MOSCOW. April 7 (Interfax) - World uranium production grew 4.3% in 2007 instead of the projected 10-13%, Atomredmetzoloto (ARMZ), Russia's state uranium holding, reported.

The company estimates global uranium production totaled about 41,120 tonnes in 2007. UxC Consulting had forecast production would grow 13% to 44,430 tonnes, while the World Nuclear Association (WNA) expected production to increase 10% to 43,320 tonnes.

Eight countries account for 90% of global uranium production: Canada, Australia, Kazakhstan, Russia, Niger, Namibia, Uzbekistan and the United States. Russia overtook Niger to become the world's fourth largest producer, as it increased uranium output by 6% to 3,413 tonnes.

The leading uranium miner is Canada, where production dropped 4% to 9,475 tonnes. Australia followed with output of 8,603 tonnes, up 13% from the previous year. Kazakhstan has firmly held onto third place since 2003, and last year saw the strongest growth as uranium output jumped 26% to 6,638 tonnes.

Niger and Namibia, respectively in fifth and sixth place, reduced uranium production last year by respectively 8% and 6%, to 3,154 tonnes and 2,878 tonnes. Production in Uzbekistan edged up 0.5% to 2,270 tonnes. The other major producer with output of at least 1,000 tonnes was the United States, where uranium production rose 14% to 1,800 tonnes.

Mixed forecasts

This year is expected to be better for companies in the uranium sector, ARMZ said. Companies plan to accelerate production growth, as demand for uranium continues to increase, particularly in Southeast Asia.

The growth leaders in 2008 will be Kazakhstan, Namibia and Canada, according to plans announced by companies in the sector. Production is forecast to surge by more than 40%, or 2,810 tonnes in Kazakhstan this year, Canada plans to increase production by 5-8%, or 500-800 tonnes with the development of the McLean Lake mine, and Namibia expects to increase production by about a third thanks to the development of the Rossing deposit.

UxC Consulting forecasts that world uranium production will grow 13% to 46,850 tonnes in 2008. ARMZ analysts are more reserved in their projections, saying that such strong growth is unlikely given that production forecasts for this year in countries such as Kazakhstan and Namibia are not being borne out yet.

"It is more probable that, even given favorable conditions for the operations of uranium mining companies, world production growth in 2008 will be much more modest [and] total output will amount to about 44,000 tonnes," representing a 7% increase over 2007 rather than 13%, ARMZ said.

Uranium price could climb higher

World spot prices for uranium were very volatile in 2007. They nearly doubled in the first half of the year and in the period until August, rising from $72 to $138 per pound, but subsequently tumbled to $90 by the end of the year.

Prices continued to fall from the beginning of 2008, dropping to where they were at the end of 2006 and closing March at about $71 per pound.

However, most analysts at consulting companies, investment banks and hedge funds think that prices for uranium concentrate will average $100 per pound this year, ARMZ said.

Canada

Canada is the world's biggest producer of uranium, but over the past ten years production there has been unstable and has generally declined somewhat. This has been due to the closure of many old, depleted mines and opening of new ones over this period.

Canada now produces uranium at three mines. The biggest in the country and the world is McArthur River, which produced 7,200 tonnes in 2007. Cameco owns 70% of this mine and France's Areva owns 30%. McArthur River is also unique in its extremely high ore grade, with uranium content averaging 24%, about 100 times more than other known uranium deposits that are deep mined.

The Rabbit Lake mine, which is wholly owned by Cameco, produced more than 1,500 tonnes of uranium last year. Output here has been declining for about two years, and dropped 22% last year after operations were suspended until the start of 2008 due to flooding. However, Cameco is working on a program to expand production capacity at the Rabbit Lake processing plant to 4,600 tonnes of uranium per year, enabling it to also ship uranium here from the Cigar Lake deposit starting in 2012. This deposit, which is 50% owned by Cameco and 37% by Areva, is also one of the largest in the world, with uranium content of 19%. The launch of the mine has been repeatedly postponed due to restoration work following flooding that occurred at the preparation stage. Analysts think that events at Cigar Lake were one of the drivers behind the growth of spot prices for uranium last year.

The third Canadian mine, McLean Lake, produced 730 tonnes of uranium last year, and plans to double production to 1,230-1,540 tonnes in 2008. McLean Lake is 70% owned by Areva, 22.5% by Denison Mines and 7.5% by OURD.

Australia

Australia also produces uranium at only three mines at the moment: Rio Tinto's Ranger, BHP Billiton's Olympic Dam and Heathgate Resources' Beverly. There are also plans to start developing a fourth deposit, Honeymoon, where Uranium One secured the final permit at the beginning of 2008. The mine is expected to yield its first product in the fourth quarter.

