the 11 plants currently in operation to as much as 70 GWe by 2020.¹⁷ Even in the US, applications to build 26 new plants have been submitted to the NRC most of which would be located at or adjacent to existing plants.¹⁸

Uranium Resources. Estimates of worldwide uranium resources are principally dependent on the costs of extraction and price.¹⁹ Subject to these and other factors, estimates of known recoverable uranium resources are as much as 5.5 million tonnes of uranium (tonnes U), principally from Australia (23%), Kazakhstan (15%), Russian (10%), South Africa and Canada (8% each), the US (6%) and Brazil (5%).²⁰ Historically, US production has come from the Colorado Plateau in the four corners area of the Western United States (Colorado, Utah, Arizona and New Mexico),²¹ as well as Wyoming and more recently Texas, particularly involving ISR Facilities. Uranium mining in the US has been cyclical, with an initial boom occurring in the 1950's under financial incentives established by the AEA and the responsible agency, the Atomic Energy Commission (AEC), to encourage uranium production for nuclear weapons.²² Subsequent boom cycles with growing demand for uranium to supply the nuclear power industry occurred in the 1970's and early 1980's and more recently starting in 2003 which has been significantly dampened by the current worldwide financial crisis. As previously discussed, more recent uranium mining in the US has focused on ISR Facilities due to cost structure and the limited number of mills available to process uranium from conventional mines into yellowcake. Geologically, however, not all uranium deposits are good candidates for ISR technology and some deposits must

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therefore be mined by removing the ore and processing it above ground in a conventional mill.²³

2. Exploration and Development of Uranium Resources

Acquiring Rights to Uranium.

The US and Canada are common law countries and as such the applicable regimes relating to the exploration and development of uranium are comprised not only of relevant statutes and regulations of the federal, state and provincial governments but also of common law, i.e., case law from the courts as well as agencies charged with rendering decisions on matters that fall within their jurisdiction. The following is a brief summary of the principal means by which a mining company might acquire the right to explore for and develop uranium in the US.²⁴

Federal Lands - US: Mineral rights including those with potential value for uranium may be owned and controlled by private parties (fee lands), individual states (state lands) or the federal government (federal land). In the western US, the most significant mineral owner is the federal government under the management of the US Department of Interior's Bureau of Land Management (BLM). Both federal and state law govern the location, perfection and maintenance of mining claims on federal lands.²⁵ Federal law is based on the General Mining Law of 1872,²⁶ and applicable regulations found in the Code of Federal Regulations (CFR),²⁷ which set forth requirements for locating and perfecting federal mining claims. In addition to complying with federal law, a locator must comply with the requirements of the State in which the mining claim is

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located.²⁸ The following is a summary of the principal federal and state requirements for locating lode mining claims on federal lands in the State of Colorado:²⁹

• The lands must be open to location - they have not been withdrawn, as for example in the case of a national park³⁰

• The locator must be a US citizen - individuals, corporations and, in general other US entities, including joint ventures that are comprised of US citizens³¹

• The mineral must be locatable - uranium is a locatable mineral as are base metals and precious metals but not coal or oil and gas

• The claim must be staked and monumented on the ground

• A location certificate with the name and address of the locator, the name of the claim, the date of location and a...