TORONTO -- Canada’s revival of a plan to relax foreign ownership rules in its uranium industry could draw more investment from foreign miners such as France’s Areva and help restore Canada’s decreasing share of global production.
Canada, long the world’s top producer of uranium, will be eclipsed this year by Kazakhstan, where several mines have been started after the country opened up its sector more than a decade ago. Australia, which has the world’s biggest reserves, is also catching up after recently relaxing its own uranium mining bans.
Canada’s move — outlined briefly in a government policy speech on Wednesday — comes as countries such as China and India embark on ambitious nuclear-power building programs that are predicted to stretch uranium demand beyond current supply capacity.
Both countries could clamber for access to Canadian uranium, particularly with India having recently signed an agreement to reopen nuclear technology trade with Canada.
Current rules restrict foreign ownership of Canadian uranium mining assets to 49%, meaning producers have to seek joint-venture partners and essentially cede control of the assets to the local partner.
In 2008, a government-commissioned panel recommended raising the foreign ownership limit, but a bill to open up investment in the sector died when Parliament was prorogued in December.
Relaxing ownership rules could allow Areva, which already owns minority stakes in both producing assets and undeveloped projects in Canada, to try to raise its stake in some of the assets and meet its own uranium sales commitments.
Other large producers such as BHP Billiton and Rio Tinto might also be looking to invest in Canadian production, said analyst Simon Tonkin of Thomas Weisel Partners.
"The reason (the government) wants to do this is to spur activity. Canada’s got the most favorable geological environment. They’ve got the highest grade deposits," he said.
"But these projects cost billions of dollars to build and by having foreign investment they are going to create further jobs and keep Canada on top of the pedestal."
A spokesman for Rio Tinto, a top uranium producer, said the company had explored for uranium in Canada as recently as 2001, and said ownership restrictions at the time weren’t really a factor in deciding whether to explore or not.
BHP, which owns potash and diamond assets in Canada but no uranium, would not comment, while Areva did not respond to a request for comment.
The higher foreign investment would likely not include a takeover of Canadian uranium mining giant Cameco, formerly a federal government-owned corporation whose ownership is still heavily restricted.
In addition to the 49% limit, separate federal laws limit foreign voting ownership in Cameco to 25%, while legislation in the province of Saskatchewan requires the company maintain its head office there.
Company spokesman Lyle Krahn said Cameco, the world’s top publicly traded uranium producer, does not object to increased foreign investment in the Canadian industry as long as it’s a two-way street.
"We’re hopeful the government supports the principle that if other countries come here to do business, Canada should receive reciprocal benefits," he said.
Cameco’s base of operations is the Athabasca region in northern Saskatchewan, where deposits often run at a staggering 20% uranium, which is about 100 times the richness of a deposits elsewhere.
However, the deposits are hard to find and the development costs are generally much higher than in Kazakhstan, for instance.
Additional sources of foreign capital could help bring high-cost deposits to production, analysts say.
Other potential sources of investment include China and India, which both have aggressive plans to expand their nuclear power capacity, although some question how welcoming Canada’s government would be to Chinese investment in uranium.
However, David Davidson, an analysts at Paradigm Capital, said China will be eager to lock in uranium supply as it currently is relying on volatile spot markets.
"Certainly China would be looking at opportunities," he said.
As well, India and Canada recently reached a nuclear co-operation agreement to open India’s market to nuclear technology and fuel deals for the first time in 35 years.
Cameco has opened an office in India and has said it hopes the reopening will lead to uranium supply deals and mining joint ventures.
© Thomson Reuters 2010