Uranium production growth in Australia in 2007 was driven by the Ranger and Olympic Dam mines. The latter is the world's largest by uranium reserves, which exceed 1.5 million tonnes. Uranium production at Olympic Dam, where the main element is copper and uranium, gold and silver are associated elements, increased by 18% last year and reached a three-year high in the fourth quarter. However, production was below targets, leading to the purchase of uranium on the spot market in order to meet contractual obligations.

Energy Resources of Australia, whose main shareholder is Rio Tinto, operates the Ranger mine, which produced 4,589 tonnes of uranium in 2007, the second highest figure in its history.

The Beverly mine, operated by General Atomic subsidiary Heathgate Resources, produced 660 tonnes.

Kazakhstan

Kazakhstan mines uranium at eleven deposits, ten of which are located in the Chu Sarysui and Syr Darya uranium provinces: Uvanas, Kanzhugan, North and South Karamurun, East Mynkuduk, Akdala, Moinkum, South Moinkum, Inkai and Zarechnoye. The Vostok deposit is located in the North Kazakhstan region.

Uranium concentrate in the Central Asian country is produced by National Atomic Company Kazatomprom, both independently (Taukentskoye, Stepnoye, RU-6 and Stepnogorsky) and under joint ventures with foreign partners (Betpak Dala, Katko, Zarechnoye and Inkai).

Under Kazakhstan's "15,000 Tonnes of Uranium by 2010" program, the country planned to mine 7,103 tonnes of uranium last year, but actually output was lower at 6,638 tonnes. This was due to the postponement of the launch of Kazakhmys' Balkhash sulfuric acid plant from May 2007 to the second quarter of 2008.

This year, Kazakhstan intends to increase uranium production by boosting productivity at existing mines and launching new facilities. New mines are scheduled to come on stream in the first half at the North Kharasan, South Inkai, Tortkuduk and Budyonnovskoye-2 deposits.

Russia

All uranium mining assets of the Federal Atomic Energy Agency are now being consolidated under the ARMZ uranium holding. The biggest uranium miner in Russia is Priargun Mining & Chemicals Association, which mines the Streltsovskoye ore field. Uranium is also mined in small amounts by Kurgan-based Dalur and Chita's Khiagda. Priargun accounts for nearly all, more than 3,000 tonnes, of the country's uranium output.

Russian uranium miners plan to produce 3,512 tonnes this year, particularly thanks to growth at Dalur and Khiagda. ARMZ also sees long-term prospects for the sector in the development of uranium deposits in Yakutia.

Africa

Niger mines uranium at the Arlit and Tamou deposits operated by Somair, and Akouta mine operated by Cominak. Both companies are controlled by France's Areva.

Uranium production in Niger fell in 2007 due to a decline in output at the Akouta mine, and there are plans to bring the new Afasto deposit on stream in order lift production.

The country expects to increase uranium production by more than 150% in the next few years with the development of the Imouraren deposit with Areva, and the Teguida deposit with China Nuclear International Uranium Corp (Sino-U). The former is scheduled to come on stream in 2011 with capacity to produce 4,000 tonnes of uranium per year, and the latter is to start up in 2010 with capacity of 700 tonnes.

Namibia's uranium sector is developing with the Rossing deposit at Langer Heinrich. Production in the country fell in 2007, primarily due to updates at this mine, which is operated by Rossing Uranium Ltd., a local firm owned by Rio Tinto.

The Langer Heinrich deposit is being developed by Australia's Paladin Energy and produced 269 tonnes of uranium last year.

Uzbekistan and United States

In Uzbekistan, uranium is mined by Navoi Mining & Metals Works, which mines the small Surgaly, North and South Bukinkai, Beshkak, Ketmenchi, Sabyrsai, North Kenimekh and a number of other deposits. In addition, mines have been launched in recent years at t he Kendyktyube, Lyavlyakan and Tokhumbet deposits. Navoi's low production of 2,260 tonnes is due to technical problems with production of sulfuric acid, but the company plans to modernize and increase production by 50% by 2012.

The United States mines five uranium deposits: Mestena Uranium LLC's Alta Mesa; Crow Butte and Smith Ranch/Highland, operated by Power Resources, a subsidiary of Canada's Cameco; and Uranium Resources' Kingsville Dome and Vasquez projects. Uranium concentrate is also produced by the White Mesa mill (Denison Mine), to which ore is shipped from various sources. In addition, Uranium One plans to open the Hobson processing facility this year with capacity of 384 tonnes of uranium.

Other Countries

Another eleven countries that mine uranium made a comparatively modest contribution to global production in 2007: 2,930 tonnes or 7.1%, ARMZ estimates. Ukraine produced 800 tonnes, China 750 tonnes, South Africa 520 tonnes, the Czech Republic about 300 tonnes, Brazil about 200 tonnes and India 200 tonnes. The other countries - Romania, Pakistan, Iran and Argentina - produce no more than several tens or several tonnes each. In addition, France and Germany produce several tonnes of uranium from mine water in the course of mine recultivation.

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